Mortgage Lenders’ and Servicers’ Catch 22 in Connecticut

By: Jonathan M. Robbin and Adam M. Swanson

Ambiguities in Connecticut Public Act 2013-156, and the courts construing them, have created a Catch-22 for lenders and servicers. Connecticut Public Act 2013-156 and recent Court decisions allow condo associations to pursue serial foreclosures stripping more of the scant equity securing a first mortgage and shifting all of the associations’ losses. As a result, lenders and servicers are left with a difficult decision: Continue to pay associations and their fees and lose more equity in properties – many of which are underwater – or take title and risk affirmative claims by borrowers and/or regulatory scrutiny.

The attached article examines the Connecticut Act and the effect it has recently had on lenders and servicers.

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