Before the foreclosure crisis, federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited and tended to favor foreclosing lenders. However, many federal and state laws now give protections to borrowers. Servicers generally must provide borrowers with loss mitigation opportunities, account for each foreclosure step, and carefully comply with foreclosure laws.
Also, most people who take out a loan to buy a residential property in Connecticut sign a promissory note and loan contract called a "mortgage deed." These documents give homeowners some contractual rights in addition to federal and state legal protections.
So, don't get caught off guard if you're a homeowner behind in mortgage payments. Learn about Connecticut foreclosure laws and how the foreclosure process in Connecticut works, from missing your first payment to a foreclosure sale.
In a Connecticut foreclosure, you'll most likely get the right to:
Once you understand the Connecticut foreclosure process and your rights, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible.
The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. (Sometimes, people refer to the period before a foreclosure sale happens as "preforeclosure," too.)
During the preforeclosure period, the servicer can charge you various fees. Also, in most cases, federal law requires the servicer to let you know how to avoid foreclosure, and most mortgage contracts require the servicer to send you a breach letter.
Under federal law, the servicer usually can't officially begin a foreclosure until you're more than 120 days past due on payments, subject to a couple of exceptions. (12 C.F.R. § 1024.41). This 120-day period provides most homeowners with ample opportunity to submit a loss mitigation application to the servicer.
If you default on your mortgage payments for your home in Connecticut, the foreclosure will be judicial. However, the process might vary from other states that use a judicial process. While a "decree of sale foreclosure" (or "foreclosure by sale") is basically a typical judicial foreclosure, a "strict foreclosure," is a slightly different process.
A foreclosure by sale officially begins when the foreclosing lender files a lawsuit (a "complaint") in court and serves a copy to the borrower. If the borrower doesn't respond, the lender automatically wins the case. If the borrower responds to the suit, the court will move the case through the litigation process.
Either way, if the lender wins, the court enters a judgment against the borrower and sets a sale date. The home is then sold at a foreclosure sale (see below).
A strict foreclosure and foreclosure by sale involve the same process up until the setting of the sale date, at which point the process differs.
In a strict foreclosure, rather than setting a sale date, the court sets a "Law Day" for the borrower and the other defendants in the case. The borrower has to redeem the home (discussed below) by this deadline or lose the legal right to the property.
When all assigned Law Days pass, the lender files a Certificate of Foreclosure in the land records, which serves as evidence that the foreclosure is complete and the lender now owns the property. A foreclosure sale isn't held.
After the lender files a motion for judgment of strict foreclosure, you may file a motion for foreclosure by sale. This motion asks for an auction to sell the home to the highest bidder.
If you have equity in the property (the amount your property is worth less any mortgages or liens on the home, plus the costs of the foreclosure and sale), selling the home at auction gives you a chance to recover some of the equity.
In a foreclosure by sale, the property is sold to the highest bidder at the sale. At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less.
In some states, including Connecticut, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower. If the lender is the highest bidder, the property becomes "Real Estate Owned" (REO).
But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds—that is, money over and above what's needed to pay off all the liens on your property—you're entitled to that surplus money.
Along with the complaint, the lender also has to provide notice to the borrower about Connecticut's foreclosure mediation program. The mediation program applies to foreclosure actions that have a return date up to June 30, 2029. (Conn Gen. Stat. § 49-31l).
Under an amendment to Connecticut's foreclosure laws, if the foreclosure involves a federally backed mortgage loan, the lender must provide the following information to the mediator so that the mediator can include them in the mediation reports:
The Connecticut Housing Finance Authority (CHFA) helps homeowners in Connecticut avoid foreclosure by providing financial counseling, mortgage assistance loans, and job training. To learn more about programs the CHFA offers to homeowners trying to avoid a foreclosure, get information about eligibility requirements, and find out how the programs might be able to help you, go to the CHFA website.
If you agree to a Connecticut "foreclosure by market sale," you get to live in the home while the lender advertises it on the open real estate market and sells it to a new owner. If the home doesn't sell, the lender must foreclose. In the meantime, you get to live in the property even though you're not making monthly mortgage (or rent) payments.
A foreclosure by market sale is a hybrid process that combines features of a short sale with the strict foreclosure process. To learn more about this kind of foreclosure, see Conn. Gen. Stat. §§ 49-24a to 49-24g or talk to an attorney.
A few potential ways to stop a foreclosure and keep your home include reinstating the loan, redeeming the property, or filing for bankruptcy. Working out a loss mitigation option, like a loan modification, will also stop a foreclosure.
Or you might be able to work out a short sale or deed in lieu of foreclosure and avoid foreclosure. But you'll have to give up your home with a short sale or deed in lieu of foreclosure transaction.
While Connecticut law doesn't allow a homeowner to stop the foreclosure by "reinstating" the loan, the mortgage contract might provide this right. Or your lender might agree to let you complete a reinstatement.
One way to stop a foreclosure is by "redeeming" the property. In Connecticut, you have up until:
If you're facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy.
Once you file for bankruptcy, something called an "automatic stay" goes into effect. The stay functions as an injunction that prohibits the lender from foreclosing on your home or otherwise trying to collect its debt, at least temporarily.
In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy might be the answer. To find out about the options available to you, speak with a local bankruptcy attorney.
In a foreclosure, the borrower's total mortgage debt sometimes exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a "deficiency." For example, say the total debt owed is $600,000, but the home sells for $550,000 at the foreclosure sale. The deficiency is $50,000.
In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount—in our example, $50,000—from the borrower.
Connecticut allows deficiency judgments.
Connecticut law allows the lender to seek a deficiency judgment with both decree of sale foreclosures and strict foreclosures.
Deficiency judgments in decree of sale foreclosures. In a decree of sale foreclosure, the lender can ask the court for a deficiency judgment as part of the foreclosure suit. But if the property sells for less than its appraised value, the lender has to credit you with half of the difference between the sale price and the appraised amount. (Conn Gen. Stat. § 49-28).
Deficiency judgments in strict foreclosures. To get a deficiency judgment following a strict foreclosure, the lender must file a motion with the court within 30 days after the Law Day. The deficiency amount will be the difference between the total outstanding debt and the home's fair market value. (Conn. Gen. Stat. § 49-14).
For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Get tips on what to do—and what not to do—if you're facing a foreclosure.
Find out if foreclosures are on the rise.
If you have questions about Connecticut's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney. Talking to a HUD-approved housing counselor about different loss mitigation options is also a good idea.