OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http: //www. cga. ct. gov/ofa

sHB-6351

AN ACT CONCERNING FORECLOSURE MEDIATION.

As Amended by House "A" (LCO 8179)

House Calendar No. : 184

Senate Calendar No. : 635

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 12 $

FY 13 $

Judicial Dept.

GF – Implements Budget

5. 2 million

5. 2 million

Depts. of Agriculture, Environmental Protection; Commission on Culture & Tourism; Connecticut Housing Finance Authority; State Library

GF - Revenue Gain

Greater than 200,000

Greater than 250,000

Note: GF=General Fund

Municipal Impact:

Municipalities

Effect

FY 12 $

FY 13 $

All Municipalities

Revenue Impact

See Below

See Below

All Municipalities

Savings

Potential

Potential

Explanation

Foreclosure Mediation

Sections 1 to 11 of the bill extend the sunset date of the Foreclosure Mediation Program from July 1, 2012 to July 1, 2014, and result in a cost of $5. 2 million in both FY 13 and FY 14, and $1. 4 million in FY 15. 1 It should be noted that funding of $5. 2 million in FY 12 and FY 13 is included in PA 11-6 (the biennial budget) to continue funding for the foreclosure mediation program. Since the mediation deadline is 90 days after mediation begins, the cost of the bill would continue for three months into FY 15.

The bill also extends the foreclosure mediation program to owners of properties occupied by religious organizations. This is not expected to result in additional costs to the Judicial Department.

The bill also makes various changes to the foreclosure mediation process that do not result in a fiscal impact.

General-Use Prepaid Cards and Gift Certificates

Sections 9 to 12 of the bill do not result in a fiscal impact to the state as they concern the usage of “general-use prepaid card” and “gift certificate” transactions between individuals and private entities.

Registration of Properties in Foreclosure

Sections 13 to 15 of the bill will result in a State revenue gain estimated to be at least $200,000 in FY 12 (based on partial year implementation) and $250,000 in FY 13. Payment of the land record filing fee would be required of a person when registering a residential2 property (the title of which has vested through foreclosure) with the municipality in which it is located. Similarly, registration and payment of the same fee would be required of any person commencing an action to foreclose a mortgage on residential property. 3 The land record filing fee is $53, of which $38 is remitted to the State ($36 is deposited to the Community Investment Account4; $2 is deposited to the State Library). 5

A minimal revenue impact to municipalities will result. The bill: (a) Expands the list of properties in foreclosure that are subject to mandatory registration to include commercial and residential buildings containing one or more dwelling units (under current law mandatory registration is restricted to one-to-four family dwellings); (b) removes a requirement that the property be vacant; (c) requires registration when a foreclosure action is commenced; and (d) eliminates the option of registering with the Mortgage Electronic Registration Systems (MERS) instead of the municipality. However, the amount towns collect from registrants is reduced from $100 to $15, the municipal portion of the land record filing fee6. Survey responses from thirteen municipalities indicate that, since 10/1/097, the number of $100 registration fees collected per community has ranged from none to 53. The net revenue impact from the additional registrations and the fee reduction will vary according to each community's experience, but is anticipated to be less than $5,000.

Additional local revenues would be generated by collection of civil penalties from persons failing to register properties. The bill specifies penalties of: (1) $100 for a plaintiff in a foreclosure action, up to a maximum of $5,000, and (2) $250 for a person in whom title to a residential property has vested through a foreclosure action, up to a maximum of $25,000. Municipalities would be authorized to institute civil actions to collect such penalties.

Reporting of occupied properties subject to foreclosure may result in earlier identification of persons responsible for remediating housing code violations that render housing units unsafe. Local governments may experience savings to the extent that this mitigates the need to provide for tenant's housing or health needs at town expense.

The bill would also result in additional hearings before the Superior Court. It is anticipated that the number of additional hearings would be minimal, and would not result in additional costs to the Judicial Department.

House “A” struck the underlying bill and its associated fiscal impact and results in the impacts described above.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation, as well as trends in property foreclosures.

Sources:

Core-CT Financial Accounting System

1 HB 6650 (AAC Implementing the Provisions of the Budget Concerning the Judicial Branch, Child Protection, Criminal Justice, Weigh Stations and Certain State Agency Consolidations) also extends the sunset date for the foreclosure mediation program. This bill has passed both the House and Senate.

2 As defined in the bill.

3 According to realtytrac. com, the number of new foreclosures in Connecticut was 747 in February 2011.

4 This account benefits programming under the Departments of Agriculture and Environmental Protection; the Commission on Culture and Tourism; and the Connecticut Housing Finance Authority.

5 HB 6651 (AAC the Provisions of the Budget Concerning General Government), which eliminates the sunset of a $10 land record filing fee surcharge on 7/1/11, has passed both the House and Senate.

6 Of this amount: $1 must be used for preservation and management of historic documents; $3 must be deposited to general revenues for capital improvements; and $11 is retained by the town clerk.

7 PA 09-144's effective date.