I hear and read a lot about the rising number of foreclosures in Connecticut.
When I used to think about foreclosure, I the thing that always came to mind was the sign on the front lawn and the auction at the property.
Why don’t you see more foreclosure signs in Connecticut?
The answer is that Connecticut has two methods of foreclosure: strict foreclosure and foreclosure by sale.
In a strict foreclosure, a judge sets a date by which the homeowner must redeem the mortgage or title vests with the bank. There is no sale in a strict foreclosure action and hence no sign on the front lawn.
A foreclosure by sale happens when a homeowner has equity in the property. I’ve heard judges say that they look for about 20% equity in the property before they will order a foreclosure by sale. The reason being that a foreclosure by sale costs money which ultimately comes from the equity in the property.
Many of the homes presently in foreclosure financed nearly 100% of the value of the property. Property values have decreased in recent years which often results in the amount owed on the note being greater than the value of the house. This results in more homes going into “strict foreclosure.”
That’s why despite the rising number of foreclosures you don’t see as many ads in the paper or signs on front lawns as you may otherwise expect.