Connecticut Enacts New Laws for Foreclosure Alternatives
by: Margaret Wright
CT Foreclosure by Market Sale, Servicer Licensing and Foreclosure Mediation
House Bill No. 5514
Optional Method of Foreclosure
Effective October 1, 2014, the Connecticut state legislature has enacted House Bill No. 5514 providing for an alternate method of foreclosure. Under the new bill a first mortgage against a property may be foreclosed by a judgment of foreclosure by market sale upon written motion of the mortgagee and with consent of the mortgagor. Previously, the optional method of foreclosure available was foreclosure by a decree of sale, instead of a strict foreclosure, at the discretion of the court before which the foreclosure proceedings are pending.
The bill outlines the steps which must be taken in order to utilize the market sale foreclosure process.
Prior to initiation of foreclosure utilizing the market sale process, notification must be sent to the mortgagor at the address of the property secured by the mortgage. This notice must include the following information:
- A notice advising the mortgagor of their delinquency or default
- A notice that the mortgagor has the option to discuss whether the property may be marketed for sale, by mutual consent of the mortgagor and mortgagee
- The contact information of the mortgagee
- The date by which the mortgagor must respond, may not be less than 60 days from date of notice
- A notice that the mortgagor should contact a licensed real estate agent to discuss the feasibility of listing the property for sale pursuant to the foreclosure by market sale process
- That if both parties agree to process an appraisal will be required as well as an interior and exterior inspection
- The terms and conditions of the listing agreement and offer to purchase must be acceptable to both the mortgagor and mortgagee
- A notice that mortgage will sign an agreement to sell the property if an acceptable offer is received
- A notice in at least 10 point bold print that the mortgagor will not be eligible for foreclosure mediation if the mortgagor consents to a foreclosure by market sale.
Foreclosure proceedings may continue once the date as provided in the notice has passed and the market sale foreclosure process will not be utilized. The mortgagor must file an affidavit with the court indicating that the notice provisions had been complied with and that the mortgagor did not respond or the market sale process was otherwise unable to proceed despite mortgagor response. Other reasons for not proceeding with a market sale foreclosure include:
- Mortgagor and mortgagee are unable to reach a mutually acceptable agreement
- The appraisal uncovered that the subject property is not eligible for market sale foreclosure
- The mortgagee did not grant reasonable interior access to the property for the required appraisal
- The mortgagor and mortgagee were unable to reach agreement concerning an acceptable listing agreement
- No offers to purchase were received
- Offers to purchase received were unacceptable.
Where the mortgagor and mortgagee agree to discuss the market sale option the first step is for the mortgagee to obtain the appraisal of fair market value of the property. A copy of this appraisal must be provided to the mortgagee “as soon as practicable” after the mortgagee receives the report. If the appraisal indicates that foreclosure by market sale is an option, the mortgagor and mortgagee then must reach an agreement concerning a listing agreement. The mortgagee may not require use of a particular listing agent.
Where an offer to purchase on the agreed upon terms is received and acceptable to both mortgagor and mortgagee, the mortgagor shall execute a contract of sale reflecting the same and provide a copy to the mortgagee no later than five days after execution and also must provide written documentation evidencing the mortgagor’s consent to the filing of a motion for judgment of foreclosure by market sale.
Where an offer to purchase is received but is not acceptable to the mortgagee, the mortgagee must provide the mortgagor with written notice of the decision including a general explanation and reasons for the decision.
After receipt of the sale contract and mortgagor’s consent, the mortgagor may commence foreclosure action to consummate the sale no later than 30 days after receipt or 30 days after any sale contract contingencies have been satisfied or expired.
The mortgagee may then file a timely motion for judgment in which the court may make a final judgment approving the purchase and sale contract, appoint a person to make the sale and proceed with the foreclosure by market sale judicial process.
House Bill No. 5353
Effective October 1, 2014, the Connecticut state legislature has enacted House Bill No. 5353 primarily amending the mortgage servicer licensing requirements and foreclosure mediation process.
House Bill No. 5353 contains additional technical amendments, including definition updates, concerning Connecticut financial institutions, consumer credit licenses, banking statues, the modernization of corporation law and reverse mortgage transactions.
Mortgage Servicer Licensing
The bill requires that as of January 1, 2015 all persons acting as a mortgage servicer, either directly or indirectly must be licensed under the new requirements. Institutions exempt from this licensing requirement are any bank or credit union that is federally insured and any wholly-owned or operating subsidiary of the federally insured bank or credit union. Mortgage lenders meeting certain requirements may also be exempt from the new servicer licensing requirement.
Pre-mediation requirements
The amendments to the servicing requirements also include the development of a pre-mediation review where a foreclosure action has been commenced. In this new pre-mediation step, the mediator may request documents be corrected or completed that have been previously submitted incomplete for an initial review. Corrected and completed requested documents will be resubmitted to the mediator for review.
View the recent Bills in their entirety at: http://www.cga.ct.gov/
About the Author:
Margaret Wright, J.D., is V.P. and Regulatory Compliance Director at Bankers Advisory. She is a graduate of Stonehill College and earned her Juris Doctor at Suffolk University Law School. She is admitted to the Massachusetts Bar. She can be reached at Margaret@bankersadvisory.com
Margaret Wright, JD, is regulatory compliance director with CLA. She is a graduate of Stonehill College and earned her juris doctor at Suffolk University Law School. She is admitted to the Massachusetts Bar.
Great post….Foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.NJ Attorney