What is the Foreclosure Mediation Process in Connecticut?

Notice of foreclosure of a house. Visual concept for a legal blog discussing the Connecticut foreclosure mediation process, and how it helps residents renegotiate mortgages, and ways to avoid losing their homes.

When Connecticut residents fall behind on their house payments, there can be a lot of pressure to find ways to save their home from foreclosure. The foreclosure mediation process in Connecticut is a tool residents can use to renegotiate their mortgage payments, bringing their payments within reach and protecting their home, and their credit score.

Connecticut Judicial Foreclosure Process

Connecticut uses a fully judicial foreclosure process. That means before your bank or mortgage lender can force you to sell your home, it will need to take you to court. Once you are in default, you can expect to be served with a foreclosure complaint. While it should never be ignored, you still have some time to consider your options and find a solution that meets your needs and your priorities. Connecticut law provides for two types of foreclosure judgments:

  • Strict Foreclosure results when the court finds that your property has no equity in excess of the mortgage being foreclosed, in other words, it is “underwater”
  • Foreclosure by Sale results when the property does have equity does have equity in excess of the mortgage being foreclosed. This will be the case even if the equity in excess of the mortgage being foreclosed is consumed by subsequent liens like a home equity line of credit, or judgment liens, so there may still be no equity for you. If the United States holds a tax lien a sale will be required even if there is no equity at all for it (just to make sure).

But before the case begins the bank must notify you that your mortgage or home loan is in default, and give you information on how to avoid foreclosure. This “pre-foreclosure” stage gives you time to catch up on your mortgage payments or apply for any loan modification options that may be available. Unless you can, however, the lender can file a complaint for judicial foreclosure. When it serves you with that complaint, your mortgage company must also send you a notice of the Connecticut foreclosure mediation program.

Connecticut Foreclosure Mediation Process

Since 2008, Connecticut law has provided a failsafe to ensure banks deal fairly with their borrowers to help them avoid foreclosure laws that could force them to lose their homes. Connecticut’s mandatory foreclosure mediation process is an essential step in the bank’s efforts to reclaim your property. It forces your lender to come to the table, giving you and your bankruptcy attorney a chance to find an alternative to foreclosure and save your home. If you are eligible for foreclosure mediation – by being the named borrower on a loan secured against your primary residence – then you can use that program to explore options other than forfeiting your home to foreclosure that will satisfy your debt to the bank. The process isn’t mandatory for the borrower. However, if you file a Foreclosure Mediation Certificate within 15 days of the complaint being filed, the lender can’t opt out. We have represented homeowners in many successful mediations, but to make sure we can pursue this option it is important that you contact us as soon as you are served.

The Connecticut foreclosure mediation process pauses the foreclosure proceedings against you, giving you and your bankruptcy attorney time to negotiate with your lender to modify your mortgage or home loan. (Mediation is not available in foreclosures resulting from condominium liens or tax liens.) If your case is referred to mediation, it will be assigned to a neutral third party mediator, who can help facilitate negotiations so you can obtain a repayment plan you can afford, or explore options to resolve your debt. The foreclosure process will then be stayed until the mediator reports that settlement was successful, or that no resolution can be reached.

Mediation Reports

If your mortgage involves a federally backed mortgage loan, your lender is required to provide certain information to the mediator in advance. “Federally backed mortgage loans” include:

  • Loans insured by the Federal Housing Administration (FHA loans)
  • Veterans’ loans guaranteed or insured by the Department of Veterans Affairs (VA loans)
  • Department of Agriculture loans (USDA loans)
  • Loans purchased or secured by Fannie Mae or Freddie Mac

If a foreclosure involves one of these federally backed mortgage loans, then the lender must provide a mediation report to the mediator as part of the foreclosure mediation process which describes:

  • Notifications sent to the borrower of loss mitigation and foreclosure alternative options
  • Foreclosure avoidance efforts taken by the lender regarding the borrower’s account

Making the Most of Foreclosure Mediation

One mistake many people make is not bringing in an experienced attorney early enough in the foreclosure mediation process. You should contact a bankruptcy and foreclosure attorney as soon as you receive your initial notice – even before the foreclosure proceedings are filed. That way, you and your attorney can decide whether to file a Foreclosure Mediation Certificate and consider all the possible alternatives to resolving your debt.

Most often, this includes a mortgage modification arrangement that addresses details such as tax and water liens that would be impractical to resolve outside the court mediation process. The solution can be tailored to fit your circumstances (within limits), including deferring interest and payments to the end of the loan term and modifying the monthly payment amount. If the foreclosure mediation process is best, you and your attorney can put together a plan and gather the necessary information to advocate against the bank’s preference for foreclosure.

Preparing for Foreclosure Mediation

A successful foreclosure mediation process depends on preparation and diligence. During the mediation process, you and your attorney will gather comprehensive information about your income, expenses, and financial situation, including:

  • Bank statements for all open and recently closed accounts
  • Most recent federal and state tax returns (file them late if you have to)
  • Current utility bills
  • Proof of income for at least the last 2 months
  • Pay stubs, W-2s, 1099s, or other proof of income
  • For self-employed borrowers, company profit & loss statements, business expense reports and other financial information.
  • Modification Application worksheets
  • Hardship letter

Most lenders have a form they require borrowers to complete if they are seeking to modify their existing loans. It will give the bank a starting point to understand the financial aspects of your request for modification and provide a basis for negotiation. However, it is not necessary to gather this information in advance. We will guide you through the process.

A hardship letter is the most important part of your submission to the foreclosure mediator. It explains why you have fallen behind on your mortgage or home loan, what modifications you are seeking, and how you plan to succeed in paying off your debt if the modification is approved. The hardship letter is an important part of demonstrating the viability of your position, explaining what caused the default and how you intend to make future payments under a modified loan. Your attorney will work with you to tell a convincing story and clearly lay out what you can accept to resolve your case.

At Lawrence & Jurkiewicz, we can help you understand the Connecticut foreclosure mediation process and make the most of negotiations with your bank. Through preparation, advocacy, and diligence, we help clients in Hartford and Litchfield Counties find resolutions to their unpaid mortgage balances. We will work with you to reach an outcome that aligns with your priorities and protects your property. Please call (860) 264-1551 or contact us for a consultation.