Homeowners struggling to make mortgage payments could get some help from legislation signed into law Wednesday, as expected, by Gov. M. Jodi Rell.
The much debated legislation, which sets aside about $140 million for relief and enacts stricter mortgage lending standards, is designed to curtail a rising number of foreclosure filings across the state.
It isn't known exactly how many borrowers will benefit, but there is the potential to help "many hundreds" of borrowers, state Banking Commissioner Howard Pitkin said Wednesday.
The new legislation, backed by the House and Senate last month, incorporates Rell's "CT Families" initiative, which is aimed at first-time homeowners and those who refinanced into adjustable-rate mortgages. It also adds two new components: the Homeowner Equity Recovery Opportunity program (HERO) and the Emergency Mortgage Assistance Program (EMAP), both scheduled to begin July 1. The programs are run by the Connecticut Housing Finance Authority.
HERO provides $30 million to buy mortgages from lenders and then place borrowers on an affordable repayment plan.
EMAP, a $64 million program, requires lenders to give borrowers the option of seeking help from the CHFA in making mortgage payments before bringing foreclosure action.
"Connecticut residents are feeling the pressure from all sides — from staggering gas prices, rising prices for all forms of energy, food prices and the overall cost of living," Rell said. "We are here to help, and with this legislation, we will."
The push for legislation came in the wake of the subprime mortgage crisis, touched off by a wave of adjustable-rate loans resetting sharply higher from low introductory interest rates.
Connecticut hasn't been hit as hard by foreclosures as states like California, Florida and Nevada, but foreclosure filings through April are 40 percent above last year's pace.
"Our hope is that this fair lending legislation will not only help people currently facing foreclosure save their homes but actually prevent a second wave of foreclosures from hitting Connecticut," said Erin Kemple, executive director of the Connecticut Fair Housing Center.
For information about the programs, call CHFA at 860-571-3500.
In addition to the bailout programs, the new law provides for mediation between borrowers and lenders in the courts, makes changes to protect future subprime borrowers from prepayment penalties and generally does not allow lenders to boost interest rates when the mortgage is in default.
The new law also requires lenders and brokers to carefully evaluate whether borrowers can repay their loans, especially if monthly payments could rise. It requires that taxes and insurance premiums be made part of payments.
Contact Kenneth R. Gosselin at firstname.lastname@example.org.
Reprinted with permission of the Hartford Courant.
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