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In Connecticut Foreclosures Cases, Legislative Committee Backs Mandatory Mediation

KENNETH R. GOSSELIN

March 11, 2009

Some people have called Connecticut's foreclosure mediation program the most successful of the state's mortgage relief efforts enacted in 2008.

Now, participation might become mandatory.

The state legislature's banks committee approved a bill Tuesday that would require homeowners in foreclosure to enter the mediation program once their cases are in the courts.

The mediation program, launched July 1 and set to run for two years, now brings borrowers and lenders together voluntarily. As of Dec. 31, 1,205 cases had completed mediation, with 681 borrowers, or 57 percent, staying in their homes.

State Rep. Ryan Barry, D-Manchester, and co-chairman of the banks committee, said mediation could be having a greater impact if used in more cases. He said he hopes that by making it mandatory, participation will double from the current 28 percent.

Barry said he believes that having a mediator involved in negotiations between borrowers and lenders leads to loan modifications and other agreements that can last for the long term and benefit both parties.

He said he also was concerned about studies showing that loan modifications worked out without a mediator often slip back into foreclosure.

"What we're looking to create here is sustainable homeownership," Barry said after Tuesday's vote.

Supporters also hope the mediation program will help identify borrowers who might benefit from other state and federal mortgage relief programs. The bill will probably need approval by the judiciary committee and require expanding a staff of 12 mediators by as many as 10.

The cost would be about $3 million, but funds could be shifted from other mortgage relief programs that have gotten off to a slow start, Barry said. It was unclear Tuesday how the staff would be added because the state has a hiring freeze.

Foreclosure filings in Connecticut surged 25 percent in the fourth quarter compared with a year earlier, according to The Warren Group.

Expanding mediation is supported by Gov. M. Jodi Rell and the state's largest banking industry group.

Thomas S. Mongellow, vice president of the Connecticut Bankers Association, said the mediation program has established a strong record in a short time.

"It encourages a conversation between lenders and borrowers," Mongellow said, "often for the first time."