Experts fear surge in foreclosures in Conn.

Tens of thousands of homeowners behind on mortgages

In a typical year as a foreclosure prevention counselor, Herman Gibson might help 30 people long past-due on their mortgages to renegotiate their loan, go to court, or sometimes find new housing. This year, Gibson has already aided three times that number of people.

It’s all because of the COVID-19 pandemic and the economic setbacks that triggered for many homeowners across the state, said Gibson, who works at

the Hartford-based Community Renewal Team, an anti-poverty nonprofit.

Now, as the end nears for mortgage deferrals that were put in place in early 2020 to help alleviate the pressure from lost income, tens of thousands of homeowners in Connecticut are facing a multi-thousand dollar crunch as skipped mortgage payments come due.

He and other experts fear many homeowners will ultimately be unable to pay off what they owe, setting the stage for a potential surge in foreclosures that could have a particularly significant impact in Connecticut.

The concern for Connecticut is greater than elsewhere because, for years leading up to the pandemic, the state’s 90day delinquency rate — the percent of consumers in Connecticut with mortgages 90 days or more past due — was the secondworst in the country and roughly double the national average, according to an analysis of data from the Federal Reserve Bank of New York.

“If I haven’t paid my mortgage in three months, I’m not going to be able to pay that kind of money. I don’t think a lot of homeowners can,” said Jason Richardson, director of research and evaluation for the National Community Reinvestment Coalition.

Connecticut maintained the second-worst delinquency rate during the pandemic, through the end of 2020, even as delinquency rates dropped slightly with help from COVID-19 relief packages.

Gibson said many of his clients were on unstable ground before the pandemic, working jobs in service, for instance, that don’t provide income yearround. Many didn’t realize they would owe their missed mortgage payments when the federal relief period ended.

“All of this was just water building up behind the dam,” he said.

Nationwide, mortgage debt has grown substantially during the pandemic.

“Not even during the worst of the Great Recession have so many borrowers been so far behind,” the Consumer Financial Protection Bureau stated in late June.

In March 2020, Congress passed legislation designed to protect homeowners from losing their homes during the pandemic. Soon after President Joe Biden took office in January, his administration extended that aid, stopping foreclosures through the end of July.

Then, the Consumer Financial Protection Bureau enacted rules in late June that also aimed to stymie any surge in foreclosures.

During the pandemic, the federal government also gave borrowers the option to go into 18-month forbearance, or a temporary freeze on payments. Thousands in Connecticut took advantage, peaking at 66,000 properties in June of 2020, according to information from the financial services and analytics firm Black Knight, Inc. About 23,100 properties in Connecticut were still in forbearance as of Sept. 1.

Still, because of the relief that was available to homeowners in the first 18 months of the pandemic, it is difficult to estimate how many Connecticut mortgage holders could be in jeopardy of losing their homes in the coming months, in the absence of any aid.

But with forbearance opportunities beginning to dry up as the pandemic reaches its 18th month, borrowers will find themselves on the hook for the payments they deferred.

Some owners may face foreclosure. Others might refinance their loans or seek adjusted payment plans. For families who have suffered job losses and have fallen 90 days or more behind on mortgage payments, it will likely be difficult to catch up, Richardson said.

Around 1 percent of mortgage-holders in Connecticut are three months or more past-due, according to the Federal Reserve Bank of New York. That’s the second-highest rate in the country and about double the national average. The only state with a worse delinquency rate is New York at 1.24 percent.

Connecticut has maintained one of the worst rankings on that metric since the mid-2010s, after many states’ economies fared better following the Great Recession.

Fred Carstensen, an economist at the University of Connecticut and director of the Connecticut Center for Economic Analysis, said the state’s persistently high delinquency rate is a factor of the state’s “extraordinarily weak economy.”

After the recession, Carstensen said, Connecticut failed to keep pace with a modernizing, increasingly digital marketplace. Jobs were lost in high-wage sectors like finance, insurance and pharmaceuticals, he said, and economic output was stagnant even before the COVID-19 pandemic. He said Connecticut’s negative 1 percent rate of growth in the decade since the 2008 recession is the poorest performance of any state in the country.

“It’s the worst-performing state economy in the nation by a significant measure,” he said. “The quality of jobs in Connecticut have been systematically deteriorating.”

That trend disproportionately affects people with lower-paying jobs the most, Carstensen said, which may trickle down to the relatively high rate of missed mortgage payments.

Connecticut also saw a “high degree” of predatory lending practices ahead of the 2008 recession, and it was difficult for many to bounce back, said Jeff Gentes, managing attorney for the Fair Lending and Foreclosure Prevention Project at the Connecticut Fair Housing Center.

The state’s relatively high rates of inequality have also contributed to Connecticut’s high mortgage delinquency rates, he said.

“It took us a long time to even get past that [the recession], and now the effects of the pandemic have been disproportionately borne by people of color, people with low wealth,” Gentes said.

Gentes said the number of foreclosures hasn’t ticked up just yet. But he anticipates they’ll start to rise as people exit forbearance this fall.

However, in recent weeks, the types of foreclosures Gentes has seen have deviated from the norm.

More of the foreclosure prevention cases have been unrelated to mortgages — foreclosures from tax debts, sewer liens, condominium association fees and other charges, Gentes said. Forbearance options didn’t freeze non-mortgage payments, and homeowners may have missed payments while in forbearance.

He also has seen an influx of foreclosure cases stemming from second mortgages. Whether a lender takes foreclosure action on a second mortgage typically depends on the home’s current value, and average home prices are up now.

“We’re getting far more second mortgage calls than we used to,” Gentes said. “It’s like the second mortgage was so underwater, then something happened to it.”

Gov. Ned Lamont spokesman Max Reiss said funding from the state’s homeowner assistance program “will be critical to provide security to families and keep them in their homes.”

Plenty of mortgage aid is still available through the state’s Homeowner Assistance Fund Program. Now in the second phase of its pilot, the program allows property owners with certain mortgage servicers who earn up to 100 percent of their area median income to get up to $20,000 in mortgage assistance.

The pilot, managed by the Connecticut Housing Finance Authority, is funded with $10 million in federal dollars from the American Rescue Plan. A public comment period for the plan for the $123 million full program ended Friday.

Gibson’s agency, Community Renewal Team in Hartford, has grants of up to $8,000 available for lowincome borrowers who live either in Hartford or Middlesex counties, earn less than twice the federal poverty level and have missed mortgage payments specifically because of COVID-19.

Gibson said the worst thing someone who’s behind can do is ignore the problem.

“Keep the lines of communication open with your lender,” he said. “Be responsive. Don’t give up.”

Around 1% of mortgage-holders in Connecticut are three months or more past-due, according to the Federal Reserve Bank of New York. That’s the second-highest rate in the country and about double the national average.