04 Dec Connecticut Legislative Update
The Connecticut legislature recently amended it laws governing foreclosures, and after passage further amended the effective date, which is January 1, 2015.
Connecticut House Bills 5515 and 5597
A first mortgage against real property may now be foreclosed, on the written motion of any party to any related suit, by a judgment of foreclosure by market sale upon the written motion of the lender and with the borrower’s consent.
On and after January 1, 2015, a lender who desires to foreclose upon a mortgage encumbering residential real property of a borrower must give notice to the borrower by registered or certified mail, postage prepaid, at the address of the residential real property that is secured by the mortgage. A lender must not commence a foreclosure of a mortgage prior to mailing the notice. The notice must advise the borrower of his or her delinquency or other default under the mortgage and that the borrower has the option to contact the lender to discuss whether the property may, by mutual consent of the lender and borrower, be marketed for sale according to a listing agreement.
The notice must also advise the borrower:
- Of the mailing address, telephone number, fax number, and email address that should be used to contact the lender;
- Of a date not less than 60 days after the date of the notice by which the borrower must initiate contact, with contemporaneous confirmation in writing of the election to pursue the option sent to the designated mailing address or email address of the lender;
- That the borrower should contact a licensed real estate agent to discuss the feasibility of listing the property for sale according to the foreclosure by market sale process;
- That, if the borrower and lender both agree to proceed with further discussions concerning an acceptable listing agreement, the borrower must first permit an appraisal to be obtained for purposes of verifying eligibility for foreclosure by market sale;
- That the appraisal will require both an interior and exterior inspection of the property;
- That the terms and conditions of the listing agreement, including the duration and listing price, must be acceptable to both the lender and borrower;
- That the terms and conditions of any offer to purchase, including the purchase price and any contingencies, must be acceptable to both the borrower and lender;
- That if an acceptable offer is received, the borrower will sign an agreement to sell the property through a foreclosure by market sale; and
- In bold print and at least 10-point font, that if the borrower consents to a foreclosure by market sale, the borrower will not be eligible for foreclosure mediation in any type of foreclosure action that is commenced following the giving of such consent.
The notice provided above may be combined with and delivered at the same time as any other notice required by the Connecticut Housing Finance Authority Act or federal law.
At any time after the date provided in the notice required above, the foreclosure of the borrower’s mortgage may continue without any further restriction or requirement, provided the lender files an affidavit with the court stating that the notice requirements have been complied with and that either the borrower failed to confirm his or her election by the date disclosed in the notice or that discussions were initiated, but:
- The lender and borrower were unable to reach a mutually acceptable agreement to proceed;
- Based on the appraisal, the property does not appear to be subject to a mortgage that is eligible for foreclosure by market sale;
- The borrower did not grant reasonable interior access for the appraisal;
- The lender and borrower were unable to reach an agreement as to a mutually acceptable listing agreement;
- A listing agreement was executed, but no offers to purchase were received;
- An offer or offers were received, but were unacceptable to either or both the lender and borrower; or
- Other circumstances exist that would allow the lender or borrower to elect not to proceed with a foreclosure by market sale, or that would otherwise make the mortgage ineligible for foreclosure by market sale.
The affidavit required above may be combined with the affidavit that accompanies the notice of foreclosure.
If a lender and borrower both elect to proceed with further discussions about the possibility of pursuing a mutually acceptable foreclosure by market sale, the lender must cause a written appraisal of the fair market value of the residential real property to be performed by a licensed appraiser. The borrower must, promptly upon request, permit the appraiser access at reasonable times to the interior and exterior of the residential real property for the sole purpose of gathering facts necessary to perform the appraisal assignment. The borrower and the lender need not proceed with further discussions.
As soon as practicable after receiving a report of a written appraisal, the lender must furnish the borrower with a copy of the appraisal. If the appraisal indicates that the mortgage would likely be eligible for foreclosure by market sale, the borrower and the lender may reach an agreement on mutually acceptable terms and conditions to list the property with a licensed real estate broker or salesperson and chosen by the borrower using a listing agreement meeting the applicable requirements.
Any listing agreement requires the licensee to report any offer for the residential real property to both the borrower and the lender as soon as practicable. The lender must provide the name, mailing address, telephone number, fax number, and email address to be used to report offers to the lender.
The lender may not require the use of a particular licensee or group of licensees as a condition to approving a listing agreement. The borrower and the lender need not reach an agreement regarding a mutually acceptable listing agreement.
If a borrower executes a listing agreement that is acceptable to both the lender and borrower and receives an offer to purchase the residential real property that encompasses a price, terms and conditions that are acceptable to both the borrower and the lender, the borrower must execute a contract for sale with the purchaser that reflects the agreed-upon price, terms, and conditions and is contingent upon the completion of the foreclosure by market sale.
If an offer is received, but is unacceptable to the lender, the lender must provide the borrower with written notice of its decision and, without limiting the breadth of its discretion, a general explanation of the reason or reasons for the decision. The notice must not be required in instances where the offer is unacceptable to the borrower. The borrower must, not later than 5 days after the date of the execution of the purchase and sale contract, provide the lender with a copy of the contract along with written documentation, in a form and substance acceptable to the lender, evidencing the borrower’s consent to the filing of a motion for judgment of foreclosure by market sale.
Unless otherwise prohibited by applicable law, not later than 30 days after the receipt of the contract and the documentation evidencing consent, or not later than 30 days after the satisfaction or expiration of any contingencies in the contract that must either have been satisfied or expired before the foreclosure action may be commenced to consummate the sale, whichever 30-day time frame is later, the lender must commence a foreclosure by writ, summons, and complaint. Any complaint must claim, in the prayer for relief, a foreclosure of the mortgage and must contain a copy of the contract between the borrower and the purchaser as well as a copy of the appraisal.
A lender must not require the employ or use of a particular list of licensed real estate brokers or salespersons as a condition of approval of an offer. A lender must not require the use of an auction or other alternative method of sale as a condition of approval of an offer once the listing agreement has been executed by the borrower. The lender and the borrower need not approve any offer that is made.
A lender may file a motion for judgment of foreclosure by market sale on or after the 10 days following the return date specified in the complaint. Upon motion of the lender and with the consent of the borrower, the court, after notice and hearing, may render a judgment of foreclosure by market sale approving the purchase and sale contract, which will be final for purposes of appeal, and appoint a person to make the sale.
When the court renders a judgment of market sale, the court will schedule, not later than 30 days from the date of the entry of a judgment of foreclosure by market sale, right-of-first-refusal law days in inverse order of priority according to which the subordinate lienholders may seek to preserve their interest in the equity in the residential real property by tendering to the person appointed to make the sale the amount of the agreed upon price in the purchase and sale contract.
If a subordinate lienholder takes no action to preserve the lienholder’s interest in the equity on the lienholder’s designated right-of-first-refusal law day, the lienholder’s subordinate lien will be extinguished upon passage of the law day. If a subordinate lienholder’s action to preserve the lienholder’s interest in the residential real property results in the lienholder purchasing the property, the purchaser indicated in the contract for the market sale will be entitled to reimbursement from the proceeds of the market sale of any costs and expenses associated with the contract as determined by the court.
When a sale has been made according to a foreclosure by market sale, a conveyance of the property sold must be executed by the person appointed to make the sale, which conveyance will be valid against all parties to the cause, but against no other persons. The court, at the time of or after the sale in the case of a foreclosure by market sale may order possession of the property sold to be delivered to the purchaser and may issue an execution of ejectment after the time for appeal of the judgment of foreclosure by market sale has expired.
In the case of a foreclosure by market sale, the person appointed to make the sale must bring the proceeds of the market sale into court.
A borrower who consents to a foreclosure by market sale is not eligible for the foreclosure mediation program, except as otherwise provided above.