Future is Uncertain for State’s Groundbreaking Foreclosure Mediation Program
April 26, 2018
Source: Hartford Courant
Connecticut General Assembly (HB 5495 full text/information)
Connecticut’s foreclosure mediation program — launched during the height of the national mortgage crisis a decade ago — could become permanent, but a bill winding its way through the legislature faces an uphill battle.
The program, which brings together borrowers and lenders, was started in 2008 and initially was intended to be temporary but has been extended several times. The program is set to expire June 30, 2019.
The bill, which narrowly cleared the General Assembly’s banking committee in a 10-9 vote and is now pending in the wider legislature, would remove a “sunset” provision for the program.
While the mortgage crisis has eased significantly in Connecticut, program supporters argue that thousands of borrowers still face the potential loss of their homes.
In 2017, 3,700 borrowers qualified for mediation — an intermediate step before the foreclosure enters the courtroom — down from 9,799 in 2009, the height of the foreclosure crisis in Connecticut, according to the state’s judicial branch.
“Although the foreclosure crisis has receded from the headlines, it is still a problem out there,” Rep. Matthew Lesser, D-Middletown and co-chair of the banks committee, said. “The idea of the program is very simple: borrowers sit down with lenders and try to work things out. In a huge number of cases it works out, and that is enough.”
Opponents of the bill say removing the sunset provision a year early is premature.
Rep. William Simanski, R-Granby and a member of the banks committee, voted against the bill, saying an evaluation next year would provide a more accurate snapshot.
“I see no need to do away with the sunset now,” Simanski said.
Lesser noted that mediation relieves the burden on the court system and isn’t paid for by taxpayers. The cost is picked up by the banking industry, Lesser said.
The cost of the program initially was $2 million, but it rose each fiscal year to $6.3 million in 2016-2017, according to a state auditor report earlier this year.
But in the current fiscal year, lawmakers cut the budget for the program in half, to about $3.6 million, and its staff of mediators, supervisors and support personal was reduced to 20 from 50. The budget cut reflected the decline in foreclosure activity. The funds that were saved were allocated to the crumbling foundation problem in eastern Connecticut.
Housing advocates acknowledged the decline in foreclosures but noted the significant role the mediation program still plays in keeping borrowers in their homes.
According to the judicial branch, 27,958 cases were completed between the start of the mediation program on July 1, 2008 and Dec. 31, 2017. Of those, 19,656 cases, or 70 percent, resulted in borrowers staying in their homes; 4,444, or 16 percent, reached agreements for a short sale or other measure for leaving the home; and 3,858, or 14 percent, weren’t settled.
The program served as a model for other states after it was launched.
Jeff Gentes, a staff attorney who manages foreclosure prevention at the Connecticut Fair Housing Center in Hartford, noted there will be always be “ebbs and flows” in foreclosure activity.
“If those numbers were 250, I’d acknowledge there would have to be some floor,” Gentes said. “As long as the program is serving thousands of people, it’s more than worth its while.”