Connecticut House Passes Sweeping Mortgage Aid Bill

While housing-related legislation remains stalled and hotly debated on Capitol Hill, Connecticut’s House of Representatives on Monday joined a growing list of states enacting their own more local legislation targeting the ongoing housing mess, passing a wide-ranging bill that lawmakers in the state say will help struggling homeowners.

The bill, H.B. 5577, passed on a wide 124-24 vote Monday night, and now moves to the state Senate for consideration.

At the core of the Connecticut mortgage bill are measures that widely expand the reach and scope of the Connecticut Housing Finance Authority. Under the bill’s various terms, the CFHA will receive $70 million for refinancing troubled mortgages, and would see the statutory limit on uninsured mortgages that CHFA can hold raised from $1.0 billion to $1.5 billion.

The state’s Office of Fiscal Analysis noted in its analysis of the bill that the expansion of the CHFA’s purchase authority “could potentially affect the agency’s ability to meet its debt service liability,” if enough of the uninsured mortgages it held went into default. The CHFA is currently rated AAA by major rating agencies, which the Connecticut OFA said made it “unlikely” that such a shortfall would occur.

The bill also creates a right for borrowers to appeal to the Banking Commissioner for a six-month moratorium on foreclosures, and establishes a program that allows the CHFA to buy foreclosed property and use it for affordable housing.

The bill relaxes some underwriting standards for loan provided by the CHFA, as well, per a Newsday report:

Gov. M. Jodi Rell worked with CHFA in November to create the CT FAMILIES assistance program. But lawmakers said the underwriting rules were so strict that only 250 families have qualified. This bill aims to help at least 1,500 more families.