AN ACT CONCERNING RELIEF FOR FAMILIES FACING FORECLOSURE.

This bill expands eligibility for the Connecticut Housing Finance Authority's (CHFA) Emergency Mortgage Assistance Program (EMAP), changes the timing for program applications, and makes other program modifications. By law, EMAP provides short-term loans to homeowners experiencing financial hardships beyond their control. The loans help them pay their mortgages. The program covers one-to-four family owner-occupied homes, including single-family units in a condominium, cooperative, or other common interest community.

The bill also expands eligibility for a CHFA mortgage refinancing program. Under current law, CHFA's Connecticut Families home mortgage refinancing program is for people with adjustable rate mortgages. The bill expands the program to include all homeowners facing financial hardships that affect their ability to make their monthly payments.

EFFECTIVE DATE: Upon passage, applicable to loan applications filed after July 1, 2008

Under current law, homeowners are eligible for EMAP if they (1) lose 25% or more of total family income for specific reasons beyond their control (see BACKGROUND) or (2) experience a significant increase in mortgage payments (e. g. , adjustable rate mortgage). The bill makes eligible people who lose less than 25% of their income due to an unanticipated rise in housing or other expenses unrelated to credit or installment debt accumulated for recreational or nonessential items.

The bill adds to the definition of “housing expense” uninsured damage to the mortgaged property that affects liveability and necessitates costly repair. Under current law, “housing expense” means the sum of a mortgagor's utility and heating expenses; common interest community costs (if any); monthly hazard insurance payment; taxes; and required mortgage payments, including escrows.

The bill requires (1) an applicant to provide CHFA satisfactory proof of the unanticipated rise in expenses and (2) CHFA to adopt written procedures specifying the criteria for evidence that a mortgager must submit to determine if a reduction of less than 25% is valid.

The law requires homeowners also to meet other eligibility criteria, such as the likelihood of being able to resume full mortgage payments within five years.

Under current law, a person may apply for the program only when a mortgagee has notified a homeowner of its intention to foreclose (see BACKGROUND). The bill also allows a person to apply when he or she is 60 days or more delinquent on mortgage payments. It specifies that CHFA may refer the applicant to a counseling agency approved by the U. S. Department of Housing and Urban Development as part of the application process.

By law, eligible applicants may receive an EMAP loan to assist in paying a mortgage until they can afford to repay the EMAP loan based on their housing expenses. Specifically, when a mortgagor's total housing expense (e. g. , mortgage and other costs) is less than or equal to 35% of his or her family 's total income, he or she must pay CHFA the difference between 35% aggregate family income and the total housing expense, unless the authority determines otherwise after examining the person's financial circumstances and ability to repay the EMAP loan. But when the mortgagor's total housing expense is greater than 35%, CHFA defers repayment until that expense drops to 35% or less of the family's total income. Under the bill, if the EMAP loan repayment pushes a family's housing expenses above 35%, CHFA must defer repayment.

By law, a person is eligible for EMAP due to “financial hardship due to circumstances beyond the mortgagor's control. ” The threshold for financial hardships is a 25% reduction in a family's total income or a significant increase in the periodic payments for a mortgage (including principal, interest, taxes, insurance, and, if applicable, condo fees. ) Under the law, homeowners qualify for EMAP if the hardship cannot be alleviated by selling assets and income reduction is due to:

1. unemployment or underemployment of one or more of the mortgagors;

2. a loss, reduction, or delay in receiving benefits from a government (e. g. , Social Security) or private (e. g. , pension or retirement) entity;

3. divorce or a loss of support payments;

4. disability, illness, or death of a mortgagor;

5. uninsured damage to the mortgaged property that affects liveability and necessitates costly repairs; or

6. expenses related to the disability, illness or death of a mortgagor's family member.

By law, a homeowner does not qualify for EMAP if (1) the hardship is related to installment debt for recreational or nonessential items accumulated before the alleged circumstances beyond the mortgagor's control occurred and (2) that debt would have caused the mortgagor's total debt service to exceed 60% of aggregate family income at that time.

By law, a lender must comply with the EMAP statute if it wants to foreclose on a mortgage on a one-to-four family, owner-occupied residence that is not insured by the Federal Housing Administration (FHA) and the borrower (1) has not mortgaged the property for commercial or business purposes, (2) has not previously received EMAP assistance (except if the person has reinstated the mortgage and has not been delinquent for six consecutive months since the reinstatement), and (3) is not in default except for the monetary delinquency.

This means the lender must send a notice to the borrower stating that he or she has 60 days to (1) have a conference with the lender or a face-to-face meeting with a credit counseling agency to attempt to resolve the default and (2) contact CHFA about EMAP if they are unsuccessful in doing so. If the parties reach an agreement but the borrower still cannot pay due to financial hardship, he or she can still apply for emergency assistance after 30 days of any default. If the borrower fails to comply with the deadlines or CHFA fails to approve the EMAP application within 30 days of its filing, the foreclosure proceeding can continue. The lender must file an affidavit confirming the forclosure.

The act provides that EMAP participants can still exercise their rights under the foreclosure mediation program, but the concurrent exercise of those rights cannot delay the EMAP eligibility determination.

Yea

Nay

(03/10/2009)