Nearly four out every five Connecticut residents who completed the state's foreclosure-mediation program wound up keeping their homes or making a graceful exit, according to a report released Thursday by the Federal Reserve Bank of Boston.
The report, "State Foreclosure Efforts in New England: Mediation and Assistance," said Connecticut's foreclosure-prevention program - one of the first and most comprehensive in the nation - resulted over a three-year period in 64 percent of people retaining their homes and 15 percent backing out of mortgages through bank-supported short sales, debt forgiveness and other means.
"Connecticut's mediation program appears to be quite successful in meeting its objectives," according to a summary of the report penned by Fed policy analyst Robert Clifford.
"The mediation process provides homeowners a channel of communication with their lenders that has been difficult for most to establish on their own."
The report cited Connecticut as a model for other states to emulate. Not only does the state offer a mandatory foreclosure-mediation program, the report said, it also provides two sources for financial assistance: the Connecticut Fair Alternative Mortgage Lending Initiative and Education Services (CT FAMLIES) for refinancing and the Emergency Mortgage Assistance Program (EMAP) for mortgages.
"The demand for assistance from CT FAMLIES puts the program on pace to exhaust most of its funding by the end of 2011," the summary noted.
The report said that of 9,472 Connecticut homeowners who completed the foreclosure-prevention process, 7,478 avoided foreclosures. Just less than 2,000 could not come to an agreement with lenders that was deemed "mutually beneficial."
About half of those who went through the program wound up with loan modifications, while 8.5 percent signed a forbearance agreement designed to catch them up on payments over a period of time. Another 5 percent were able to receive a one-time mortgage insurance payout that helped them catch up with their payments.
While some other states, cities and counties have seen similar positive results, the benefits have not been as translatable in states such as Maryland and New Hampshire, where participation is voluntary.
"Mediation programs also tend to report lackluster results in their early stages … as they deal with a backlog of foreclosures," the report said.
Still, the success of Connecticut and other states' foreclosure-mediation programs has spurred interest nationwide. While only five mediation programs existed three years ago, 21 states now offer some time of foreclosure prevention.
"As these programs have yielded results, they have grown in popularity," the report summary said.