PA 15-124—sHB 6752

Banking Committee

Appropriations Committee

Judiciary Committee

AN ACT EXTENDING THE FORECLOSURE MEDIATION PROGRAM

SUMMARY: This act extends the state's foreclosure mediation program for three years, until July 1, 2019. Courts may not accept mediation requests on or after that date, and the program terminates when the mediation of all previously submitted requests concludes. Under prior law, courts could not accept mediation requests on or after July 1, 2016.

The act also expands the scope of the program for foreclosure actions with a return date on or after October 1, 2015. In these cases, it makes eligible an owner-occupant who is not a borrower on the mortgage but who is a permitted successor-in-interest (i. e. , a person who, among other things, holds title to the property as a result of certain events, such as divorce, legal separation, property settlement, or the borrower's death).

It expands the account history and related information a mortgagee must provide to a mediator and mortgagor by requiring the mortgagee to include copies of any agreements that modify the note or mortgage. Under the act, a mortgagee must also provide the most current version of required evaluation forms.

The act (1) specifies when the required pre-mediation meeting between the mediator and mortgagor must be held and (2) extends the deadline to submit certain forms and documentation to the mortgagee. The act allows the court, for good cause, to grant a mediator's motion to extend the premediation period.

The act requires the chief court administrator to report on the mediation program to the Banking Committee annually starting March 1, 2016 until March 1, 2019, instead of once by February 14, 2015. Under existing law, the chief court administrator must work with the governor's office, the banking industry, and consumer advocates to develop some of the required report data. The act requires that he also work with the Banking Department.

It also makes technical and conforming changes.

EFFECTIVE DATE: July 1, 2015

FORECLOSURE MEDIATION PROGRAM

The state's foreclosure mediation program determines whether parties can reach an agreement to avoid foreclosure. The Judicial Branch's foreclosure mediators conduct mediation sessions with the mortgagee (lender) and the mortgagor (borrower or certain non-borrowers) in a statutorily prescribed timeframe. The program is funded within available appropriations.

Permitted Program Participants

The act expands the types of homeowners who may participate in the foreclosure mediation program. Under existing law, a homeowner could participate in the program if he or she (1) was the owner-occupant of a one-to-four family home in Connecticut that he or she used as a primary residence and (2) was the borrower under a mortgage on the property. For foreclosure actions with a return date on or after October 1, 2015, the act also allows a homeowner who is not the borrower on the mortgage but is a “permitted successor-in-interest” to participate in the program.

Under the act, a “permitted successor-in-interest” is someone who is a defendant in a foreclosure action with a return date on or after October 1, 2015, and is:

1. a decedent-mortgagor's former spouse, who acquired sole title to the residential real property by virtue of (a) a transfer from the decedent's estate or (b) the death of the decedent-mortgagor where title was held as joint tenants or tenants in the entirety (see BACKGROUND) or

2. the spouse or former spouse of a mortgagor or former mortgagor who (a) acquired title by virtue of a transfer resulting from a divorce decree, legal separation agreement, or property settlement agreement and (b) ensures that all necessary consents to the disclosure of nonpublic personal financial information have been provided to the mortgagee (see below).

By law, a religious organization that is the owner of real property located in Connecticut and the borrower under a mortgage on such real property may also participate in the program.

Consent to the Disclosure of Nonpublic Personal Financial Information

By law, a mortgagor must file an appearance and foreclosure mediation certificate forms with the court within 15 days after the return date for the foreclosure action.

Under the act, for actions with a return date on or after October 1, 2015, in order for a spouse to be considered a permitted successor-in-interest, the court must confirm that the foreclosure mediation certificate consents to the full disclosure of certain nonpublic personal financial information by the mortgagee, to the extent the mortgagee has such information.

The spouse or former spouse must consent to disclosing this information to any other person who is obligated as a borrower on the note. Any other person who is a mortgagor must consent to disclosing this information to a spouse or former spouse.

If a foreclosure mediation certificate is not submitted by a mortgagor, other than a spouse or former spouse claiming to be a permitted successor-in-interest, the court must confirm, instead of the requirements described above, that the foreclosure mediation certificate submitted by the spouse or former spouse contains a signed statement certifying that all people who are obligated on the note have otherwise given documentation to the mortgagee authorizing the full disclosure by the mortgagee of that person's nonpublic personal information to the spouse or former spouse.

Under the act, the mortgagee may rebut any such certification, if it submits a written statement to the court certifying that, based on reasonable belief, the mortgagee does not possess such documentation.

Account History Requirement

By law, for foreclosure actions with return dates on or after July 1, 2009 for residential real property and on or after October 1, 2011 for real property owned by a religious organization, the court must notify all appearing parties when it assigns a case to mediation. The mortgagee or its counsel, upon receiving the notice of case assignment, must send an account history and related information to the mediator and mortgagor.

Under existing law, related information includes all reasonably necessary forms needed for the mortgagee to evaluate the mortgagor for common foreclosure alternatives available through the mortgagee, if any. The act requires the mortgagee to send the most current versions of these forms.

Existing law requires the mortgagee to also send the mediator and mortgagor a copy of the note and mortgage. Under the act, the mortgagee must also include any agreements modifying the note and mortgage.

Mediator and Mortgagor Pre-mediation Meetings

By law, the court must (1) assign a foreclosure mediator and (2) schedule a meeting with the mediator and the mortgagor. Under the act, the court must hold the meeting, if possible, within 49 days after the return date. Prior law required only the scheduling of the meeting within this timeframe.

Delivery of Forms and Documents to Mortgagee

Under the law, the mediator must confirm submission of the forms and documentation by the mortgagor to the mortgagee's counsel and at the mortgagee's election, directly to the mortgagee. Prior law required the mediator to do so as soon as practicable within 84 days after the return date. The act extends this deadline to (1) the end of any premediation period extension granted by the court (see below) or (2) three days after the court denies a motion for such an extension.

Premediation Period Extension

The act allows the court, for good cause, to grant a mediator's motion to extend the premediation period beyond the 84th day after the return date.

Under the act, the mediator must file such motion, with a copy simultaneously sent to the mortgagee and as soon as practicable to the mortgagor, not later than the 84th day after the return date. The mortgagee and mortgagor must file an objection or supplemental papers within five business days after the day the motion for extension was filed. The court must issue its ruling, without a hearing, within 10 business days after the date the motion was filed. If the court determines that good cause exists for an extension, it must establish an extended deadline so that the premediation period ends as soon as practicable, but not later than 35 days after the ruling. The court must consider the complexity of the mortgagor's financial circumstances, the mortgagee's documentation requirements, and the timeliness of the mortgagee's and mortgagor's compliance with their respective premediation obligations.

REPORTING REQUIREMENT

The act requires the chief court administrator, starting March 1, 2016 until March 1, 2019, to submit annually to the Banking Committee a summary of the mediation program and specified data collected from mediators' reports received from July 1, 2013 to December 31 of the year immediately preceding each report. Among other things, the specified data include the aggregate number of mediation cases, mediation sessions, and agreements reached. Prior law required the chief court administrator to report once by February 14, 2015.

Existing law requires the chief court administrator to work with the governor's office, the banking industry, and consumer advocates to develop the data points required for this report. Under the act, the chief court administrator must also work with the Banking Department to develop these data points for the annual reports.

BACKGROUND

Joint Tenancy

“Joint tenancy” is a type of concurrent estate in which co-owners have a right of survivorship. Thus, if one owner dies, his or her property interest passes to the surviving owner or owners by operation of law, avoiding probate.

Tenancy By The Entirety

“Tenancy by the entirety” is a type of concurrent estate where a married couple's ownership of property is treated as though a couple were a single legal person. Like joint tenancy, it also involves a right of survivorship. If one spouse dies, sole control of the property passes to the surviving spouse without going through probate.

OLR Tracking: MK; JB; PF; BS