Connecticut Seal

General Assembly

 

Raised Bill No. 6484

January Session, 2009

 

LCO No. 3717

 

*03717_______BA_*

Referred to Committee on Banks

 

Introduced by:

 

(BA)

 

AN ACT CONCERNING EMERGENCY MORTGAGE RELIEF.

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

Section 1. (NEW) (Effective October 1, 2009) As used in this section and sections 2 to 5, inclusive, of this act:

(1) "Borrower" means the owner-occupant of an eligible home, who is also the borrower under an eligible mortgage of such real property.

(2) "Eligible home" means a one-to-four family residential property located in this state including, but not limited to, a single family unit in a common interest community that is a borrower's principal residence and is subject to an eligible mortgage.

(3) "Lender" means the original lender under an eligible mortgage, or its agents, successors or assigns.

(4) "Eligible mortgage" means any loan or extension of credit that became effective during the period commencing on January 1, 2000, and ending on December 31, 2008, that encumbers an eligible home, and in which the principal amount of the loan does not exceed the current conforming loan limit, as established from time to time by the Federal National Mortgage Association, on the date the foreclosure was commenced.

(5) "Sum available for debt service" means thirty-eight per cent of the average monthly income of the borrower and the adult members of the borrower's family.

Sec. 2. (NEW) (Effective October 1, 2009) (a) From October 1, 2009, to June 30, 2012, inclusive, any party to an action to foreclose an eligible mortgage on an eligible home may, before the entry of judgment of foreclosure, move the court to grant emergency mortgage relief pursuant to this section.

(b) Upon motion made by any party pursuant to subsection (a) of this section, the court shall appoint a real estate appraiser who shall provide the court with an opinion regarding the current fair market value of the eligible home. The court may make such appointment by agreement of the parties or by direct appointment. In making such appraisal, the appraiser shall assume the eligible home has been listed with a licensed real estate broker and exposed to the market for ninety days. Any costs incurred by the court as a result of a direct appointment of an appraiser under this section shall be assessed against the parties in the court's discretion. In addition to the appraiser appointed by the court, any party may submit an appraisal of the eligible home within a time frame set by the court.

(c) At the time the court appoints an appraiser under subsection (b) of this section, the court shall also:

(1) Order the borrower and adult members of the borrower's family who occupy the eligible home to submit to the court under sworn affidavit evidence of (A) the gross income earned from all sources during the month in which the appraiser in appointed and each of the three months preceding such appointment, and (B) the expenses accrued during the month in which the appraiser in appointed and each of the three months preceding such appointment;

(2) Order the lender to submit to the court under sworn affidavit (A) evidence of the original principal of the eligible mortgage being foreclosed and the unpaid balance owed by the borrower on such mortgage, and (B) a history of all debits and credits with respect to the balance owed by the borrower on such mortgage; and

(3) Order the lender to provide notice of the motion for emergency mortgage assistance to all persons holding an interest in any instrument for which the eligible home serves as collateral or to all fiduciaries of such persons.

(d) After the court has received all appraisals of the eligible home required or permitted pursuant to subsection (b) of this section, and all financial evidence required pursuant to subsection (c) of this section, and after giving the parties to the foreclosure an opportunity to be heard, the court shall determine, based on the evidence submitted by all parties: (1) The present fair market value of the eligible home; (2) the outstanding balance on the note owed by the borrower and secured by the eligible mortgage; (3) the average monthly income that the borrower and the adult members of the borrower's family would reasonably be assumed to earn during the foreseeable future; (4) the sum available for debt service; and (5) the monthly debt service for a mortgage note in a principal amount equal to the fair market value of the eligible home, as determined by the court, if such note were amortized over a thirty-year term at an interest rate equal to the interest rate currently being offered to qualified owner-occupants of one-to-four family homes by ____.

(e) If the court determines that the sum available for debt service would not be sufficient to pay the monthly debt service calculated by the court under subsection (d) of this section, the court shall deny the motion for emergency mortgage relief filed pursuant to subsection (a) of this section.

(f) If the court determines that the sum available for debt service would be sufficient to pay the monthly debt service calculated by the court under subsection (d) of this section, the court shall order emergency mortgage relief and shall require that the existing promissory note signed by the borrower and secured by the eligible mortgage be divided into two notes, as follows:

(1) If the sum available for debt service would support a monthly payment greater than the monthly debt service calculated under subdivision (5) of subsection (d) of this section, the court shall fix the principal amount of the first note in the amount the sum available for debt service would support.

(2) The amount of the other note shall be the difference between the current outstanding balance owed by the borrower on the eligible mortgage, as determined by the court under subsection (d) of this section, and the principal amount of the first note pursuant to subdivision (1) of this subsection. The second note shall not bear interest and shall be payable to the lender only upon the sale of the eligible home or upon default by the borrower under the first note.

(g) After the court determines the amounts of the notes pursuant to subsection (f) of this section, the court shall order the lender to promptly (1) record the order restructuring the note secured by the eligible mortgage on the land records in the municipality in which the eligible home is located; and (2) deliver a copy of the court's order of emergency mortgage assistance to the persons to whom the lender provided notice under subdivision (3) of subsection (c) of this section.

Sec. 3. (NEW) (Effective October 1, 2009) (a) After an eligible mortgage is restructured pursuant to section 2 of this act, such mortgage shall continue to secure payment and performance of both the notes described in subsection (f) of section 2 in accordance with their terms, and such restructure shall not affect the priority of its lien.

(b) Restructuring an eligible mortgage pursuant to section 2 of this act shall not affect the priority of voluntary and involuntary liens on the eligible home that are subordinate to such mortgage and shall not extinguish such subordinate liens. Notwithstanding any provision of the general statutes, from the date of the court's order for emergency mortgage relief, (1) no interest shall accrue on such liens, (2) such liens shall become due and payable only upon the sale or transfer of the eligible home, and (3) the holder of such liens may not seek to foreclose such liens except following default under the note described in subdivision (1) of subsection (f) of section 2 of this act.

Sec. 4. (NEW) (Effective October 1, 2009) The borrower shall commence payment of the note described in subdivision (1) of subsection (f) of section 2 of this act in accordance with its terms on the first day of the first month following the date on which the court enters its order of emergency mortgage relief pursuant to section 2 of this act. The lender shall notify the borrower of the payment due on such note before such payment is due. If the borrower defaults in its payment obligations under such note, the lender shall be entitled to foreclose on the mortgage securing the note, and the borrower shall not be entitled to further relief under section 2 of this act.

Sec. 5. (NEW) (Effective October 1, 2009) Nothing in sections 1 to 4, inclusive, of this act shall be construed to prevent the lender from withdrawing a foreclosure action and resorting to such other remedies as may be available under law.

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

Section 1

October 1, 2009

New section

Sec. 2

October 1, 2009

New section

Sec. 3

October 1, 2009

New section

Sec. 4

October 1, 2009

New section

Sec. 5

October 1, 2009

New section

Statement of Purpose:

To provide, in the public interest, an emergency mechanism by which courts may assist homeowners who are in foreclosure.

[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.]