Archive for 'Connecticut'

Starting July 1, Connecticut’s voluntary mediation program to prevent foreclosures will become mandatory after the state General Assembly passed a bill making foreclosure mediations mandatory.

According to housing advocates, the voluntary mediation program has been effective because almost 60 percent of borrowers who participated in the program were able to save their homes from foreclosures. They argued that a mandatory mediation program will further increase the success rate of mediation.

Under the legislation, mediation would be mandatory for all residential foreclosures started between July 1 this year and June 30 next year. More foreclosure filings are expected in the next months based on data from the Mortgage Bankers Association.

MBA records show that over 28,000 mortgage loans in Connecticut are either three months past due or already counted as foreclosures as of the end of March.

Additionally, the state Judicial Branch expects more mediation cases because only around 34 percent of mortgage borrowers qualified for the voluntary mediation scheme have taken advantage of the program.

Deborah Fuller, legislative head of the state Judicial Branch, said her office supported the expansion of the foreclosure mediation program despite the expected increase in work load. The program has been funded with $5 million, but an increase will surely be needed for the expanded implementation of the program.

Meanwhile, banks are expected to increase their resources allotted to the mandatory mediation program, including representatives and lawyers who will attend mandatory mediations and work out repayment schemes to prevent foreclosures.

Connecticut Bankers Association’s vice president Tom Mongellow said the state banking sector initially fought the mandatory mediation program because of lack of details. But he expressed the willingness of banks to cooperate and help prevent more foreclosures.

On the other hand, Christopher Brown, credit chief at Westport-based law firm Begos Horgan & Brown LLP, expressed reservations about the mandatory program. He cited borrowers in pre-foreclosure who were rejected for loan modifications. He however hoped that the mediation scheme would reduce the number of foreclosure cases in courts.

Senator Robert Duff, co-chairman of the legislature’s banking committee, declared the passage of the bill as a huge victory for homeowners.

The other banking committee co-chairman, Representative Ryan Barry, explained that the mandatory mediation scheme was much better than other foreclosure prevention options, such as foreclosure moratoriums and bankruptcy-linked loan modifications.

Barry explained that the mediation program is acceptable to both lenders and borrowers. He said that banks prefer mediation over other options because they do not like moratoriums on foreclosures and do not like to own and maintain foreclosure properties.

Potential homebuyers are starting to complain that most Connecticut foreclosed homes are legally owned by out-of-state lenders.

Most of these homebuyers have already made a down payment on houses in foreclosure only to find out that the properties are owned by out-of-state lenders who are not keen on selling the repo homes immediately.

The reluctance of big lenders to sell their foreclosed homes immediately only exacerbates the growing problem of abandoned and vacant houses in the state.

In New Haven, hundreds of vacant foreclosed homes are owned by big lenders who are slow to sell the properties to new occupants.

To address the foreclosed homes crisis in his city, Mayor John DeStefano urged 39 lending companies to register their foreclosure properties with the city.

New Haven’s ordinance law stipulated that mortgage lenders will be fined $250 daily if they do not register their foreclosed homes and the name of a person to contact, mailing address and telephone number.

DeStefano, in his letter to lenders, urged them to be good neighbors by registering their foreclosed homes.

An example of this problem is the case between Deutsche Bank in Germany and New Haven’s Water Pollution Control Authority (WPCA). The WPCA made a foreclosure on a property due to failure to pay sewer fees. The WPCA accounted for 10 percent of New Haven’s foreclosures in 2008 due to sewer fee non-payment.

The property in question was auctioned and purchased by a homebuyer who made a down payment and waited for the court’s approval of the deal.

When Deutsche Bank, which legally owned the property, learned about the sale it made a move to block the deal. Deutsche convinced the court that the bank is the true holder of the mortgage. In effect, the WPCA and the homebuyer’s deal was declared null and void.

Reacting on the case, DeStefano said that Deutsche purchased the majority of foreclosure properties in his city in 2008.

Real Options, Overcoming Foreclosures (ROOF) director Eva Heinzelman argued that Deutsche is the trustee for the foreclosed properties and it work with various servicers who are responsible for making decisions. She added that the problem is that sometimes it is difficult to identify who the servicers are.

ROOF is an organization that helps distressed homeowners who owns mortgage more than the market value of their properties.

The rising tide of foreclosure is obviously still wreaking havoc in many cities across the nation. In Connecticut, the hardest hit by the housing crisis is Windham County, with foreclosure filings that have reached 23 out of 1,000 homes. Statewide, foreclosure rate has soared by 40 percent compared to last year.

Local residents are worried about the current real estate market condition. As it is, the inventory of homes for sale has climbed steadily with not much buyer in sight. If this keeps up, home prices can be expected to decline as a result of the sluggish home sales. The economics of this situation is simple – too much supply and not much demand. According to the Warren Group, median home sale prices statewide have already declined by 9.8 percent as of April.

In addition to this, the locals are also concerned about these troubled homeowners facing foreclosure. With the scarcity of vacant apartments and not to mention, the high rents, these families will have difficulties finding a place they could move to.

Compared to other states such as Michigan, Nevada, Florida and California, Connecticut certainly has it easier. Although the number of foreclosure homes has steadily grown in the past year, these properties are scattered across different neighborhoods.

And it seems like these foreclosure problems are not enough. The state is also faced with problems related to nationwide recession. If prices of fuel and food continue to rise and job losses become rampant, many families will find themselves struggling to make ends meet. The northeast portion of Connecticut has actually suffered much from the loss of thousands of defense and manufacturing jobs. Obviously, all these factors could worsen the foreclosure dilemma.

The only positive news is that foreclosure homes are selling at bargain prices and investors are flocking the market, hoping to enjoy great incentives and discounts.

Not all states experienced a rise in foreclosures rate for the month of May. In fact, the inventory of Connecticut foreclosure homes did not grow much, resulting in the state dropping to the tenth place for highest foreclosures rate. With the foreclosures situation improving, real estate investors have begun staking their claims on foreclosure homes sold at bargain prices.

The improving market conditions can be attributed to the considerable drop in default filed. As you know, the number of defaults can somehow dictate the future number of bank foreclosures. This low default rate can probably be tied to more owners working with their lenders to explore new payment arrangements in order to stop foreclosure. Another good reason might be the fewer number of subprime mortgages whose interest rates were re-set. These mortgages are actually being blamed for the nationwide rise in foreclosures rate. In 2006, there were over one million homes repossessed by lenders, mostly from the subprime market.

You can also expect sellers to take advantage of the improving market conditions. As home prices stabilize, they can now receive 95 to 100 percent of their asking prices. Before, sellers settle for less than 90 percent of their asking prices just so they can reduce the number of Connecticut foreclosure homes in their inventory. Some sellers even enter into listings contract with brokers like Foreclosure Deals in order to attract more buyers.

Local officials are hoping that the market trend continue to be positive. The past months have really been hard for Connecticut home owners who felt that the market condition was driving down home values. Those facing foreclosure could not even sell their homes even if they wanted to since the proceeds of the sale is not enough to cover the amount of mortgage they still owe.