State Senator Eric D. Coleman
March 24, 2008
Key Committee Approves Coleman’s Bill to Help Homeowners Deal With Subprime Mortgage Crisis
It would set up $50 million emergency loan fund and ban prepayment penalties
The General Assembly's Judiciary Committee has approved a bill introduced by Senator Eric Coleman (D-Bloomfield) that is designed to provide relief to homeowners in Connecticut who could be in jeopardy of losing their homes because of the subprime mortgage crisis. It calls for a $50 million emergency mortgage assistance program and would prohibit penalties for prepayment of loans.
Senator Coleman is a member of the committee and the co-chair of the Planning and Development Committee, which earlier approved the legislation. S.B. 208 will prohibit mortgage companies from charging prepayment penalties and to provide funds for assistance to homeowners affected by subprime mortgage lending, predatory lending and other situations resulting in crises or emergencies.
"There is a provision in the bill that would provide for the issuance of bonds for the amount of $50 million to replenish the Emergency Mortgage Loan Fund," said Senator Coleman. "We determined this amount is reasonably necessary in order to generate any significant amount of relief and help for those who have found themselves in an emergency mortgage situation."
"The members of the Planning and Development Committee concluded that under circumstances where a subprime mortgage loan is in question, the prepayment penalties should not be permitted if a person is trying to get out of a subprime mortgage, by way of refinancing, selling the property, or by having a foreclosure action against the property," said Senator Coleman. "Under those conditions it is thought that the lender should not be permitted to assess any penalty against the mortgagor. There is some thought that the lender is in some complicity with the situation because of the relaxed underwriting standards that may have been applied in order to make the loan to the mortgagor in the first place."
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