Connecticut enacted Public Act No. 08-176 effective July 1, 2008.  The law has the following provisions:

• On the front end, when lenders make mortgages, the state now imposes an affirmative duty to act in good faith toward borrowers. This means that lenders cannot engage in misleading, deceptive, or untruthful conduct.

• Lenders must make a good faith effort to determine a borrower's ability to pay, instead of simply lending on the value of the property.

• When setting rates, the law now distinguishes three types of loans: prime, non-prime, and sub-prime. Non- and sub-prime loans are subject to stricter interpretations of these lenders' duties.

• For homeowners with ARMs facing foreclosure because the loan has reset to an unaffordable rate, the state has created the Homeowner's Equity Recovery Opportunity Loan program (HERO).

• The Connecticut Housing Finance Authority (CHFA) will buy ARMs from banks and then issue a new loan to the homeowner at an affordable fixed rate. Homeowners must meet certain repayment requirements such as showing an effort to meet financial obligations and a stable income.

• For borrowers whose troubles stem from income or employment difficulties, the new laws established the Emergency Mortgage Assistance Program (EMAP). Under EMAP, families whose income has dropped, mortgage payments have increased, or both may be eligible for up to 5 years of assistance from CHFA. Moreover, lenders who initiate foreclosure must include notice that defaulted borrowers have 60 days to apply for EMAP assistance.

• Lenders starting foreclosure proceedings must also notify borrowers of the state's new foreclosure mediation program. Borrowers must request mediation within 15 days of the foreclosure return date. Banks can still go forward with foreclosure proceedings during mediation, but the court cannot enter judgment during the 60-day mediation period.

In 2010, Connecticut enacted Public Act No. 10-181, which extended the foreclosure mediation program through June 30, 2012. This act also required that the lender to be present at mediation sessions with homeowners either in person or by telephone.

In 2011, House Bill 6351 was signed into law. This new law:

• Extends the foreclosure mediation program to July 1, 2014.

• Generally prohibits parties from making motions in foreclosure litigation, other than motions related to mediation, for an eight-month period after the foreclosure return date (only applies for foreclosure actions with return date on or after July 1, 2009).

• Prohibits court from entering judgment of strict foreclosure or foreclosure by sale until 15 days after the mediation period has expired or been terminated, or until the 8 month period has expired (only applies for foreclosure actions with return date on or after July 1, 2009).

• Requires mortgagees, when bringing a foreclosure action, to provide mortgagors with information about consumer credit counseling agencies (only applies for foreclosure actions with return date on or after October 1, 2011).

• Requires mortgagees to provide mortgagors with a mortgage account credit and debit history for the last twelve-month period, within 15 days of the first mediation session (only applies for foreclosure actions with return date on or after October 1, 2011).

See also the Connecticut Office of Legislative Research’s Summary of the Bill.