Thursday, June 23, 2011

Connecticut Introduces an Excellent Foreclosure Mediation Program

Connecticut lawmakers hope to help distressed homeowners deal with lenders who negotiate loan modifications while foreclosing at the same time. The state law makers are implementing a mandatory eight-month stay on foreclosure processes when homeowners enter mediation with a lender. “This is an effort to let the mediation process play itself out and give them space,” said state representative William Tong (D-Stamford). Tong is co-chair of the state legislature Banks Committee. This effort is designed to supplement the state’s groundbreaking foreclosure mediation program, which is run by the state judicial branch and is mandatory for homeowners facing foreclosure. State senator Bob Duff (D-Norwalk) believes that the 8-month stay is necessary because although “a lot of people were able to work things out within three months…there were some very difficult cases out there and those took longer”. The state has argued that this massive regulation is necessary because foreclosures are hurting home values too much in the state. I believe that this is an excellent response to a challenging problem, but I think that it needs to be implemented for reasons other than declining home values. It should be implemented due to the inherent unfairness of putting home owners through a lengthy loan modification process and later deny any relief after nine months to a year of cooperation by the distressed home owner.
Connecticut also recently attempted to cut MERS out of the equation in property transactions by passing a bill requiring foreclosing entities to register properties directly with town clerks or face fines. This also is a well though-out response to a difficult situation. Hopefully, more states will follow the lead of Connecticut. I also should comment that the many states require mediation or offer it to home owners in foreclosure.. the problem is that most state mediation plans place little leverage in lenders. Frequently, lenders do not even appear and the “representative” attending the mediation does not have authority – so what is the point?? Still, medication has been a very valuable tool. New York, and New Jersey have excellent medication programs and Florida has a very weak one.

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