State Senator Bob Duff
August 7, 2009
Banks Committee Chairs: Foreclosure Mediation Plan Continues to Save Connecticut Homes
60 percent of participants stay in their homes, 74 percent reach a settlement; other programs deliver millions in direct assistance
The co-chair of the General Assembly’s Banks Committee — Senator Bob Duff (D-Norwalk) and Representative Ryan Barry (D-Manchester) — today said that new data from the state Judicial Branch shows that the state’s hallmark voluntary foreclosure mediation program has provided settlements for 74 percent of its participants.
Sixty percent of the 2,932 cases that have moved through the program since May 31, 2009, have reached a settlement that allows individuals and families to stay in their homes. Forty-one percent of those who stayed in their homes received a loan modification from their lender.
However, only 35 percent — or 6,575 cases — of those eligible — a total of 18,702 cases in the state of Connecticut — have taken advantage of this successful program. Senator Duff and Representative Barry said that recent changes to the program made during the regular legislative session, which make mediation mandatory for any action filed on or after July 1, 2009, will improve participation rates and help keep more Connecticut families in their homes.
“The foreclosure mediation program we created in 2008 continues to demonstrate success for homeowners in Connecticut because it helps create a win-win-win situation,” said Senator Duff. “The majority of individuals and families get to stay in their homes, banks and lenders are not left with properties to dispose of and communities are spared the drop in property values and increase in crime that go hand-in-hand with foreclosure. Under the new mandatory mediation law, I’m confident that this program will benefit even more people and help to drop foreclosure rates in our state.”
“Sixty percent means that 1,771 families no longer have to face some scary circumstances,” Representative Barry said. “They don’t have to worry about where their children are going to sleep. They don’t have to worry about being homeless or being forced to move away from their schools and their extended families. As a mandatory program, we’ll reach an even greater population of people facing foreclosure. That’s a lot more people who will have their difficult circumstances made just a little easier because they’ve reached a mutually equitable solution with their lender.”
The co-chairs also noted that two programs operating through the Connecticut Housing Finance Authority (CHFA) — the Emergency Mortgage Assistance Program (EMAP) and the CTFAMILIES program — that provide fixed-rate loans to homeowners facing foreclosure have provided more than $20 million in direct financial assistance to struggling families.
From its creation on December 10, 2007, through August 4, 2009, the CTFAMILIES program has issued 72 fixed-rate, 30-year loans totaling $14,620,177. Fifteen more loans for a total of $3,126,950 are currently reserved and being processed. Action during the regular session expanded the program to offer eligibility to homeowners who meet income guidelines and have either adjustable or fixed-rate mortgages effective July 1, 2009. Previously, the program was only available for homeowners with adjustable-rate mortgages.
The EMAP program is available to Connecticut homeowners who have fallen behind on their mortgage payment because of a temporary financial hardship that is beyond their control, such as unexpected medical bills or loss of income. EMAP provides an initial disbursement to being a homeowner’s delinquent mortgage current; homeowners may be eligible to receive monthly mortgage assistance.
From July 1, 2008, to August 4, 2009, 64 loans were approved for up to $4,189,063 in assistance ranging from a low of $97 to a high of $2,666. Total monthly assistance is $58,727, with the average monthly assistance at $1,012. In addition to monthly assistance, EMAP has issued $668,636 in funds to 56 homeowners to bring their mortgages current.
Effective July 1, the legislature opened EMAP eligibility to give CHFA more flexibility in determining what constitutes a significant reduction in income and to expand the circumstances that constitute a financial hardship. From July 10, 2009, to August 4, 2009, 19 EMAP loans have been approved for $1,412,000 in assistance under the new guidelines.
“These programs are working and, under the new eligibility guidelines, they’re going to work even better,” Representative Barry said. “Connecticut used to have one of the top 10 highest foreclosure rates in the country. We’re now ranked 27, which is a testament to the policies we’ve enacted to try to stop the flood of foreclosures from washing us away.”
“These programs are a hand up, not a hand out, at a time when that’s what many families really need,” said Senator Duff. “These loans will help hundreds avoid foreclosure and make ends meet, and that’s something that benefits us all. Under expanded eligibility — which has only been in effect for a month — greater access is already being granted to those who need it.”
Funding for both the EMAP and CTFAMILIES comes from pre-Ullman issued CHFA bonds and is independent from the state’s General Fund and the Special Banking Fund.
Funding for the foreclosure mediation program comes from the state’s Special Banking Fund, which is paid for through licensing and other fees applied to banks, lenders, brokers and other financial institutions.
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