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Lawmakers To Address Condo Bills Aimed At Abuses

By Ann-Marie Adams, Staff Writer

WEST HARTFORD — Rodvald Jones felt vindicated.

A Hartford Superior Court Judge last January ruled that a condo association was negligent in its duty to protect Jones’ rights before initiating foreclosure proceedings in 2004.

The association filed a complaint, claiming Jones owed two months condo payments, less than $600. The association’s lawyer took no further action on the complaint, refused payments for six months and then withdrew the complaint after collecting $20, 000. Jones had to sue his association to get relief. His counterclaim, TWINOAKS CONDO V JONES, he asserted, among other things, statutory theft and breach of contract. And a jury awarded him $25,000.

Twin Oaks Condominium Association Inc. no longer uses Imagineers LLC., the management company Jones battle with for several years. The association replaced its West Hartford-based attorney, Rosenberg and Rosenberg, P.C., with another law firm on the appeal case.

Although Jones received some relief, he said, the fight continues.

“There has been a tremendous loss,” he said. “That management company damaged not just my life but a lot of people’s lives.”

Jones is not alone in his bitter struggle against an association he assumed would protect his rights.

Across Connecticut and the nation, similar stories abound. Condo owners are now pressuring lawmakers to address reports of abuse, neglect and unethical violations. In January, several Connecticut lawmakers introduced bills to specifically address these concerns.

Sen. Paul Doyle

Sen. Paul Doyle (D-Rocky Hill) of the 9th district introduced Bill 797. The aim is to prohibit condominium association from foreclosing on a unit unless the overdue condo fees and fines are at least three months past due, or at least $2,000.  Currently condo associations can begin foreclosure actions if someone is two months past due and the amount is less than $600.

The judiciary committee will hold a public hearing on Bill 797 in the Legislative Office Building Room 210 on Friday, March 4 at 10 a.m.

Condo Complaints and Concerns

In Connecticut, about 500 complaints have been filed with the state attorney general’s office, which prompted former State Attorney General Richard Blumenthal to propose a bill to create a State Ombudsman position, as in Florida, Virginia and other states. That person would oversee internal misconduct with the state’s reportedly 250,000 condo associations.

In his statement to the legislature last year, Blumenthal said: “Many of the complaints received by my office concern failures by association boards of directors to follow basic governance principles, such as adopting an annual budget with notice to the unit owners, holding fair elections for the board of directors, providing key financial information about the association and fairly imposing association fines.  Some of these complaints are based on deliberate indifference by association boards to association bylaws or state condominium laws.”

Doyle said he has been fielding calls from lobbyists, who opposed these bills. These lobbyists represent property managers and lawyers and others who do business with condo associations. For every foreclosure action that begins—even if it’s withdrawn, a lawyer can charge the condo association up to $2,000. If it’s a contested foreclosure, where the unit owner has a defense, the lawyer’s fees could exceed $20, 000, depending on how long the case stays in court. By law, the condo owner is responsible for the association lawyer’s fee.

In some cases lawyer’s fees jump to as much as $45,000, according to one source. Lawyers have reasons to delay, sources say, because mortgage banks usually pay the alleged amount before owners emerge from a mix of confusion and shock, or muster up courage to defend themselves.

More than half of the $20, 000 collected in Jones’ case allegedly went toward attorney fees. If the condo is foreclosed on and sold, the association, under state law, would only be allowed to collect six months condo fees in arrears before the bank collects. This, some say, begs the question: why go that far if the goal is really to get monthly assessments? In most cases, there is very little equity in a condo after a sale to pay off the bank and the associations.

Extreme cases such as that are rare in Florida, said Larry Tolchinsky, a Florida real estate lawyer.

“That’s clearly an abuse of practice where the Bar Association needs to get involved,” Tolchinsky said. “I don’t have all the facts, but that sounds like an ethical violation.”

Scott Sandler agreed and said Jones’ situation seemingly stems from a lawyer’s policies and practices rather than the absence of a law to address missed payments.

“A few have fallen on difficult times and can’t pay common charges,” said Sandler, a foreclosure lawyer. “I usually seek a way to work out payment plans.”

Sandler chairs the Legislative Action Committee for the Connecticut chapter of Community Associations Institute. The LAC is lobbying hard against Bill 797 and others that call for condo association reform, including the Ombudsman bill. These bills, he said, would curtail efforts to collect fees.

In the past, Sandler and other CAI lobbyists have been successful.

“Associations need to act quickly toward foreclosure,” Sandler said. ”We have to have a quick way to collect past due fees.”

CAI’s Executive Director Kim McClain, in a statement to The Guardian, said the CAI advocates flexibility and compassion in collection policies and procedures in times of difficulties, illness, loss of employment or other economic problems. The main goal of the organization, she said, is to educate their members about best practices and good communication.

But that has not been the case with many instances of foreclosure currently in court. In one case, a young married couple at Oakwood Condominium saw their bill go from $600 to more than $10,000 in less than six months, according to their lawyer. The wife, who was pregnant, had to be taken to the hospital on several occasions because of stress induced by Rosenberg and Rosenberg, he said.

Another of his client from Middletown was also taken to court by Rosenberg and Rosenberg. In this case, the lawyer said, the owner filed a grievance against Rosenberg. The Statewide Bar Counsel forwarded the case to a grievance panel that saw no misconduct.

In another case, a condo owner accused her attorney of allegedly colluding with Rosenberg. The assistant chief disciplinary counsel, Suzanne Sutton, decided the case had no merit even after the grievance panel had already determined gross negligence and probably cause in the case. When asked about her decision “not to go forward with the case,” she said she knows the attorney.

With that avenue closed to individuals for relief from predatory tactics of lawyers acting as collection agents, condo owners file grievances with the attorney general’s office.

Attorney George Jepsen’s spokeswoman said in the first two weeks of January, there were already nine condo complaints, which included five from Millpond and two from Kingsbury association. Other groups that have filed complaints in the past include Towpath Association in Avon and Mayberry Village in Middletown, which are both managed by Elite Property Management.

Getting no relief, several condo owners have also formed a group to advocate for reform.  The Ombudsman bill would curb the abuse of power by volunteer board members and property managers who lack knowledge of the instruments that are already in place, said Isabella Fusillo, a lawyer and a member of the newly formed group, Connecticut Condo Owners Coalition.

Jones agreed, saying his association’s board president claimed ignorance about the dealings of the law firm. When called, Rosenberg refused comment.

“The laws on the books are very clear,” Jones said. “They just need to be enforced.”

Limitations on Current Law

Condo foreclosures have rapidly increased, making up a significant number of the overall foreclosure proceedings in the court systems across the nation. And while lawmakers are quickly finding ways to stem the number of bank foreclosures that have crippled economic recovery, many have anemic responses to condo foreclosures.

Currently, the state mandates that all banks enter mediation before they foreclose on a house. But this is not required for condo associations. In some states like Connecticut, associations can close quicker than banks because they have first priority. In addition, the department of consumer protection and the state attorney general’s office claim they do not have the authority to address condo unit owners’ concerns because associations are not businesses. Consequently, condo owners have no protection from unscrupulous lawyers, management companies or incompetent board members, Fusillo said.

“The problem we have is that we have board members and management companies not familiar with their own instrument and the Common Interest Ownership Act.” said Fusillo, who was also in a tussle with her own condo association. “I realized there was no enforcement of the laws already there. That was a problem.”

Senator Doyle’s bill is only one of 10 bills introduced this year to address that and more problems posed by the wave of condo foreclosures in the state. The other nine bills are aimed at stemming a tsunami of bank foreclosures that have flood the state courts since 2007.

Doyle’s bill is just barely a beginning, however. It does not address loopholes in the law that allowed for the “horrific” saga Jones endured for three years. The bill does not address circumstances in which condo owners send payments to the association and the association returns those payments, saying there is no law that mandates acceptance of payments, according to court documents. And associations can still claim owners failed to pay monthly assessments because they refused to deposit owners’ checks.

These and other stories of abuses are across the state, including Avon, Bloomfield, West Hartford, Danbury, Rocky Hill and Middletown. And few lawyers take on these cases. The preference is to represent associations, with an active lobby group, condo reform advocates say.

Sandler, who has “developed relationships” at the Capitol, sent emails to Doyle opposing the bill. Sandler said the bill is just another layer of bureaucracy to cripple the associations’ efficiency with foreclosures, and if passed, would place small condo associations in financial ruin. Besides, he said, there are already mechanisms in place to curb unethical practices.

“The courts are already there to guard against abuses,” Sandler said. He also said he’s unfamiliar with Jones’ case, or any other types of abuses. “Someone maybe needs to take a look at how that particular law firm is doing business.”

CT, Land of Condos

Sandler said Connecticut is the land of condos. The largest condo association is Heritage Village with 2,580 units in Southbury for those over 55 and Farmington Woods with about 1,081 units. Most condo associations unit ranges from 6 to 100. The goal of the CAI, according to its website, is to educate professionals who do business with these associations’ board volunteers. In doing so, the CAI aims to foster “harmonious community associations within the state.”

Fusillo said that has clearly not been the practice. Her group has tried to work out a compromise on the ombudsman bill, but there was no agreement. In addition, individual unit owners lack a strong voice in the CAI’s decision making process because many individuals cannot afford the yearly membership of $114. Moreover, single unit owners do not have money to hire lobbyists. Clearly, Fusillo said, the unit owners are at a disadvantage.

“These management companies and lawyers make money off the backs of condo owners,” she said. ‘We need some accountability.”

Jones agreed and said he and other condo owners at Twin Oaks are also looking for accountability. Because of years of “neglect and vindictiveness,” the association has caused tremendous harm. Imagineers and Rosenberg refused comment.

“The state really needs to step in,” Jones said. “There’s gross abuse of power by some of these property managers and lawyers. There should be someone to monitor them.”


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CT Foreclosure Filings Up, Many Stuck in Court Mediation

By Wendy Innes and Andrew White, Staff Writers

HARTFORD —  Roberto  Rodriguez  is knee deep in foreclosure-related paperwork, sorting out fax receipts from folders he has stacked in his two-bedroom condominium in Windsor.

His papers date back to May 2008 when he first sought help to avoid an impending foreclosure. But help didn’t come soon enough. Six months before Wells Fargo filed foreclosure paperwork in New Britain Superior Court, Rodriguez  contacted the bank’s bill collector, America\’s Servicing Company, and sought ways to overcome his unfortunate situation. First, he was underemployed, then unemployed. Then his mother died, and he lost his job. But the bank did not offer a solution. He then learned about a Connecticut Housing Finance Authority’s Housing Fair in late spring 2008. While there, he talked to someone at Department of Banking, which in turn referred him to Association of Community Organizations for Reform Now ( ACORN)  and Neighbohood Assistance Corporation of America (NACA) programs. Both program representatives in 2008 requested financial information and other personal documents after telling him they had a record of getting modifications for their clients.  To date, Rodriguez  has yet to get a help from  ACORN  or NACA.

Then in May 2009, the bank filed foreclosure papers and Rodriguez applied for foreclosure mediation. Since then he has been in mediation. Armed with his fax receipts of paperwork he sent to the bank, he would meet with the bank’s lawyers from Hunt, Liebert and Jacobson, P.C. Each lawyer would have a different story. They didn’t receive the paperwork. After he produced the fax receipts, they would tell him to refax the information and wait. He would wait only to hear on his second and third meetings that his paperwork was still being reviewed. And by the time the paper work was processed, he was told to refax the information—again.

“I don’t think there is any good faith effort in these mediation sessions,” Rodriguez  says. “They are playing ridiculous games that even a five-year old can decipher. How can you mediate with someone who doesn’t want to mediate?”

In March, there was a 22 percent spike in new foreclosure filings statewide, according to  RealtyTrac, a foreclosure tracking firm that gives monthly state by state foreclosure trends.  In April, that number rose again by 4.4 percent, with another 2,915 new foreclosure filings.  In Hartford county alone the number  is down almost 3 percent from the previous month but up almost 13 percent  from the previous year with one in every 593 housing units in some stage of foreclosure, including those who are stuck or are on their way to being stuck in mandatory mediation. According to the latest number released by the mediation program, about 10, 000 homeowners are in Connecticut’s mandatory court mediation program—and in limbo.

“It is a significant number,” says Foreclosure Mediation Program Manager Roberta Palmer. “But saying people are in limbo is, I guess, accurate, but they are in a much better place because their homes cannot be foreclosed on.”

Rising Mortgage Defaults, Rising Frustration

Industry experts at first linked rising default rates across the country to looser lending in the subprime market, which provides mortgages to people with poor credit or low income. Some were drawn in by initially low teaser rates, and then when the low-interest rate period ended, they got stuck and realized they can’t pay the loan,” says Erin Kemple, executive director of the Connecticut Fair Housing Center, a Hartford-based nonprofit organization that advocates for fair housing.

Because subprime lending in Connecticut appears to be concentrated in urban areas, the rise in foreclosure filings raises concerns about deteriorating rates of home ownership in city neighborhoods, Kemple, says.

“People have gotten into loans that have unaffordable terms,” she says. “We would call them predatory; not everyone would.”

Concentration of Foreclosures in Urban Areas

Now, the foreclosure crisis is also driven by people who lost their jobs. And they are turning to the courts for help.

Connecticut’s mandated mediation program is a judicial process that allows homeowners to meet with a representative who has the authority to negotiate for the lender. The mediator’s role, Palmer says, is to ensure there’s an accurate review of homeowner’s financial information and to  make sure the federal guidelines are accurately applied.  The Lender may reduce interest rate, fixt interest rate, extend the term of loan and/or reduce principal balance. Or the homeowner may qualify for the Home Affordale Modification Program (HAMP) where the federal government help with some of the arreagage and mortgage payments. However, some homeowners may still lose their homes after their paperwork is reviewed. These would receive “graceful exists” such as short sales, deed in lieu of foreclosure or an extended sale date.

But some who are considered qualified  for what’s called the Obama plan or HAMP, never get to the end of the process, housing advocates say, because lenders come unprepared to sessions and are usually unaware of the guidelines and how to apply them.

Foreclosure Attorney Keith Fuller places most of the blame for the delays with the lenders. Fuller supports the program, but says that banks are making it difficult for the homeowners.

“I find that it takes a lot of these banks a while to do a full review of a loan for modification. By the time they get around to putting all the pieces together to analyze it for a full modification, the last financial information that’s been submitted is outdated.” Fuller says.

According to Fuller, it takes the bank 60-90 days to review all of the required information and by the time their review is complete, the information is no longer considered valid and the bank requests the information again.

“It’s sort of this cycle that goes on and on,” he says. “It’s extremely difficult and really emotionally taxing for these people to go weeks and weeks or months and months without a straight answer from the bank because from their perspective, it’s confusing to know what the bank is doing.”

In addition, borrowers will call their lenders only to find that the information that they had sent in weeks before has disappeared.  Fuller expresses his frustration for his clients’ situations, “In this information age, it seems to me, that the banks should be a little bit more organized in collecting all this information.”

Eugene Melchionne, foreclosure attorney and chairman of the National Association of Bankruptcy Attorneys in Connecticut is a critic of the program, and he champions federal intervention in bankruptcy court.  Melchionne also represents homeowners who are stuck in the foreclosure mediation process.  

“The oldest mediation I have now is easily going on a year and a half,” he says.  “The mediators don’t really have any power to be able to force banks to cooperate fully. Security is “the primary reason why people buy houses. Clearly those stuck in limbo, waiting to find out if they will keep their home have little of that.”

But there is a silver lining here. That’s because to being in limbo, Palmer says, is better than being out of the house. She says the court is aware of the frustration level on both sides and how burdensome it is for mediators as their caseload grows.

The court, however, is resolute on one matter. “We won’t let those cases out of mediation until we get an answer one way or the other on whether or not they qualify on any settlement,” Palmer says.

Mediation, A Success Story

Connecticut’s mediation session is touted as a model for other states across the country. In February, the program  boasts a success rate of about 60 percent. But some question the accuracy of that number. Attorney Melchionne says that the statistics put out by the court don’t tell the whole story. The court only tracks those people who have completed the mediation process. There is no data on those who are in limbo. In addition, Melchionne says,  his clients are making payments under temporary modification, but are continuing to be reported as late on their credit reports and receiving notices from the banks that their homes are going to be foreclosed on.  

“They’re showing a huge success rate, but they’re counting people who are leaving their homes as successes,” he says.  When asked what he would define as a successful mediation, he says that homeowners staying in their homes are what he considers a success.

Matt Silverman, a Boston-based businessman who was  banking specialist for 10 years, agrees with Melchionne. Silverman says the state’s program has a phenomenal success rate and is too good to be true.

“I’d like to see that number verified because it would be the most successful program in the nation, especially when compared with about a 5 percent success rate everywhere else,” Silverman says. “If a program like this is working that well, they should be talking with the Obama administration’s highest officials to roll out … a national program that finally solves the housing crisis.”

Silverman offers a free online course at www.hopeforfree.org. This site helps homeowners with how to package their story for the lender and how to find a lawyer experienced in debt negotiation, he says.

The state also has measures to help homeowners stuck in limbo, thanks to the works of housing advocates such as Connecticut Housing Center. They recognized early on the limitation of the mediation program and have been pushing for state officials to strengthen the program. advocates say. As a result of their work, the General Assembly in May passed a bill to extend the state’s foreclosure mediation program for two years. The bill promises to punish lenders and servicers who come to the mediation unprepared to do good faith negotiation.

The new bill will take effect on July 1. 

Helpful Links:

Connecticut Housing Finance Authority

Connecticut\’s Forelcosure Mediation Program

Mortgage Law Network

Editor’s Note: Roberto  Rodriguez  is a pseudonym for a person who wants to remain anonymous. The name and other identifiers have been changed to protect the person’s identity.

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