This post was contributed by a community member. The views expressed here are the author's own.

Community Corner

Proposed Law Could Protect Homeowners Facing Foreclosure

Homeowners would get more support for problem mortgages if new law is approved.

A legislative proposal to protect homeowners faced with foreclosure might also help the real estate industry according to the Connecticut Association of Realtors.

The realtor association said the bill by U.S. Rep. Rosa DeLauro, known as the Regulation of Mortgage Servicing Act, would be especially beneficial to the Greater New Haven region, which has been hit harder with foreclosures and declining property values than elsewhere in Connecticut.

Bob Kennedy, executive vice president of the association said DeLauro’s bill was “long overdue. The idea is to set standards so the industry is more responsive to its customers,” he said.

Find out what's happening in Cheshirewith free, real-time updates from Patch.

Kennedy said most people might not understand the difference between bankers and mortgage servicers; lenders issue mortgages while servicers handle mortgage payments and escrow accounts.

The trouble is that the recession that hit in 2008 touched off sharp declines in real estate prices while causing an equally sharp increase in foreclosures. Kennedy said mortgage servicers were not able to handle the large number of foreclosures involving customers who owed more than their homes were worth.

Find out what's happening in Cheshirewith free, real-time updates from Patch.

“The issue is a huge one, very important to the economy,” he said.

“The New Haven area has a lot of them,” said Betty Alberico, chairman of the Greater New Haven Association of Realtors. “Every town has some.”

A report shows New Haven County has 1,437 foreclosures. Cheshire has a significantly lower amount with just 1 in every 2,464 properties for 2011

Compounding the problem is the region’s higher-than-average unemployment rate and low rental housing vacancy rate, making it difficult to find affordable housing for families forced out of their homes, said Jeff Gentes, a foreclosure prevention attorney for the Connecticut Fair Housing Center.

Homeowners complain that mortgage servicers frequently lose documents and that they may find themselves dealing with different people every time they call about their loan modification. These factors make the process more difficult and frustrating.

Kennedy said there are three ways to deal with possible foreclosure when the mortgage exceeds the value of the house:

  • lower the interest rate or extend the payment terms through refinancing
  • grant a forbearance until the mortgage holder is able to resume making payments
  • arrange a “short sale,” in which the bank accepts a lower amount than the outstanding principle of the loan.

The housing experts and realtors said the Regulation of Mortgage Servicing Act would:

  • require servicers to assign a single person to each foreclosure or loan modification
  • prohibit “dual tracking” by servicers, the practice of proceeding with a foreclosure while working on a loan modification
  • require a third-party review of loan modifications and foreclosure alternatives before sending a family into foreclosure.

Recent economic news, such as last week’s employment report that showed job growth and a lower unemployment rate, are glimmers of good news. Alberico said she is optimistic that 2012 will be a better year. “We’re getting some signs of it,” she said.

“We need to get our economy back. We need to get people working again,” Alberico added.

We’ve removed the ability to reply as we work to make improvements. Learn more here

The views expressed in this post are the author's own. Want to post on Patch?