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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 suite, 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
that 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 statues. 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 that 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 not, 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. |
