Connecticut Seal

General Assembly

 

Raised Bill No. 5552

February Session, 2008

 

LCO No. 1535

 

*01535_______HSG*

Referred to Committee on Select Committee on Housing

 

Introduced by:

 

(HSG)

 

AN ACT CONCERNING PROCEDURES IN THE FORECLOSURE OF RESIDENTIAL PREMISES.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective July 1, 2008) As used in sections 2 to 6, inclusive, of this act:

(1) "Dwelling unit" means any house or building, or portion thereof, which is occupied, designed to be occupied, or rented, leased or hired out to be occupied as a home or residence of one or more persons;

(2) "Foreclosure action" means a civil action to foreclose a mortgage or other lien on residential premises;

(3) "Residential premises" means a building or buildings that contain one or more dwelling units; and

(4) "Reasonable effort to negotiate a fair resolution of the dispute" means the use of applicable loss mitigation practices intended to help the mortgagor retain ownership of the residential premises, including, but not limited to, capitalizing arrearages, extending the term of the loan, waiving late and other fees, and modifying the interest rate, except that if the mortgagor does not want to retain ownership of the residential premises, loss mitigation practices include, but are not limited to, short sales and deeds in lieu of foreclosure.

Sec. 2. (NEW) (Effective July 1, 2008) (a) At least thirty days prior to filing any foreclosure action regarding residential premises, but not earlier than a date the mortgage is at least sixty days in default, the mortgagee or mortgage servicer shall mail to each mortgagor, on its own letterhead, a notice, in plain and simple language and readable format, containing at least the following information: (1) A statement that the mortgage is in default and a warning that failure to correct the default could result in the loss of the mortgagor's home; (2) a statement of the amount of the default and how a reinstatement figure may be obtained, including the telephone number for obtaining such figure; (3) a statement that the mortgagee is prepared to make a reasonable effort to negotiate a fair resolution of the dispute and that the mortgagor should make direct contact with the mortgagee or its servicer; (4) the name, address and contact information, including the toll-free telephone number, for the mortgagee's loss mitigation contact or other person authorized to negotiate a resolution of the default, a modification of the loan or other workout of the dispute; (5) the telephone number of the foreclosure hotline of the Department of Banking; and (6) a statement that the mortgagor should contact a housing counselor certified by the United States Department of Housing and Urban Development. The plaintiff shall attach to the notice a list of housing counselors certified by the United States Department of Housing and Urban Development in the region where the property being foreclosed upon is located.

(b) Beginning prior to initiation of a foreclosure action and continuing until a foreclosure judgment becomes final, the plaintiff shall have a duty to make a demonstrable and documented reasonable effort to negotiate a fair resolution of the dispute.

(c) The Banking Commissioner may adopt regulations pursuant to chapter 54 of the general statutes to implement the provisions of this section.

Sec. 3. (NEW) (Effective July 1, 2008) (a) The Chief Court Administrator shall prescribe the following foreclosure forms in plain and simple language and readable format:

(1) A notice form that shall include, but not be limited to, (A) a statement that identifies the form as a legal action that may result in the loss of the defendant's home; (B) a statement that a defendant, that wants to be heard, should file an appearance and an answer or other permissible response, for which forms are attached; (C) an advisement that the defendant should seek legal counsel, along with the name and telephone number of the foreclosure hotline of the Department of Banking, any pro bono attorney foreclosure referral networks, the state-wide legal services hotline, and the lawyer referral service of the state or local bar association; (D) an advisement that the defendant should contact a housing counselor certified by the United States Department of Housing and Urban Development; (E) a place for the plaintiff to fill in the name, address and contact information, including the toll-free telephone number, for the loss mitigation contact of the plaintiff or other person authorized to negotiate a settlement of the action, a modification of the loan or other resolution of the dispute; (F) a place for the plaintiff to state whether consent is given to the defendant's attorney to communicate directly with the loss mitigation contact regarding any temporary indulgence, repayment plan, forbearance proposal or other settlement, provided a copy of any written correspondence is also sent to the plaintiff's attorney; (G) a statement that the plaintiff has a duty to make a reasonable effort to negotiate a fair resolution of the dispute and that the defendant should make direct contact with the plaintiff, its servicer or person identified in subparagraph (E) of this subdivision; and (H) a statement for the plaintiff describing how an itemized reinstatement figure may be obtained, including the telephone number for obtaining such a figure. The form shall also include the name of the plaintiff, the docket number of the case, the address of the court and the telephone number of the office of the court clerk.

(2) A foreclosure answer form that can be returned to the court and that includes a (A) place for the defendant to admit, deny or plead lack of knowledge of each paragraph of the complaint; (B) checklist of foreclosure defenses, including equitable defenses; and (C) space for the defendant to state any other legal or equitable defenses or special defenses that such defendant may claim.

(b) The plaintiff in every foreclosure action of residential premises shall attach to the foreclosure complaint, as the first sheets of the document package on top of the summons, the following:

(1) The notice form prescribed by the Chief Court Administrator pursuant to subdivision (1) of subsection (a) of this section, completed appropriately with information available to the plaintiff;

(2) An appearance form for each defendant, with the portions of the form known to the plaintiff completed;

(3) The answer form prescribed by the Chief Court Administrator pursuant to subdivision (1) of subsection (a) of this section; and

(4) A list of housing counselors certified by the United States Department of Housing and Urban Development in the region where the property being foreclosed upon is located.

(c) If a mortgagee or mortgage servicer enters into an agreement with a mortgagor to suspend, without withdrawing or dismissing, a pending foreclosure action, the mortgagee shall not resume any activity in pursuit of the foreclosure action unless, at least fifteen days prior to such resumption or at such other time as may be specified by court order, the mortgagee delivers to the mortgagor a notice stating that such mortgagee will resume foreclosure procedures after fifteen days and attaches a new copy of the notices required by subsection (b) of this section.

(d) The plaintiff in each foreclosure action shall include within the complaint an allegation as to whether the premises are or are not residential premises.

Sec. 4. (NEW) (Effective July 1, 2008) (a) The plaintiff shall certify upon each pleading in a foreclosure action that a copy of the pleading has been sent to each party appearing pro se and to each appearing counsel and, if any defendant has not appeared, to that defendant.

(b) Within five days after the filing of a foreclosure action, the plaintiff shall file with the court and mail to the defendant or the defendant's attorney a copy of the documents supporting the entry of a judgment for the plaintiff, including, but not limited to, the note evidencing the debt, the original mortgage executed by the borrower, and any assignments or other evidence demonstrating the transfer of ownership of the mortgage and note, and the succession of holders of the mortgage and note.

(c) No judgment shall be entered in a foreclosure action unless the plaintiff under oath certifies (1) that the notice required pursuant to subsection (a) of section 2 of this act was sent to each defendant; (2) that it has made reasonable efforts to comply with the loss mitigation requirements of subsection (b) of section 2 of this act; (3) an itemized statement of such efforts; and (4) that it has complied with all applicable standing orders of the court. Upon its own initiative or upon motion of the defendant, the court may stay proceedings upon a finding that, despite reasonable efforts by the defendant to propose a reasonable reinstatement or loan workout, the plaintiff has failed to respond in a timely manner.

(d) No judgment shall be entered in a foreclosure action unless the plaintiff establishes through evidence that the plaintiff was the owner of the mortgage and note at the time the foreclosure action was initiated and is the owner at the time that a judgment of foreclosure is entered. If the plaintiff is not the original mortgagee of the mortgage, the plaintiff shall establish through evidence the chain of title of the mortgage and note documenting the plaintiff's ownership. No judgment shall be entered in a foreclosure action against the owner of residential property who resides in the property until at least ninety days after the return day.

(e) No fees shall be approved in a foreclosure action unless the court determines that the fees are reasonable. No fees for appraisals, inspections or other services shall exceed their actual cost to the plaintiff.

(f) In a foreclosure by sale, the court shall not award a deficiency judgment to a plaintiff who fails to bid at least the appraised value of the property.

Sec. 5. (NEW) (Effective July 1, 2008) (a) A mortgage of residential premises shall be reinstated at any time prior to entry of judgment if the defendant pays all amounts, other than amounts required by acceleration of the mortgage, due at that time under the mortgage, including unpaid principal and interest and the costs of the action to the date of payment.

(b) The defendant in a foreclosure action may raise any legal or equitable defense to the action.

Sec. 6. (NEW) (Effective July 1, 2008) (a) Foreclosure shall not affect the rental agreement of a tenant whose rental payment is subsidized under state or federal law or who occupies premises that are subject to a state or federal loan or assistance contract.

(b) In any foreclosure action of residential premises in which one or more dwelling units are occupied by a person other than the mortgagor or his immediate household and in which any of such persons are named defendants in the foreclosure action, the action shall, upon motion by such a defendant, be transferred to the division of the Superior Court with venue for housing matters pursuant to section 47a-70 of the general statutes and subsections (b) and (c) of section 51-348 of the general statutes.

This act shall take effect as follows and shall amend the following sections:

Section 1

July 1, 2008

New section

Sec. 2

July 1, 2008

New section

Sec. 3

July 1, 2008

New section

Sec. 4

July 1, 2008

New section

Sec. 5

July 1, 2008

New section

Sec. 6

July 1, 2008

New section

Statement of Purpose:

To protect homeowners and renters in the foreclosure process by establishing a duty for mortgagors and mortgage servicers to resolve cases so that the homeowner retains the home, requires plain language notices and that pleadings be sent to defendants, and protects renters in foreclosed buildings.

[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]