A bill signed into law last week by Gov. Ned Lamont drives a stake into the heart of so-called “zombie” mortgages.
A “zombie” mortgage refers to a second mortgage debt that a homeowner may have thought was satisfied or forgiven years ago but, in fact, still exists.
Senate Bill 1336, now Public Act 25-46, establishes a 10-year statute of limitations for bringing an action to foreclose on certain mortgages for a one- to four-family dwelling that the borrower uses as his or her home.
The bill was approved overwhelmingly by two committees and both legislative chambers. Both the Banking Committee (12-0) and the Judiciary Committee (40-0) unanimously approved the legislation.
On May 15, the full Senate voted 35-1 in favor of the bill, with the lone vote against cast by Sen. Rob Sampson (R-Wolcott). On May 29, the House voted 140-6 in favor, with five legislators absent or not voting.
The bill was introduced by Sen. Pat Billie Miller (D-Stamford), co-chair of the Banking Committee, who said that one of her constituents was caught off guard after a company that had acquired his second mortgage, which he thought had been forgiven, began trying to collect on the loan with interest.
“This bill protects our homeowners from foreclosure threats based on debt that’s been dormant for more than a decade,” Miller said after the bill passed the Senate.
She added that the bill aligns Connecticut with other states nationwide that have approved similar laws.
“No one making reliable payments on their primary mortgage should face foreclosure because someone made an opportunistic decision to resurrect a secondary loan years after deciding that collection wasn’t worth the effort,” Miller said.
Sen. Eric Berthel (R-Watertown), the ranking Republican on the Banking Committee, also praised passage of the bill.
“Property values have surged in recent years, and now these so-called ‘zombie’ mortgages — which were not worth the effort to collect at the time — are being pursued,” Berthel said. “This bill protects homeowners from collections by predatory lenders or collection agencies now seeking a payoff, and it was met with strong support from realtors, bankers, and credit unions.”
Actually, bankers did raise some concerns about a similar bill, House Bill 6878, saying that the way it was written could prohibit foreclosing on any mortgage after 10 years. That bill died on the House calendar. SB 1336, meanwhile, specifically addresses zombie second mortgages.
Sampson, meanwhile, said during debate on the bill in the Senate that, “I believe if you borrow money, you have an obligation to pay it back,” adding that the state should not negate the right of a lender to collect on a debt, regardless of the length of time involved.
The new state law’s ban on bringing an action against a long-overdue mortgage generally begins with the earlier of 10 years after:
- the due date for the mortgage’s last payment or the maturity date set or calculated from information in the mortgage or the note, bond, or other obligation secured by the mortgage, or
- the last payment by, or on behalf of, the borrower.
The law does allow an extension of the 10-year period “if there is a written instrument that extends it, in which case the new statute of limitations is 10 years after the extended date.”
In addition, if during the last two years of the 10-year period, a law, order or rule prohibits an action from being brought, the law allows for an extension equal to the duration of the prohibition.
The law also exempts mortgages from the statute of limitations if they are:
- Recorded before 2026 and were first in priority at the time of recording (including one subsequent to a satisfied, but not yet released, mortgage), or
- Subordinate to a first mortgage when they were recorded, regardless of recording date, that are held by the original lender or its subsidiary, affiliate, or successor by merger or acquisition.
The bill was among 29 the governor signed into law on June 10. To date, he has signed 65 bills and signed line-item vetoes of two bills.
