Connecticut Seal

General Assembly

File No. 448

    February Session, 2016

Substitute Senate Bill No. 408

Senate, April 4, 2016

The Committee on Banking reported through SEN. WINFIELD of the 10th Dist., Chairperson of the Committee on the part of the Senate, that the substitute bill ought to pass.

AN ACT CONCERNING THE PROTECTION OF DELINQUENT HOMEOWNERS AND THE EMERGENCY MORTGAGE AND LIEN DEBT ASSISTANCE PROGRAM.

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

Section 1. Section 12-146 of the 2016 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

Unless the context otherwise requires, wherever used in this section, "tax" includes each property tax and each installment and part thereof due to a municipality as it may have been increased by interest, fees and charges. If any tax due in a single installment or if any installment of any tax due in two or more installments is not paid in full (1) on or before the first day of the month next succeeding the month in which it became due and payable, or if not due and payable on the first day of the month, (2) on or before the same date of the next succeeding month corresponding to that of the month on which it became due and payable, the whole or such part of such installment as is unpaid shall thereupon be delinquent and shall be subject to interest from the due date of such delinquent installment. Except for unpaid real estate taxes the collection of which was, or is, deferred under the provisions of section 12-174, and any predecessor and successor thereto, which unpaid real estate taxes continue to be subject to the provisions of such deferred collection statutes, the delinquent portion of the principal of any tax shall be subject to interest at the rate of [eighteen] eight per cent per annum from the time when it became due and payable until the same is paid, subject to a minimum interest charge of two dollars per installment which any municipality, by vote of its legislative body, may elect not to impose, and provided, in any computation of such interest, under any provision of this section, each fractional part of a month in which any portion of the principal of such tax remains unpaid shall be considered to be equivalent to a whole month. Each addition of interest shall become, and shall be collectible as, a part of such tax. Interest shall accrue at said rate until payment of such taxes due notwithstanding the entry of any judgment in favor of the municipality against the taxpayer or the property of the taxpayer. The collector shall apply each partial payment to the wiping out of such interest before making any application thereof to the reduction of such principal. If any tax, at the time of assessment or because of a subsequent division, represents two or more items of property, the collector may receive payment in full of such part of the principal and interest of such tax as represents one or more of such items, even though interest in full on the entire amount of the principal of such tax has not been received up to the date of such payment; in which event, interest on the remaining portion of the principal of any such tax shall be computed, as the case may be, from the due date of such tax if no other payment after delinquency has been made or from the last date of payment of interest in full on the whole amount or unpaid balance of the principal of such delinquent tax if previous payment of interest has been made. Each collector shall keep a separate account of such interest and the time when the same has been received and shall pay over the same to the treasurer of the municipality of the collector as a part of such tax. No tax or installment thereof shall be construed to be delinquent under the provisions of this section if (A) such tax or installment was paid through a municipal electronic payment service within the time allowed by statute for payment of such tax or installment, or (B) the envelope containing the amount due as such tax or installment, as received by the tax collector of the municipality to which such tax is payable, bears a postmark showing a date within the time allowed by statute for the payment of such tax or installment. Any municipality may, by vote of its legislative body, require that any delinquent property taxes shall be paid only in cash or by certified check or money order. Any municipality adopting such requirement may provide that such requirement shall only be applicable to delinquency exceeding a certain period in duration as determined by such municipality. Any municipality shall waive all or a portion of the interest due and payable under this section on a delinquent tax with respect to a taxpayer who has received compensation under chapter 968 as a crime victim.

Sec. 2. Subsection (f) of section 12-157 of the 2016 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(f) Within sixty days after such sale, the collector shall cause to be published in a newspaper having a daily general circulation in the town in which the real property is located, and shall send by certified mail, return receipt requested, to the delinquent taxpayer and each mortgagee, lienholder and other encumbrancer of record whose interest in such property is choate and is affected by such sale, a notice stating the date of the sale, the name and address of the purchaser, the amount the purchaser paid for the property and the date the redemption period will expire. The notice shall include a statement that if redemption does not take place by the date stated and in the manner provided by law, the delinquent taxpayer, and all mortgagees, lienholders and other encumbrancers who have received actual or constructive notice of such sale as provided by law, that their respective titles, mortgages, liens, restraints on alienation and other encumbrances in such property shall be extinguished. After such notice is published, and not later than six months after the date of the sale or within sixty days if the property was abandoned or meets other conditions established by ordinance adopted by the legislative body of the municipality, if the delinquent taxpayer, mortgagee, lienholder or other encumbrancer whose interest in the property will be affected by such sale, pays to the collector, the amount of taxes, interest and charges which were due and owing at the time of the sale together with interest on the total purchase price paid by the purchaser at the rate of [eighteen] eight per cent per annum from the date of such sale plus any taxes and debts owed to the municipality that were not recovered by the sale and any additional charges under section 12-140, such deed, executed pursuant to subsection (e) of this section, shall be delivered to the collector by the town clerk for cancellation and the collector shall provide a certificate of satisfaction to the person paying the money who, if not the person whose primary duty it was to pay the tax or taxes, shall have a claim against the person whose primary duty it was to pay such tax or taxes for the amount so paid, and may add the same with the equivalent precedence, rate of interest and priority as the tax paid over other nongovernmental encumbrances but without precedence or priority over any state or municipal tax lien or any tax that was not yet due and payable when notice of the levy was first published to any claim for which he has security upon the property sold, provided the certificate of satisfaction is recorded on the land records but the interests of other persons in the property shall not be affected. Within ten days of receipt of such amounts in redemption of the levied property, the collector shall notify the purchaser by certified mail, return receipt requested, that the property has been redeemed and shall tender such payment, together with the amount held pursuant to subparagraph (A) of subdivision (1) of subsection (i) of this section, if any, to the purchaser. If the purchase money and interest are not paid within such redemption period, the deed shall be recorded and have full effect.

Sec. 3. Section 12-195h of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2016):

(a) Any municipality, by resolution of its legislative body, as defined in section 1-1, may assign, for consideration, any and all liens filed by the tax collector to secure unpaid taxes on real property exceeding five thousand dollars as provided under the provisions of this chapter. The consideration received by the municipality shall be negotiated between the municipality and the assignee.

(b) The assignee or assignees of such liens shall have and possess the same powers and rights at law or in equity as such municipality and municipality's tax collector would have had if the lien had not been assigned with regard to the precedence and priority of such lien, the accrual of interest and the fees and expenses of collection and of preparing and recording the assignment. The assignee shall have the [same] rights to enforce such liens [as any private party holding a lien on real property including, but not limited to,] through foreclosure and a suit on the debt. Before enforcing such liens through foreclosure and a suit on the debt, the assignee shall evaluate in good faith each homeowner's willingness and ability to repay the debt over a period of not fewer than twenty-four months. Upon commencing an action for foreclosure or a suit on the debt, the assignee shall file an affidavit with the court indicating (1) any and all efforts made by the assignee to contact the homeowner regarding repayment, and (2) the assignee's good faith evaluation of the homeowner's willingness and ability to repay the debt over a period of not fewer than twenty-four months.

(c) Notwithstanding any provision of the general statutes, each assignee shall provide a payoff statement, as defined in section 49-8a, in the same manner as a mortgagee in accordance with the requirements of section 49-10a.

(d) In any foreclosure action or suit on the debt, any attorney's fees awarded to the assignee may not exceed one thousand five hundred dollars for an uncontested suit, or one thousand five hundred dollars plus a rate of one hundred dollars per hour for any work reasonably performed to prosecute a suit involving prolonged or complex litigation. Nothing in this subsection shall be construed to require the court to award attorney's fees to any party.

(e) The assignee, or any subsequent assignee, shall provide written notice of an assignment, not later than thirty days after the date of such assignment, to any holder of a mortgage, on the real property that is the subject of the assignment, provided such holder is of record as of the date of such assignment. Such notice shall include information sufficient to identify (1) the property that is subject to the lien and in which the holder has an interest, (2) the name and addresses of the assignee, and (3) the amount of unpaid taxes, interest and fees being assigned relative to the subject property as of the date of the assignment.

(f) Not less than sixty days prior to commencing an action to enforce a lien through foreclosure under this section, the assignee shall provide a written notice, by first class mail to the holders of all first or second security interests on the property subject to the lien that were recorded before the date on which the assessment of the lien sought to be enforced became delinquent, which shall set forth the following: (1) The amount of unpaid debt owed to the assignee as of the date of the notice; (2) the amount of any attorney's fees and costs incurred by the assignee in the enforcement of the lien as of the date of the notice; (3) a statement of the assignee's intention to foreclose the lien if the amounts set forth pursuant to subdivisions (1) and (2) of this subsection are not paid to the assignee on or before sixty days after the date on which the notice is provided; (4) the assignee's contact information, including, but not limited to, (A) the name of the assignee, and (B) the assignee's mailing address, telephone number and electronic mail address, if any; and (5) instructions concerning the acceptable means of making a payment on the amounts owing to the assignee as set forth pursuant to subdivisions (1) and (2) of this subsection. Any notice required under this subsection shall be effective upon the date such notice is provided.

(g) When providing the written notice required under subsection (f) of this section, the assignee may rely on the last recorded security interest of record in identifying the name and mailing address of the holder of such interest, unless the holder of such interest is the plaintiff in an action pending in Superior Court to enforce such interest, in which case the assignee shall provide the written notice to the attorney appearing on behalf of the plaintiff.

(h) Each aspect of a foreclosure, sale or other disposition under this section, including, but not limited to, the method, advertising, time, date, place and terms, shall be commercially reasonable.

(i) A violation of this section shall be deemed an unfair or deceptive trade practice under subsection (a) of section 42-110b.

Sec. 4. Section 8-265cc of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2016):

As used in this section and sections [8-265cc] 8-265dd to 8-265kk, inclusive, as amended by this act:

(1) "Aggregate family income" means the total income of persons residing in the same household as the mortgagor and any other resident of the household declared by the mortgagor as a dependent for federal tax purposes, from whatever source derived, including, but not limited to, pensions, annuities, retirement benefits and Social Security benefits, provided the authority may exclude from income (A) reasonable allowances for dependents, (B) reasonable allowances for medical expenses, (C) all or any part of the earnings of gainfully employed minors or family members other than the chief wage earner, (D) income not regularly received, and (E) such other expenses as the authority may allow;

(2) "Authority" means the Connecticut Housing Finance Authority created under section 8-244;

(3) "Mortgage" means a mortgage deed or other instrument which constitutes a first or second consensual lien, including, but not limited to, a reverse mortgage or a home equity conversion mortgage, on one-to-four family owner-occupied residential real property located in this state, including, but not limited to, a single-family unit in a common interest community;

(4) "Mortgagee" means the original lender under a mortgage, or its agents, successors [,] or assigns;

(5) "Mortgagor" means the owner-occupant of a one-to-four family residential real property located in this state, including, but not limited to, a single family unit in a common interest community, who is also the borrower under a mortgage encumbering such real property;

(6) "Housing expense" means the sum of the mortgagor's monthly maintenance expense in a common interest community, utility expense, heating expense, hazard insurance payment, taxes and required mortgage payment, including escrows;

(7) "Financial hardship due to circumstances beyond the mortgagor's control" means a significant reduction of aggregate family household income or increase in expenses which reasonably cannot be or could not have been alleviated by the liquidation of assets by the mortgagor as determined by the Connecticut Housing Finance Authority, including, but not limited to, a reduction resulting from (A) (i) unemployment or underemployment of one or more of the mortgagors; (ii) a loss, reduction or delay in receipt of such federal, state or municipal benefits as Social Security, supplemental security income, public assistance and government pensions; (iii) a loss, reduction or delay in receipt of such private benefits as pension, disability, annuity or retirement benefits; (iv) divorce or a loss of support payments; (v) disability, illness or death of a mortgagor; or (B) (i) a significant increase in the dollar amount of the periodic payments required by the mortgage; (ii) an unanticipated rise in housing expenses; or (iii) expenses related to the disability, illness or death of a member of the mortgagor's family, but does not include expenses related to the accumulation of credit or installment debt incurred for recreational or nonessential items prior to the occurrence of the alleged circumstances beyond the mortgagor's control in an amount that would have caused the mortgagor's total debt service to exceed sixty per cent of aggregate family income at that time;

(8) "Consumer credit counseling agency" means a nonprofit corporation or governmental agency located in this state which has been designated by the authority to provide homeowners' emergency mortgage assistance program counseling. A qualified consumer credit counseling agency must either be certified as a housing counseling agency by the federal Department of Housing and Urban Development or otherwise determined accepted by the authority;

(9) "Foreclosure mediation program" means the foreclosure mediation program established by section 49-31m; [and]

(10) "Periodic payments" means principal, interest, taxes, insurance and, if applicable, condominium fees;

(11) "Lien debt" means a tax or sewer lien, as described in section 12-172, or an assessment and other sums due to an association under section 47-258;

(12) "Lienholder" means the relevant association, municipality or subsequent assignee of a lien debt; and

(13) "Homeowner" means the owner-occupant of residential real property subject to a lien debt.

Sec. 5. Subsection (a) of section 8-265dd of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2016):

(a) Not later than January 1, 1994, the authority shall establish, within available funds, a program to provide emergency mortgage assistance payments to mortgagors in accordance with the provisions of sections 8-265cc to 8-265kk, inclusive, as amended by this act. On and after July 1, 2016, the program shall, within available funds, provide lien debt assistance payments to homeowners in accordance with said sections. Any necessary and related administrative and operational expenses incurred by the authority in implementing the program may be paid from funds made available for the program.

Sec. 6. Section 8-265ff of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2016):

(a) Any mortgagor or homeowner may apply for emergency mortgage or lien debt assistance payments under sections 8-265cc to 8-265kk, inclusive, as amended by this act, if such mortgagor or homeowner (1) has received notice of intent to foreclose as provided in section 8-265ee, or (2) (A) is sixty days or more delinquent on a mortgage or lien debt, or (B) such mortgagor or homeowner anticipates that he will be sixty days or more delinquent on a mortgage or lien debt based on financial hardship beyond such mortgagor's or homeowner's control, provided the authority determines that such mortgagor or homeowner will be so delinquent. As part of the application process, the authority may refer the applicant to a counseling agency approved by the United States Department of Housing and Urban Development.

(b) If the mortgagor or homeowner applies for emergency mortgage or lien debt assistance payments under sections 8-265cc to 8-265kk, inclusive, as amended by this act, the authority shall, no later than eight business days after the date of receipt of such application, notify all of the mortgagees or lienholders listed on the application holding a mortgage or lien on the mortgagor's or homeowner's real property.

(c) The mortgagor or homeowner shall apply for a loan on the form provided by the authority. The mortgagor or homeowner shall complete and sign the application subject to the penalty for false statement under section 53a-157b.

(d) The mortgagor or homeowner shall provide the authority with full disclosure of all assets and liabilities, whether singly or jointly held, and all household income regardless of source. For purposes of this subsection, both of the following are included as assets:

(1) The sum of the household's savings and checking accounts, market value of stocks, bonds and other securities, other capital investments, pensions and retirement funds valued in an amount greater than one hundred thousand dollars, personal property and equity in real property including the subject mortgage property. Income derived from family assets shall be considered as income. Equity is the difference between the market value of the property and the total outstanding principal of any loans secured by the property and other liens.

(2) Lump-sum additions to family assets such as inheritances, capital gains, insurance payments included under health, accident, hazard or worker's compensation policies and settlements, verdicts or awards for personal or property losses or transfer of assets without consideration within one year of the time of application. Pending claims for such items must be identified by the homeowner as contingent assets.

(e) The authority shall make a determination of eligibility for emergency mortgage or lien debt assistance payments by the date thirty calendar days after the date of receipt of the mortgagor's or homeowner's application. During said thirty-day period no judgment of strict foreclosure or any judgment ordering foreclosure by sale shall be entered in any action for the foreclosure of any mortgage or lien that any mortgagee or lienholder holds on the mortgagor's or homeowner's real property, except that a judgment of strict foreclosure or ordering foreclosure by sale may be entered in a foreclosure action commenced by an association pursuant to section 47-258. No emergency mortgage or lien debt assistance payments may be provided unless the authority finds that:

(1) The real property securing the mortgage or underlying the lien debt is a one-to-four family owner-occupied residence, including, but not limited to, a single family unit in a common interest community, is the principal residence of the mortgagor or homeowner and is located in this state;

(2) Payments, including amounts for taxes and insurance payments, including mortgage insurance, or for charges, assessments and fees associated with a condominium or common interest community, as such terms are defined in section 47-202, or any combination of such payments, whether or not such payments are made into escrow or impound accounts as reserves, owed by the mortgagor under any mortgage or homeowner under a lien debt on such real property have been delinquent and the mortgagee, taxing authority, lienholder or unit owners association has indicated to the mortgagor or homeowner its intention to foreclose;

(3) The mortgagor or homeowner is a resident of this state and is suffering financial hardship which renders the mortgagor or homeowner unable to correct the delinquency or delinquencies within a reasonable time and make full mortgage or lien debt payments. For the purposes of subdivision (7) of this subsection, in order to determine whether the financial hardship is due to circumstances beyond the mortgagor's or homeowner's control, the authority may consider information regarding the mortgagor's or homeowner's employment, credit history and current and past household income, assets, total debt service, net worth, eligibility for other types of assistance and any other criteria or related factors it deems necessary and relevant;

(4) There is a reasonable prospect that the mortgagor will be able to resume full mortgage payments on the original, modified or refinanced mortgage within sixty months after the beginning of the period in which emergency mortgage assistance payments are provided in accordance with a written plan formulated or approved by the authority and pay the mortgage in full in level monthly payments of principal and interest, subject only to payment changes as provided in the mortgage, by its maturity date or, in the case of a lien debt, the homeowner is able to resume regular tax or usage payments to the lienholder immediately after emergency lien debt assistance payments are provided;

(5) The mortgagor or homeowner has applied to the authority for emergency mortgage or lien debt assistance payments on an application form prescribed by the authority [which] that includes a financial statement disclosing all assets and liabilities of the mortgagor or homeowner, whether singly or jointly held, and all household income regardless of source;

(6) Based on the financial statement, the mortgagor or homeowner has insufficient household income or net worth to correct the delinquency or delinquencies within a reasonable period of time and make full mortgage or lien debt payments;

(7) There is a reasonable prospect that the mortgagor or homeowner, as determined by the authority, will be able to repay the emergency mortgage or lien debt assistance within a reasonable amount of time under the terms of section 8-265hh, as amended by this act, including, but not limited to, through a refinancing of the mortgage, and, in the case of a mortgagor, the authority finds that, except for the current delinquency, the mortgagor has had a favorable residential mortgage credit history for the previous two years or period of ownership, whichever is less. For the purposes of this subdivision, if a mortgagor has been more than thirty days in arrears four or more times on a residential mortgage within the previous year, the mortgagor shall be ineligible for emergency mortgage assistance payments unless the mortgagor can demonstrate that the prior delinquency was the result of financial hardship due to circumstances beyond the mortgagor's control. In making a determination with regard to a mortgagor under this subsection, the authority may consider information regarding the structure of the mortgage, its repayment schedule, the length of time the mortgagor has lived in his or her home, and any other relevant factors or criteria it deems appropriate. The authority may not disqualify a mortgagor or homeowner based solely on such mortgagor's or homeowner's discharge of a debt through a bankruptcy proceeding;

(8) The mortgagee or lienholder is not otherwise prevented by law from foreclosing upon the mortgage or lien;

(9) The mortgagor or homeowner has not mortgaged the real property for commercial or business purposes;

(10) (A) The mortgagor or homeowner has not previously received emergency mortgage or lien debt assistance payments from the authority, provided a mortgagor or homeowner who has previously received such payments shall be eligible to reapply if the mortgagor or homeowner has reinstated the mortgage or lien debt, and (B) the mortgagor or homeowner shall not have been delinquent for at least six consecutive months immediately following such reinstatement;

(11) The mortgagor is not in default under the mortgage except for the monetary delinquency referred to in subdivision (2) of this subsection; and

(12) The mortgagor or homeowner meets such other procedural requirements as the authority may establish.

Sec. 7. Section 8-265gg of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2016):

(a) If the authority approves a mortgagor or homeowner for assistance under the provisions of section 8-265ff, as amended by this act, the authority shall make monthly emergency mortgage or lien debt assistance payments directly to each mortgagee or homeowner secured by the mortgagor's or homeowner's real property for a period not to exceed sixty months, either consecutively or nonconsecutively, except no such payments shall be made after sixty months have passed since the date of the initial payment. The total monthly payment made by the authority, to or on behalf of a mortgagor or homeowner under subsection (c) of this section, shall be not more than twenty-eight per cent of one hundred forty per cent of annual area median income, as published by the United States Department of Housing and Urban Development, divided by twelve. Upon receipt of payment in full from a mortgagor or homeowner of the monthly amount established under subsection (b) of this section, the authority shall pay to each mortgagee or lienholder the full amount then due to the mortgagee or lienholder pursuant to the terms of the mortgage or lien debt without regard to any acceleration under the mortgage or lien debt. Such payments shall include, but not be limited to, principal, interest, taxes, assessments and insurance premiums. The initial payment made by the authority to each mortgagee or homeowner may be an amount which pays all arrearages and pays reasonable costs and reasonable attorney's fees incurred by the mortgagee or homeowner in connection with foreclosure of the mortgage or lien.

(b) A mortgagor or homeowner on whose behalf the authority is making emergency mortgage or lien debt assistance payments shall, during the period in which such assistance is provided, make monthly payments to the authority in lieu of the mortgagor's or homeowner's monthly mortgage payments or lien debt payments. Such payments to the authority shall be in an amount which will cause the mortgagor's or homeowner's total housing expense to be less than or equal to thirty-five per cent of the mortgagor's or homeowner's aggregate family income. The mortgagor or homeowner shall make such payments to the authority not later than seven days before each mortgage payment or lien debt payment is due to the mortgagee or lienholder.

(c) The amount by which the emergency mortgage or lien debt assistance payments made by the authority to the mortgagee or lienholder exceeds the payments made by the mortgagor or homeowner to the authority shall be a loan in that amount made by the authority to the mortgagor or homeowner. Any such loan shall be evidenced by such documents as the authority may require and shall be subject to repayment with interest and secured as provided in section 8-265hh, as amended by this act.

(d) The authority shall establish procedures for periodic review of the mortgagor's or homeowner's financial circumstances for the purpose of determining the necessity for continuation, termination or adjustment of the amount of emergency mortgage or lien debt assistance payments or adjustment of the payments by the mortgagor or homeowner pursuant to subsection (b) of this section. Payments shall be discontinued when the authority determines that, due to changes in the mortgagor's or homeowner's financial condition, the payments are no longer necessary in accordance with the standards contained in section 8-265ff, as amended by this act, or the expiration of the sixty-month period of a mortgagor or homeowner eligibility for such payments under subsection (e) of section 8-265ff, as amended by this act, whichever is sooner, and a foreclosure of the mortgagor's mortgage or homeowner's lien may, at any time thereafter, proceed without further restriction or requirement under sections 8-265cc to 8-265hh, inclusive, as amended by this act. The authority may adjust payments by the mortgagor or homeowner pursuant to subsection (b) of this section based on a review under this subsection.

(e) If the mortgagor or homeowner fails to pay to the authority any amounts due under subsection (b) of this section within seven days of the date due to the authority, the authority shall review the mortgagor's or homeowner's financial circumstances to determine whether the delinquency is the result of additional financial hardship due to circumstances beyond the mortgagor's or homeowner's control. If the delinquency is not the result of additional financial hardship due to circumstances beyond the mortgagor's or homeowner's control in the mortgagor's or homeowner's financial circumstances, the authority shall terminate emergency mortgage or lien debt assistance payments and the foreclosure of the mortgagor's mortgage or homeowner's lien may, at [anytime] any time thereafter, continue without any further restriction or requirement under sections 8-265cc to 8-265kk, inclusive, as amended by this act. If the delinquency is the result of a change in the mortgagor's or homeowner's financial circumstances, the authority may modify the mortgagor's or homeowner's required monthly payments to the authority.

(f) If any mortgagee or lienholder scheduled to receive payments from the authority under the provisions of sections 8-265cc to 8-265kk, inclusive, as amended by this act, fails to receive the full amount of such payment from the authority within thirty days of the scheduled due date, or if the mortgagor or homeowner fails to observe and perform all of the terms, covenants and conditions of the mortgage or lien, the mortgagee or lienholder shall provide a fifteen-day notice to the authority and the foreclosure of the mortgagor's mortgage or homeowner's lien may, at any time thereafter, proceed without any further restriction or requirement under sections 8-265cc to 8-265kk, inclusive, as amended by this act.

Sec. 8. Section 8-265hh of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2016):

(a) Upon approval of emergency mortgage or lien debt assistance payments, the authority shall enter into an agreement with the mortgagor or homeowner for repayment of all such assistance with interest as provided in this section. The agreement shall provide for monthly payments by the mortgagor or homeowner after emergency mortgage or lien debt assistance payments have ended and shall be subject to the following provisions:

(1) If the mortgagor's or homeowner's total housing expense, including projected repayments for [mortgage] assistance under this section, is greater than thirty-five per cent of the mortgagor's or homeowner's aggregate family income, repayment of the emergency mortgage or lien debt assistance payments shall be deferred until such total housing expense, including projected repayments for [mortgage] assistance under this section, is less than or equal to thirty-five per cent of such aggregate family income;

(2) If repayment of emergency mortgage or lien debt assistance payments is not made by the date the mortgage or lien is paid in full, the mortgagor or homeowner shall make monthly payments to the authority in an amount not less than the monthly mortgage or lien payment until such assistance is repaid;

(3) Interest shall accrue on all emergency mortgage or lien debt assistance payments made by the authority at a rate based upon the cost of funds to the state periodically determined by the State Treasurer in consultation with the authority. Interest shall start to accrue whenever the mortgagor or homeowner is required to commence repayment under this section.

(b) Repayment of amounts owed to the authority from a mortgagor or homeowner under the provisions of sections 8-265cc to 8-265kk, inclusive, as amended by this act, shall be secured by a mortgage on the mortgagor's or homeowner's real property, provided [said] such mortgage shall not be deemed to take priority over any other mortgage or lien in effect against such property on the date the emergency mortgage is recorded. The authority may allow subordination of its mortgage if such subordination is required to permit the mortgagor or homeowner to obtain a home improvement loan for repairs necessary to preserve the property.

(c) The authority shall establish written procedures for periodic review of the mortgagor's or homeowner's financial circumstances to determine the amounts of repayment required under this section.

(d) All moneys received by the authority from mortgagors or homeowners for repayment of emergency mortgage or lien debt assistance payments shall be paid to the authority, deposited in such funds or accounts as the authority may establish from time to time for such purpose and be used solely for the purposes of the program established pursuant to sections 8-265cc to 8-265kk, inclusive, as amended by this act.

(e) Any mortgagor or homeowner who misrepresents any financial or other pertinent information in conjunction with the filing of an application for emergency mortgage or lien debt assistance or modification of such assistance, may be denied assistance and required to immediately repay any amount of assistance already made. The mortgagee or lienholder may, at any time thereafter, take any legal action to enforce the mortgage or lien without further restrictions or requirements.

(f) The authority may take any action it deems appropriate to recover emergency mortgage or lien debt assistance when the mortgagor or homeowner fails to repay such assistance under the terms and conditions established under this section.

Sec. 9. Section 8-265ii of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2016):

The Connecticut Housing Finance Authority shall adopt procedures in accordance with section 1-121 to implement the provisions of sections 8-265cc to 8-265hh, inclusive, as amended by this act. Such procedures shall include the establishment of a process for notification to eligible mortgagors or homeowners of the availability of funds under sections 8-265cc to 8-265kk, inclusive, as amended by this act, and for notification to the mortgagee or lienholder that an application has been received by or on behalf of the mortgagor or homeowner and of the authority's determination of eligibility.

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

Section 1

from passage

12-146

Sec. 2

from passage

12-157(f)

Sec. 3

July 1, 2016

12-195h

Sec. 4

July 1, 2016

8-265cc

Sec. 5

July 1, 2016

8-265dd(a)

Sec. 6

July 1, 2016

8-265ff

Sec. 7

July 1, 2016

8-265gg

Sec. 8

July 1, 2016

8-265hh

Sec. 9

July 1, 2016

8-265ii

Statement of Legislative Commissioners:

In Section 3, "same" was bracketed for clarity; in Section 3(f), "sent" was changed to "provided" for consistency with other provisions of the Subsec.; in Section 6(e)(4), "relevant municipality or association" was changed to "lienholder" for consistency with other sections of the bill, "homeowner or" was deleted and "the homeowner is" was added after "lien debt," for clarity; in Section 6(e)(7), ", but not limited to,", ", in the case of a mortgagor,", and "with regard to a mortgagor" were added for clarity; in Section (6)(e)(10), the subdivision was divided into two subparagraphs for clarity; in Section 7, subsections (a) and (b) of section 8-265gg of the general statutes were added to conform with the changes being made in Section 7.

BA

Joint Favorable Subst.

 

The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 17 $

FY 18 $

Treasurer, Debt Serv.

GF - Acceleration of Debt Service Costs

Potential

Potential

Connecticut Housing Finance Authority (CHFA)

EMAP Funds- Cost

See Below

See Below

Municipal Impact:

Municipalities

Effect

FY 17 $

FY 18 $

All Municipalities

Revenue Loss

Potential Significant

Potential Significant

Explanation

The bill makes changes to the Emergency Mortgage Assistance Program. It also 1) reduces, from 18% to 8%, the annual interest rate municipalities must charge for delinquent property taxes, and other delinquent fees and assessments, and 2) prevents municipalities from placing a lien valued at $5,000 or less on a property.

The bill expands the Emergency Mortgage Assistance Program (EMAP) to include 1) reverse mortgages and home equity conversions and 2) assistance payments to homeowners subject to lien debt. This will result in an increase in applications to EMAP. EMAP is supported by General Obligation (GO) bond funds as well as repayments and interest collected from the program.

Future General Fund debt service costs may be incurred sooner under the bill to the degree that the bill causes authorized GO bond funds to be expended more rapidly than they otherwise would have been.

As of March 31st, there is a balance of (1) $3.1 million available in the EMAP program from previously allocated funds and repayments and (2) an unallocated bond balance of $17 million.1

As background, in FY 15 the current EMAP program funded $7.8 million in assistance for 198 loans. In FY 14, the program funded $11.6 million in assistance for 247 loans. Through March 30th, the program funded $1.6 million in assistance for 38 loans.

The bill also results in a revenue loss to all municipalities, and is potentially significant in larger municipalities. The table below shows the estimated FY 15 impact of reducing the annual interest rate on delinquent property taxes in three municipalities.

FY 15 Est. Revenue Loss Due to Change in Delinquent Property Tax Interest Rate2

Municipality

FY 15 Est. Revenue Current Law $

FY 15 Est. Revenue Under Bill's Provisions $

Revenue Loss $

Bridgeport

$2,900,000

1,280,000

1,620,000

Manchester

1,285,000

571,111

713,000

Burlington

144,399

64,177

80,222

The revenue loss indicated above does not include the impact of: 1) reducing the interest rate on other fees besides property taxes, or 2) prohibiting liens of $5,000 or less.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

OLR Bill Analysis

sSB 408

AN ACT CONCERNING THE PROTECTION OF DELINQUENT HOMEOWNERS AND THE EMERGENCY MORTGAGE AND LIEN DEBT ASSISTANCE PROGRAM.

SUMMARY:

This bill reduces, from 18% to 8%, the annual interest rate that a municipality must charge on (1) delinquent property taxes and (2) property sold for tax purposes. In doing so, it reduces the interest rate on certain other delinquent taxes and assessments that are linked to the interest rate towns charge on delinquent property taxes.

It prohibits municipalities from assigning tax liens valued at $5,000 or less and imposes new restrictions and requirements on the entities that purchase tax liens from municipalities (i.e., assignees). The bill:

The bill makes three main changes to the existing Emergency Mortgage Assistance Program (EMAP) established by the Connecticut Housing Finance Authority (CHFA). (EMAP provides temporary monthly mortgage payment assistance to eligible mortgagors of one-to-four family owner-occupied residential property who are facing foreclosure due to financial hardship.)

First, it expands the types of mortgages that are eligible for an EMAP loan to include reverse mortgages and home equity conversion mortgages.

Second, it requires CHFA, starting July 1, 2016 and within available funds, to (1) provide assistance payments to “homeowners” (i.e., owner-occupants) of residential property subject to “lien debt” (i.e., tax or sewer liens or condominium association assessments or fees) and (2) adopt procedures to implement these changes. The bill generally extends existing EMAP procedural and program requirements to also apply to lien debt assistance payments.

Third, it prohibits CHFA from disqualifying a mortgagor or homeowner from receiving mortgage or lien debt assistance based solely on the discharge of his or her debt through bankruptcy.

The bill also makes other minor, technical, and conforming changes.

EFFECTIVE DATE: July 1, 2016, except the provisions on delinquent property tax interest rates are effective upon passage.

1 & 2 — INTEREST ON DELINQUENT TAXES

Delinquent Property Taxes

The bill reduces, from 18% to 8%, the annual interest rate that a municipality must charge on delinquent property taxes (see COMMENT). But it retains the 18% interest rate on delinquent personal property tax used in rendering certain telecommunications services (CGS 12-80a). By law, property taxes are subject to interest charges from the time they become due and payable until paid in full.

Other Delinquent Taxes and Assessments

The bill also reduces the interest rate on other delinquent taxes and assessments that are linked to the interest rate towns charge on delinquent property taxes. This includes (1) sewer system installation and connection assessments (CGS 7-254, 7-258, and 22a-506); (2) the special assessment municipalities can impose on blighted housing (CGS 12-169b); and taxes, fees, rents, or benefit assessments set by certain special taxing districts.

3 — FORECLOSURE ACTIONS BY ASSIGNEES

The law allows a municipality, by resolution of its legislative body, to sell its tax liens to third parties (assignees) for a negotiated amount. By law, the assignees have the same powers and rights as the municipality or the municipality's tax collector had the lien not been assigned. Thus, the assignee has the same rights to enforce the lien through foreclosure.

Good Faith Evaluation of Repayment

Under the bill, before foreclosing on a tax lien, an assignee must do a good faith evaluation of the homeowner's willingness and ability to repay the debt in at least 24 months.

Once the action has begun, the bill requires the assignee to file an affidavit with the court indicating the (1) efforts made to contact the homeowner regarding repayment and (2) good faith evaluation of the homeowner's willingness and ability to repay the debt.

Payoff Statement

The bill requires the assignee to provide a payoff statement in the same manner that a mortgagee must provide one to a mortgagor in a mortgage foreclosure situation.

By law, a mortgagee, upon the written request of the mortgagor, the mortgagor's attorney, or other authorized agent, must provide a written payoff statement or reinstatement payment statement to the person requesting such a statement. The mortgagee must do so on or before the date specified in the request, provided the request date is at least seven business days after the date of receipt of the written request (CGS 49-10a).

Written Notice

Under the bill, at least 60 days before beginning a tax lien foreclosure action, the assignee must send written notice, by first class mail, to the holders of all first or second security interests on the property that were recorded before the date on which the taxes became delinquent.

The notice is effective on the date it is sent and must include:

To send this notice, the assignee may rely on the name and mailing address last recorded for the holder of such interest. If the holder of such interest is a plaintiff in a pending related court case to enforce the interest, the assignee must provide the written notice to the plaintiff's attorney.

Existing law, unchanged by the bill, requires an assignee to provide written notice of an assignment, within 30 days after the date of the assignment, to any mortgagee (lender) on record as of the date of the assignment.

Attorney's Fees

The bill limits attorney's fees that may be awarded to an assignee to $1,500 for an uncontested lawsuit, plus an additional $100 per hour for work reasonably performed to prosecute a prolonged or complex lawsuit. It specifies that its provisions should not be construed to require a court to award attorney's fees to any party.

4 – 9 — LIEN DEBT ASSISTANCE

Application

Under the bill, as is the case under existing law for a mortgage assistance applicant, a homeowner may apply for lien debt assistance payments if he or she (1) has received notice of intent to foreclose or (2) is 60 days or more delinquent on a lien debt or anticipates that he or she will be 60 days or more delinquent based on financial hardship beyond his or her control, provided the authority determines that such mortgagor or homeowner will be so delinquent.

CHFA may refer the applicant to a counseling agency approved by the U.S. Department of Housing and Urban Development. CHFA must notify all lienholders listed on the property within eight business days after receiving the application.

The homeowner must apply using a CHFA form and must complete and sign the application subject to a penalty for false statement. The homeowner must disclose all assets and liabilities.

Eligibility Decision

CHFA must make an eligibility decision by 30 calendar days after receiving the lien debt assistance application. During this period, the bill prohibits a judgment of strict foreclosure or foreclosure by sale (see BACKGROUND), except with regard to a condominium association's foreclosure action related to delinquent assessments and fees.

CHFA may not approve lien debt assistance unless:

Approval, Repayment, and Periodic Review

The bill generally applies existing law's mortgage assistance approval and repayment processes to the lien debt assistance program, including requirements that CHFA:

BACKGROUND

Foreclosure by Sale

With a judgment of sale, the court (1) establishes the time and manner of the sale, (2) appoints a committee to sell the property, and (3) appoints three appraisers to determine its value. The borrower may stop the foreclosure proceedings at any time before the sale by paying the balance due on the mortgage. If no such payment is made, the committee must proceed with the sale. The lender may sue to obtain a deficiency judgment (an order that the borrower repay any remaining mortgage balance).

Strict Foreclosure

With strict foreclosure, no actual foreclosure sale is held. Instead, the lender goes to court to try and obtain a court order demonstrating the borrower is in default of the mortgage. If successful, the title transfers to the lender immediately. However, the court sets an amount of time in which the borrower may redeem the property. If he or she fails to do so, the title becomes absolute to the lender and the borrower no longer has any claim to the property. The lender then has 30 days to record a certificate of foreclosure, which must contain a description of the property, the foreclosure proceedings, and the mortgage, along with the date the title became absolute.

COMMENT

This bill reduces, from 18% to 8%, the annual interest rate that a municipality must charge on delinquent taxes but it fails to make a conforming change in the section of the statute that requires municipalities to provide notice on taxes due, which must disclose that delinquent taxes are charged an annual interest rate of 18% (CGS 12-145). The content of the notice is therefore not consistent with the actual interest rate charged under the bill.

COMMITTEE ACTION

Banking Committee

Joint Favorable Substitute

Yea

14

Nay

4

(03/15/2016)

TOP

1 PA 12-189 authorized $60 million to EMAP, of which $23 million was allocated and $20 million was cancelled under PA 15-1 JSS, for a current remaining unallocated balance of $17 million.

2 “FY 15 est. revenue current law” obtained from the FY 15 Comprehensive Annual Financial Reviews for the Cities of Bridgeport and Manchester, and the Town of Burlington.