Hartford, CT- Though the worst of the housing crisis is over, there are many homeowners across the country still dealing with foreclosure abuses, but Connecticut residents will now have additional protections.
Public Act 13-136 was signed by Governor Danell P. Malloy last week in Stamford and will now ensure that homeowners have the opportunity to negotiate with their lender prior to foreclosure, and require that lenders provide accurate documents throughout the process.
“Ensuring a fair and expedient process for everyone in a foreclosure process is an important step towards protecting people and neighborhoods across Connecticut,” Malloy said at the signing ceremony according to the Clinton Patch. “Everyone involved benefits when the properties remain occupied and families have access to stable housing.”
The new law requires that lenders enter into mediations with a troubled homeowner in order to resolve their delinquent mortgage with the assistance of a judicial mediator. The goal is to have both the lender and the homeowner come up with a mutually- agreeable solution before proceeding with foreclosure. It also requires that lenders “act in good faith and without delay,” the Patch reported.
Too often in foreclosure proceedings, lenders fail to produce accurate documents, a problem that was central to the foreclosure crisis. The new legislation places a higher burden of proof on lenders when they enter into negotiations.
Lenders will be required to bring complete account history of the homeowner’s mortgage along with other pertinent information. The lender or their representative must familiarize themselves with the borrower’s loan file and be aware of any foreclosure alternatives they might qualify for.
The homeowners must also provide their lender with a complete financial package at the beginning of the mediation process and provide any other information necessary if they wish to pursue an alternative to foreclosure such as a loan modification or short sale.
The law’s objective is to determine of the homeowner and lenders can reach an agreement on the terms of a foreclosure alternative and to expedite the foreclosure process if an alternative cannot be agreed upon.
“This is a very important opportunity for us to move properties that have been abandoned & and hopefully fast-track them into the marketplace,” Malloy said. “Housing is a major driver of economic growth, both short-term and long-term.”
Other states have passed new laws that give homeowners additional protections throughout the foreclosure process. A common theme in these laws is forcing lenders to provide complete and accurate documents since throughout the housing crisis lenders were often unable to determine who actually owned a home loan or produce the necessary paperwork.
Recently, the court documents of a case involving a foreclosure whistleblower Lynn Syzmoniak exposed the fact that thousands of people lost their homes across the country even though lenders did not have the proper documents. Syzmoniak’s lawsuit reveled that many lenders were unable to produce mortgage loan documents when they tried to foreclose on a property and encouraged lower-level employees to used forged signatures and documents in order to seize homes.