Connecticut Considers Expanding Foreclosure Help

By Susan Hagh Associated Press

HARTFORD — Connecticut lawmakers may extend state mortgage assistance programs to more homeowners facing possible foreclosure as the problem broadens across the state.

Timothy Bannon, president and executive director of the Connecticut Housing Finance Authority, told a legislative committee on Tuesday that the state’s foreclosure difficulties have spread beyond people who took out subprime mortgages in 2005. He said people who have lost their jobs or are underemployed now need help.

“The foreclosure problem in Connecticut has been severe and it does not promise to abate at any time in the future,” he said. “It is acquiring a new dimension beyond the scope it had had.”

Since August, Connecticut has had an average 1,000 home foreclosures a month. Meanwhile, the state’s unemployment rate is the highest it has been in 15 years, at 6.6 percent.

The authority, which oversees several mortgage assistance programs, supports a bill before the Banks Committee that would allow troubled homeowners to apply for emergency mortgage assistance if their loan is at least 60 days delinquent. Under current law, they can apply for help only after receiving a notice from their lender of an intent to foreclose on the property.

By the time that notice is sent, Mr Bannon said the foreclosure process has begun, late fees and back payments have mounted, and it becomes more difficult for homeowners to keep their houses.

“The earlier the homeowner is eligible for our ... assistance, we believe the better for the borrower, the homeowners,” Mr Bannon said.

Senator Robert Duff, D-Norwalk, co-chairman of the Banks Committee, said he supports extending the help to more homeowners, but worries about whether the state can afford it.

Republican Governor M. Jodi Rell has proposed taking $11 million from a Department of Banking fund set up to finance the new state assistance programs. She wants to use the money to help cover the state’s current fiscal year deficit, estimated at approximately $1 billion.

Mr Duff said about $2.5 million would be left in the account.

“There’s really not a whole lot of cash there to do anything,” he said.

Mr Duff is also concerned that $50 million in bonds authorized by the General Assembly last year to help troubled homeowners has not yet been allocated. Mr Bannon said the administration wants to see whether any of the federal economic stimulus money Connecticut expects to receive could be used to cover the cost.

The authority has helped more than 15,000 homeowners remain out of foreclosure in the past year by using several new programs that help eligible borrowers refinance into fixed-rate loans, modify their mortgages, and provide emergency mortgage assistance payments.

But those numbers could increase if the rules are loosened somewhat, Mr Bannon said.

Another part of the bill also would loosen a requirement that homeowners must experience a 25-percent decline in income to become eligible for emergency assistance. Mr Bannon said that percentage is well above the amount that most families experience financial stress.

Under the bill, the housing finance authority would determine what reduction of income would be considered financial hardship.

“Unfortunately, because of the economy, the 25 percent threshold has been really too high for a lot of people to overcome,” Mr Duff said. “We know we have to give CHFA more flexibility so we can get more people qualified to keep them in their homes.”