 Connecticut Loan Modification Guidelines
When you develop a definite plan of action with well-timed, well-informed
steps, you can stop the foreclosure process and save your home. We have
outlined the foreclose process for the state of Connecticut.
Judicial Foreclosure Available: Yes
Non-judicial Foreclosure Available: Yes
Preferred Method
Judicial foreclosure. Connecticut allows foreclosure by two strange judicial
methods, strict foreclosure and decree of sale.
Strict Foreclosure
Connecticut is one of the few states that still uses strict foreclosure.
In strict foreclosure, there is not foreclosure sale at all, not even at
the courthouse steps. The lender must go to court and obtain a court order
showing the borrower to be in default under the terms of the mortgage.
At that point, title shifts to the lender. However, the borrower has a
length of time set by the court to redeem the property. If the borrower
fails to come up with the money during that time, then the borrower is
forever barred from asserting a claim to the property and title becomes
absolute in the lender. From that date, the lender has one month to record
a certificate of foreclosure describing the premises, the mortgage, the
foreclosure proceedings, and the date title became absolute. If the lender
demands possession in the foreclosure suit, the court may issue an execution
of ejectment against the person in possession of the property. Possession
may also be obtained by peaceable entry, unless the mortgage says otherwise.
The disadvantage to the borrower is that the lender obtains title to land
that might be worth much more than what was owed on the original loan.
This is fort of windfall profit for the lender.
Decree of Sale
Upon motion by any party, a court may allow a mortgage to be foreclosed
by a decree of sale. In a decree of sale, the court will appoint a committee
to sell the property. The court also sets the time and manner of the sale.
The court further appoints three appraisers. The borrower may stop the
proceedings at any time by paying the balance due on the loan. If not,
the committee will make the sale. Afterwards, the sale will be ratified
by the court which executes a deed to the purchaser. The grantee in the
deed may obtain possession of the property by court order. A supplemental
judgment can direct the distribution of the proceeds of the sale. The lender
need only bring those proceeds to court which exceed the balance due on
the loan, which included interests and costs.
Special Protections for Unemployed Borrowers
If a residential borrower has lived in the home as a principal residence
for at least two years, and the borrower (1) has not had a foreclosure
action commenced against him or her in the past seven years, and (2) is
unemployed or underemployed as defined by law, then the borrower can claim
protection from foreclosure under Connecticut statutes. Borrowers are underemployed
or unemployed under Connecticut law if the aggregate earned income of all
the homeowners of the real property during the year preceding the foreclosure
was under $50,000 and less than 75 percent of the average aggregate annual
income during the two years prior to one year before foreclosure.
Eligibility
A court may decide that borrowers are eligible for special protection
after considering two criteria: (1) the likelihood the borrower will be
able to make timely payments on a restructured mortgage by the time a restructuring
period ends and the likelihood of a substantial prejudice to a lender or
a subordinate lien holder due to the restructuring of the mortgage debt.
Protection from Foreclosure
Under Connecticut law borrowers can get two forms of protection: foreclosure
is stopped during the restructuring period. Which may last up to six months,
and borrowers can obtain court ordered restructuring of their mortgage
so as to eliminate overdue payments.
Restructuring the Loan
The ceiling for restructured debt is either (1) the amount of the original
debt or (2) 90 percent of the fair market value of the property as determined
by an appraiser at the time of the restructure. No additional debt may
be restructured. Missed payments can be added to the balance of the loan
in a Connecticut restructure. However, the borrower must pay interest on
the amount in arrears that is added to the loan. Interest accrues on any
sums added to the old mortgage debt at the end of the restructuring period,
which may be fixed or variable, depending on the original note. A composite
rate must be used on fixed rate loans so that the restructured debt must
pay current interest rates which the main part of the loan continues at
its original rate. Such composite rates are not necessary for variable
interest rate loans.
Deficiency Judgment
The strict foreclosure proceeding does not include an action against the
borrower for payment, but the lender can sue the borrower directly. In
an independent action brought prior to or during the strict foreclosure
proceeding. Once the borrower's time limit to pay the balance due on the
loan expires, the lender obtains title to the property. If the property
is worth more than the balance owed on the loan, the lender cannot sue
for a deficiency. Please note, the lender receives all the equity in the
property without paying anything in this situation. In proceedings to foreclosure
by sale rather than by strict foreclosure, additional proceedings to collect
a debt from the borrower are stayed during the suit seeking a sale. If
the proceeds of the sale exceed the appraised value of the property , but
are not enough to pay the lender's past due loan balance, then a deficiency
judgment may be rendered against the borrower. If at the court-ordered
sale, the property is sold for less than the appraised value, then no other
proceedings to collect the debt from the borrower may be undertaken until
one-half the difference between the debt and the appraised value is subtracted
from what the borrower owes the lender.
Redemption
Redemption is determined by the court in strict foreclosure. Redemption
by a junior lien holder is subject to any prior liens.
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