With thousands of Connecticut mortgages in forbearance and foreclosures temporarily halted due to COVID-19, state lawmakers are considering whether additional protections are needed for borrowers and consumers in the months ahead.
For example, housing advocates, who are anticipating a wave of mortgage delinquencies larger than what Connecticut saw during the Great Recession, have urged the state to require banks and nonbank mortgage servicers to offer 360 days forbearance, which is what is allowed in the federal CARES Act.
In a virtual meeting last week of the legislature’s Banking Committee, Department of Banking Commissioner Jorge Perez urged lawmakers to be cautious about issuing new mandates to Connecticut financial institutions.
Any state laws would likely only apply to state-chartered banks and credit unions, which could place an uneven burden on them, as large national banks operating here — such as Bank of America, Wells Fargo and TD Bank — operate under federal charters.
“I have no jurisdiction whatsoever over them,” he said of federally chartered institutions.
Perez said big banks have been cooperative during the COVID-19 crisis, voluntarily signing onto a pledge coordinated by his department to offer temporary mortgage forbearance to impacted borrowers while waiving late fees and not reporting the delays to credit scoring agencies, and not filing any new foreclosure lawsuits during the still ongoing declared public health emergency.
Perez said some banks have filed new foreclosures during the past few months, but they are related to borrowers’ financial difficulties that predated COVID-19.
As lawmakers consider whether and how to assist, perhaps during a special session later this year, Perez advised that it may be renters, rather than homeowners, who need the most help, depending on whether jobs return and how quickly.
“We’re going to need to do more than simply forbearance or no evictions for a period of time,” Perez said. “There’s going to need to be help for that population, because they’re not going to be able to catch up.”
