Testimony of Eugene S, Melchionne, Attorney at Law in favor of H. B. No. 5552 (RAISED) AN ACT CONCERNING PROCEDURES IN THE FORECLOSURE OF RESIDENTIAL PREMISES and S. B. No. 347 (RAISED) AN ACT CONCERNING HOMEOWNERS PROTECTION.

Ladies and Gentlemen of the Committee:

My name is Eugene S. Melchionne and I am a solo consumer law attorney practicing in Waterbury, Connecticut. I have over 27 years of experience in dealing with lending, mortgages, foreclosures and bankruptcy issues in residential matters. I am the State Chairman for the National Association of Consumer Bankruptcy Attorneys, a nationwide organization of more than 3,000 attorneys nationwide representing consumers in financial distress and I am the Vice President of the Bankruptcy Law Network a web-based resource site of plain information about credit and debt, mortgages and bankruptcy. While in the past, I focused on foreclosing homes and repossessing cars, I have spent the last 17 years almost exclusively representing families and saving homes.

I am here to speak in favor of House Bill 5552 and Senate Bill 347.

It is no secret that families in Connecticut are in financial distress. Everything is more expensive, food, utilities, gasoline, taxes and housing expenses. The collapse of the sub-prime mortgage market is hurting not only low-income families, but also everyone else who is trying to sell a home. Nationwide, ten percent (10%) of all homes are now worth less than what is owed on them. This is a number not seen since the Great Depression of 1929. The inner cities of New Haven, Waterbury, Hartford, and Bridgeport have seen a 400% to 500% increase in the amount of foreclosures filed in the Courts. Empty houses are showing up in all neighborhoods forcing families to move from their homes. Not only do families lose their homes, but it also creates a health problem from blight and results in a further deterioration of home values. The situation is so hopeless that many families don’t explore the legal options open to them, but rather give in to hopelessness and abandon the homestead to move on.

House Bill 5552 creates a balance in the foreclosure process in our Courts not seen since the early 1980’s. Our current process can result in a family losing their home in as little as 60 days. There is no incentive to work things out, and indeed, several law firms specializing in foreclosure have had contests to see how fast a case can be prosecuted to judgment. Homeowners are not trained in the law and do not have the education or money to deal with the pressures of a foreclosure. It is important to give homeowners as much warning as possible that they need to take steps to save their home. When a family is in financial distress, it is not uncommon for fear to take over, causing inaction. Other times when the family is poised for action, they take steps to negotiate with the mortgage lenders while the legal process sweeps past them and the home is lost anyway. I have had several of these cases where a family would be communicating with the “Workout” Department of a lender, while the Foreclosure Department hastened to judgment in foreclosure. This bill would give families notice that a foreclosure is what it means – a legal process that must not be ignored. It further gives them the tools they need to fight on an even footing with the lenders whose only goal is to take the home and flood the market with empty real estate.

Senate Bill 347 aims to strengthen the ability of the Superior Court to restructure loans in default so that homeowners can establish a payment plan to get the mortgage current. The original provisions in our statutes were passed when interest rates had reached an unheralded high of 18% in the early 1980’s causing a great many foreclosures. That act spurred the lenders to make the accommodations giving families the breathing room they needed to stay in their homes. That statute is fatally weak and the mortgage lenders have figured it out. In the 25 years or so that it has been on the books, I personally have seen it used successfully once, only to fail thereafter because the Court was not given the power it needed to solve the problem. This bill would extend the reach of the class of people it affects to those who haven’t lost a job or become underemployed, but to those who cannot keep up with the escalating payments required by their mortgages during a time when other living expenses are also putting a strain on the family budget.

This is not about the sub-prime mortgage market or declining values in real estate. These acts are aimed at protecting Connecticut families from forces that threaten to further rip them apart. Any action this committee takes will be a step towards preserving our neighborhoods, our towns and most importantly our family units. Thank you for your consideration.