OLR Bill Analysis

sHB 6351

AN ACT CONCERNING FORECLOSURE MEDIATION.

SUMMARY:

This bill extends the judicial branch's foreclosure mediation program to owners of properties occupied by nonprofit charitable or religious organizations (see COMMENT). Current law restricts the program to owner-occupants of one-to-four unit residential properties.

The bill suspends the mortgagor's obligation to respond in the foreclosure action, and prohibits the mortgagee from making a motion or the court from entering a default or judgment, until 15 days have passed after the earlier of the mediation period's expiration or termination.

The bill eliminates the current 30-day limit for extensions of the mediation period.

The bill also makes conforming changes.

EFFECTIVE DATE: Upon passage, except a conforming change is effective October 1, 2011.

EXTENSION TO NONPROFIT CHARITABLE OR RELIGIOUS ORGANIZATIONS

The bill extends the foreclosure mediation program to owners of real property occupied by a nonprofit charitable or religious organization. As is the case with current requirements for residential owners, the owner must be the borrower on a mortgage encumbering the property, and the property must be located in Connecticut. By law, to participate in the program, a residential owner must be the owner-occupant of a one-to-four family property that is his or her primary residence.

Current law requires the loan that is the subject of the foreclosure action to be primarily for personal, family, or household purposes. The bill specifies that the loan may also be primarily for nonprofit charitable or religious purposes.

SUSPENSION OF MORTGAGOR'S OBLIGATION TO RESPOND AND PROHIBITION ON MOTIONS AND JUDGMENTS

Under current law, when the mediation period is required and available, a court cannot enter a judgment of strict foreclosure or foreclosure by sale until the mediation period has expired or otherwise ended, whichever is earlier. The bill instead prohibits a court from entering a default or judgment of any kind until 15 days have passed since the mediation period expired or ended, whichever is earlier. Until that time, the bill also (1) prohibits a foreclosing mortgagee from making a motion for default or judgment, or any motion or request with respect to the mortgagor's pleadings, and (2) suspends the mortgagor's obligation to respond in the foreclosure action.

The bill specifies that these provisions do not vacate any previously entered defaults or judgments in actions pending on or before its passage.

ELIMINATION OF 30-DAY EXTENSION PERIOD

By law, the mediation period must conclude within 60 days after the foreclosure action's return date, unless the court grants an extension. Current law allows the court to extend the mediation period for up to 30 days for good cause shown, on the court's own motion, the motion of any party, or the mediator's written request. The bill eliminates this 30 day-limit for an extension of the mediation period.

BACKGROUND

Related Bill

sHB 6463 (File 200), reported favorably by the Housing Committee, also (1) limits the types of actions that mortgagees and courts may take, and suspends the mortgagor's obligation to respond in the foreclosure action, for 15 days past the earlier of the mediation period's expiration or termination and (2) eliminates the current 30-day limit on mediation extensions. In addition, sHB 6463 extends the program's termination date for two years, from July 1, 2012 until July 1, 2014.

COMMENT

Effective Date

Section 3 of the bill, effective October 1, 2011, makes a conforming change by specifying that the chief court administrator must establish a foreclosure mediation program for property occupied by nonprofit charitable or religious organizations, as well as residential properties. The rest of the bill, which extends the mediation program to properties occupied by nonprofit charitable or religious organizations, is effective from passage. Thus, it is unclear whether nonprofit charitable or religious organizations can participate in the mediation program between the bill's passage and October 1, 2011.

COMMITTEE ACTION

Banks Committee

Joint Favorable Substitute

Yea

14

Nay

3

(03/15/2011)