Connecticut Court Achieves Resolution in Mortgage Assistance Program Case

The Rolling Stones once expressed a universal truth in their lyrics: “You can’t always get what you want, but sometimes, you get what you need.” This philosophical insight can be seen in the complex world of Connecticut foreclosures, especially after a landmark ruling by the Connecticut Supreme Court.

Background

The case in focus, KeyBank v. Yazar, 2023 Conn. Lexis 169, dealt with a particular issue regarding the statutory pre-suit Emergency Mortgage Assistance Program (EMAP) notice requirement under EAMP. Two main questions arose: firstly, whether this requirement implicated subject matter jurisdiction, and secondly if a second EMAP notice was required after dismissal on procedural grounds. This was the Supreme Court’s first opinion on EMAP, a state program designed to help homeowners in financial distress.

Historical Context

Before Yazar, many foreclosures in Connecticut were dismissed due to defective EMAP notices. The principle gained traction in 2020 with the Appellate Court’s endorsement in MTGLQ Investors, L.P. v. Hammons, where it was declared that failing to provide an EMAP notice constituted a jurisdictional defect.

This legal wrangle had the potential to impact a significant number of homeowners, given that foreclosure is a common law action in Connecticut with a lengthy history. The stage was set for the Supreme Court to make a critical decision about the power of the courts to hear the case at all.

The Decision

On July 25, 2023, the Connecticut Supreme Court delivered its verdict. In terms of subject matter jurisdiction, the Court ruled that mortgage foreclosure is indeed a common law cause of action and, consequently, that EMAP does not implicate subject matter jurisdiction. This reversal of previous Appellate Court opinions was profound in the context of consumer statutes affecting mortgage foreclosures.

As to the second issue—requiring another EMAP notice following a dismissal—the Court firmly stated that every mortgage foreclosure must rely on its unique EMAP notice. The legislative history of the statute guided this decision, highlighting the remedial nature of the law.

Practical Implications

The ruling in Yazar also had notable ramifications for servicers. Specifically, the Court overturned previous decisions on the required entity to issue the EMAP notice, asserting that the identity of the sender did not matter, provided the notice was sent.

This may save some foreclosures from being dismissed, a notable change in policy that could affect a wide range of stakeholders.

Unresolved Issues

Yazar has paved a new path for mortgage foreclosure actions in Connecticut. It clarified that the EMAP notice is a mandatory condition precedent, rather than a jurisdictional requirement. Yet, it left a critical question unanswered: What test should be applied to challenge the contents of the notice after Yazar?

The Connecticut Supreme Court’s ruling opens the door to this question and implies that substantial compliance may be sufficient, aligning with the state’s existing approach to demand letters.

The impact of the Connecticut Supreme Court’s decision in Yazar reaches beyond legal circles to homeowners, lenders, and other stakeholders in the state’s property market. By settling significant issues related to EMAP notices, it offers guidance but also leaves room for further debate.

Perhaps, as the Rolling Stones suggest, this ruling didn’t provide all the answers that various parties might have wanted, but it did deliver what was needed at the time. However, the evolving landscape of mortgage foreclosures in Connecticut suggests that future appeals may yet shape the understanding and implementation of the law. It seems likely that the dialogue between legal principles, property rights, and social justice will continue to unfold, reflecting the complex interplay of human needs and desires encapsulated in that classic song.