The state of Connecticut has long ranked among the top states in the country in foreclosure inventory, due to its status as a judicial foreclosure state.
According to new data released Monday from Black Knight Financial Services, Connecticut ranks among the top ten states with the longest average delinquency for loans in foreclosure, with the average delinquency standing at more than 2.5 years.
But thanks to new legislation sponsored by a longtime Realtor, homeowners and lenders in Connecticut now have an alternative method for foreclosure sales that seeks to bypass the judicial backlog and expedite the foreclosure sales process.
On June 3, Connecticut Governor Dannel Malloy signed H.B. No. 5514 into law, which creates a foreclosure by market sale method. The bill, which was sponsored by State Representative Joe Diminico, who has been a Realtor for more than 30 years, allows property owners who are in the beginning of the foreclosure process to work directly with a broker and the mortgage holder to “speedily sell the property” and avoid the time-consuming judicial foreclosure process.
"Essentially, it allows for a short sale but in the very beginning of the foreclosure process," Diminico said when the legislation passed in the Connecticut House of Representatives. “As a Realtor for 30-plus years, I have seen firsthand the financial difficulties many people have faced in trying to get out from under debt and reluctantly sell their homes."
The Connecticut General Assembly defines the law thusly:
To establish an additional method of foreclosure that will support the Connecticut real estate market by selling residential properties at market prices, encourage potential purchasers eligible for first-time homebuyer and other special lending programs or who wish to perform due diligence concerning a purchase to purchase a residence in foreclosure, provide a measure of dignity to residential borrowers faced with the prospect of foreclosure, reduce deficiencies by providing a procedure for a market sale instead of a forced auction sale or lender possession of property prior to sale and provide a speedy method of concluding a foreclosure when the borrower and first mortgage lender agree on a sale.
Diminico authored similar legislation in 2013, but that legislation did not pass out of the House. According to Diminico’s office, he worked with state Banking Commissioner Howard Pitkin on the bill and negotiated a compromise on the bill with the Connecticut Bankers Association, the state’s Realtors and state housing coalitions.
“This legislation is a home run for all. It will allow for the borrower to stay in the home so it doesn't become blighted and reduce the value of the neighborhood,” Diminco said. “It will also somewhat preserve the borrower's credit scores and help the lender receive as much money as possible by having the house put up for sale on the open market in a speedier fashion.”
And with bank repossessions on the rise in the state, the legislation comes at a critical time.
In May, a report from RealtyTrac showed that bank repossessions in Connecticut rose 44% from April 2013 to April 2014. In June, the rate of bank repossessions rose even higher in Connecticut, up 85% from May 2013 to May 2014.
In fact, May 2014 marked Connecticut’s 15th consecutive month with an annual increase in bank repossessions.
With the new legislation now in effect, there may be a welcome reduction of the glut of foreclosures in the state.
“While we have seen a turnaround in housing, we still have a long way to go to a full recovery and this new legislation will help us get there by adding a time- and money-saving tool to the state's foreclosure process,” Diminico said.