Feb. 3, 2009 - Blumenthal Bill

Blumenthal Bill Targets Foreclosure-Rescue Schemes
By KENNETH R. GOSSELIN
January 7, 2009

With foreclosures at record levels in Connecticut, the attorney general on Tuesday proposed legislation aimed at protecting consumers from foreclosure-rescue and other personal finance schemes that promise help for a fee, but don't deliver.

Attorney General Richard Blumenthal said his proposal would tighten existing regulations and require that any entity offering to help consumers facing foreclosure or mounting debt be a nonprofit counseling agency. The state regulates such agencies.

The legislation seeks to eliminate a loophole that allows disreputable businesses to take advantage of consumers by charging high fees or, in some cases, requiring them to give up ownership of their homes, Blumenthal said.

Blumenthal said hundreds of residents have been victimized by such schemes, which have grown in number with the rise in foreclosures and job losses. He said his office is investigating several cases and is compiling a list of perpetrators.
"They sink consumers like quicksand through financial schemes that doom families to deeper debt, even as they struggle," Blumenthal said.

In addition to requiring mortgage- and debt-assistance companies to be nonprofit, the proposed legislation would require the businesses to clearly spell out services in a contract, allow consumers to cancel within three days and would prohibit upfront fees.

Blumenthal was joined at a press conference Tuesday by key legislators and housing advocates.

"When people are desperate, they make these calls," said state Rep. Kenneth Green, D-Hartford and chairman of the legislature's housing committee. "They don't realize they get promised a lot of things, but they don't get the delivery of those services."

Green said the problem could get worse if the economy deteriorates further and more people lose their jobs and get behind on their mortgage or other monthly bill payments.

As of Sept. 30, the state had 18,600 home mortgages in foreclosure or 90 days past due, about 3.5 percent of all home loans, according to the Mortgage Bankers Association. That compared with 16,560, or 3.1 percent of the total, as of June 30.

The co-chairmen of the legislature's banks committee — state Sen. Bob Duff, D-Norwalk, and state Rep. Ryan Barry, D-Manchester — said Blumenthal's proposal would build on mortgage lending reforms and programs passed in the last session of the General Assembly.