Home sales in Connecticut tend to run just slightly above the national rate and have for the last 20 years. Ranked 23rd for homeownership against all fifty states, the Constitution State dropped a bit over the past few years from 70% to about 66%. Buyers in Connecticut often look for special financing options that can serve as alternatives to traditional mortgage loans from the big banks. One option that is gaining in popularity is called a hard money loan. These are offered by small or individual investors and require that the borrower put up their home or some other owned real estate as collateral to secure the funds. The loans usually fund faster than the traditional mortgage loans offered by large banks and also typically require much less paperwork.
Connecticut Foreclosure Laws
Connecticut is a little bit different from other states when it comes to foreclosure process. Connecticut foreclosures follow one of two paths, they can be "foreclosure by sale" which means that the courts order the home sold and the proceeds of the sale are paid to the lender to help satisfy outstanding debt. Or, they can follow a "strict foreclosure" process where the court transfers title to the home directly to the foreclosing party, without holding a public foreclosure sale Conn. Gen. Stat. § 49-24. Both methods are managed by the courts, which is why the state is considered a judicial foreclosure state.
Property Redemption after Foreclosure
In some states, you can redeem (repurchase) your home within a certain period of time after the foreclosure sale. For Connecticut homeowners facing foreclosure, the right to redeem is determined by which type of foreclosure process is followed.
In a foreclosure by sale, the borrower can redeem or reclaim the home up until the court confirms the sale. In a strict foreclosure, the court will set a specific date as a deadline, known as a Law Day, which is the last date that the borrower can redeem the home.
Deficiency Judgments in Connecticut
In most states, when a home is lost to foreclosure, money from the sale of the home is applied to the homeowner's debt to the lender. If the home does not sell for enough to cover the debt, then lenders often seek relief by asking the courts for a deficiency judgment, forcing the homeowner to continue paying on the debt until it has been satisfied.
With a foreclosure by sale, if the property sells for less than fair market value, the lender has to credit the homeowner with half the difference between the sale price and the appraised value. Conn Gen. Stat. § 49-28. With a strict foreclosure, the lender can ask for a deficiency judgment within 30 days after the Law Day. The judgment will be limited to the difference between the remaining debt and the fair market value of the home. Conn. Gen. Stat. § 49-14.
Deed in Lieu of Foreclosure
When the struggle to keep a home facing foreclosure gets to be too much, or when the homeowner is ready to give up and move out, there is one last option in play. It does not help save the home from auction, but it does put some of the power of closure back into the borrower's hand. This last option is called a deed in lieu of foreclosure. It is an agreement between the borrower and the lender. In this scenario, the homeowner walks away without incident, allowing the lender to opfficially take possession of the home. They sometimes pay a borrower a small amount to help with the costs of moving out. In the long run, deed in lieu of foreclosure is a good option for those facing foreclosure. It doesn't save the home but it can reduce some of the stress related to this kind of experience, significantly.
Grace Period Notice
Connecticut does not technically have a grace period built-in to the foreclosure process, designed to give borrowers extra time to find a remedy and save their home. Lenders in the state can file the foreclosure lawsuit and then borrower has 15 days after the return date to file an answer. That is the time to seek a solution. The only other time remaining when the lender gives notice to the borrowers about the pending foreclosure, they also have to provide any information available regarding mediation programs that might help save the property.
Service Members Mortgage Protections
Some states extend protections that are similar to federal military programs designed to delay foreclosure when a member is on active duty or serving overseas. In Connecticut, there are no additional state-provided protections for state Military Personnel in Connecticut.
High Risk Mortgage Protections
In Connecticut, some homeowners who are underemployed or unemployed can ask the court for protection from foreclosure and get help with modification of mortgage terms to give relief from foreclosure.
Additional State Laws
The maximum interest rate allowed by law is 12%. State interest rate laws attempt to help consumers by placing a ceiling on the amount of interest a creditor can charge. For example, the legal maximum in Connecticut is 12% in most cases, but can be 8% on court judgments. There can also be exceptions for certain mortgages.
Connecticut is a homestead state. Under the Connecticut exemption system, homeowners may exempt up to $75,000 of their home or other property covered by the homestead exemption. Say you have a $200,000 house with a $125,000 mortgage, and you file for Chapter 7 bankruptcy in Connecticut. Because you have $75,000 of equity in your home, all of which is protected by the Connecticut homestead exemption, the trustee cannot take your house and sell it as part of the bankruptcy.
Lender Licensing Requirements
A Mortgage Lender Branch license is required for any Connecticut Mortgage Lender Licensee who, through a branch office, engages in the business of making loans or issuing extensions of credit which are secured by a mortgage on an interest in one-to-four family owner-occupied residential property located in Connecticut.