Affordable Housing, Community Development, Homelessness, Reports and Publications

Fed to States: Assist At-Risk Homeowners and Mediate Foreclosures


Intervene early. Tap existing experience. Weigh funding strategies carefully. Collect and analyze results. This is advice given to states by the Federal Reserve Bank of Boston (FRBB) in a new report released Thursday. The report analyzes financial assistance programs for homeowners in trouble and mediation programs that seek to come to a non-foreclosure resolution with the lender and homeowner in all five New England states.

All New England states except Massachusetts have foreclosure mediation programs, which bring lenders and homeowners to the table to try to negotiate a settlement that either allows homeowners to stay in their homes or to leave gracefully. As a "Judicial review" state, where all foreclosures have to be brought to court, Connecticut’s mediation system is run through the Judicial branch and is mandatory for both lenders and homeowners once a foreclosure is filed.  In Connecticut, 78% of homeowners who completed the mediation process avoided foreclosure and 64% remained in their homes, according to the study.

In the study, Connecticut received high praise for its financial assistance programs for struggling homeowners. The Connecticut Fair Alternative Mortage Lending Initiative and Education Services (CT FAMILIES) program and the Emergency Mortgage Assistance Program (EMAP), both run by the Connecticut Housing Finance Authority (CHFA), have helped ease the burden on homeowners who experienced trouble paying for their mortgage.

CT FAMILIES enables CHFA to purchase mortgages and offer them to homeowners at a fixed rate, and also to offer second mortgages to homeowners with underwater first mortgages who would normally have trouble refinancing, allowing households with negative equity to bridge the gap and avoid default. The study praises the state for adequately funding CT FAMILIES throughout the recession.

EMAP, a formerly dormant program dating back to the recession of the early 1990s, was revived in 2008 and provides temporary assistance through monthly mortgage payments for up to five years for eligible homeowners facing foreclosure owning to financial hardship due to circumstances beyond their control, including a significant reduction in household income or an increase in expenses, as determined by CHFA. The study praises EMAP's adaptation to current circumstances by expanding eligibility in 2009 to include an increase in expenses as a qualification.

To Learn More:
Read the report


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