The foreclosure mediation law extension goes into effect on Wednesday, July 1, 2015. This extension will allow for distressed sellers in Connecticut to avail themselves of mediation until June 30, 2019. Lenders must participate in the mediation program if a borrower requests it, you cannot be denied the right to mediation if you are in arrears and are facing a pending foreclosure.
According to the mediation program manager for State of CT Judicial Branch, there are still a number of delinquent loans which have yet to enter foreclosure, so the three year extension seems a prudent decision.
According to statistics from the program from July 2008 through May of this year, 22,535 borrowers have completed a foreclosure mediation through the program and of those 70% were able to keep their homes and 15% of the remainder were able to move out of the home without foreclosing.
Of those that were able to keep their homes, 83% were able to obtain a modification, the remainder either had their loans reinstated, foreclosure proceedings delayed or paid off their loans.
This sounds like a success for story borrowers, their families and their neighbors who often are distraught about deferred maintenance of a neighbor’s home and the potential impact it could have on their own property values.
Hopefully the mediation program will outlast it’s usefulness as foreclosures and delinquencies are purged from the market. There is also the chance that some of the borrowers who have received a loan modification may not be able to meet the terms of their new loans and will be facing foreclosure once again before the end of the extension in 2019.
One interesting caveat in the extension is the ability to add a non-borrower (someone not on the mortgage) such as a spouse or widow to the negotiation and the window for document preparation for a mediation has been increased from 84 days to an open-ended extension ordered by a judge, which is a great relief for borrowers scrambling to get their paperwork in order and submitted in time.
At Home Selling Team we have worked with many short sales, pending foreclosures and distressed sellers over the years and much less so this year, thankfully. Although we had a team of professionals to assist us in navigating the challenges inherent in these types of situations, these transactions were often protracted, unpredictable and very stressful for the homeowners and buyers waiting for the banks to either approve or deny a sale. I for one, will be happy to return to working with qualified sellers and buyers full of anticipation and excitement, not dread and foreboding, about buying or selling a home.