Senator Pat Billie Miller, Senate Chair of the Banking Committee, led passage Thursday of legislation to place a statute of limitations on the collection of long-dormant second loans known as zombie mortgages.
The legislation, SB 1336, passed the Senate on a 35 – 1 vote and will head to the House of Representatives for consideration.
The bill protects homeowners with second mortgages which they often believed to be satisfied or forgiven by lenders who had stopped collection activities and ceased communications related to the debt. Quite often, the original loan is written off and sold to a third party.
Recently, as property values have rebounded, companies have increasingly resumed collection and foreclosures on these long-dormant second mortgages.
SB 1336 bars lenders from beginning foreclosure proceedings on secondary mortgages 10 years after they stopped communicating with a borrower or 10 years after the scheduled date of the loan’s final payment.
Senator Miller, D-Stamford, introduced the bill after a constituent was caught off guard when an unfamiliar company that had purchased his second mortgage, which he thought had been forgiven, began trying to collect on the loan with interest.
“This bill protects our homeowners from foreclosure threats based on debt that’s been dormant for more than a decade,” Senator Miller said. “The change puts Connecticut in alignment with national trends as states across the country move to shield consumers from the delayed impact of predatory lending practices. No one making reliable payments on their primary mortgage should face foreclosure because someone made an opportunistic decision to resurrect a secondary loan, years after deciding that collection wasn’t worth the effort when property values plummeted in the aftermath of the 2008 financial crisis.”
Share this page: