Update on Home Foreclosure Mediation

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Update on Home Foreclosure Mediation

• The Foreclosure Mandatory Mediation Act, S. 2912, was introduced in the Senate in December by Senator Nelson (D-Fla.).  The federal legislation would require mandatory mediation by lenders of loans with federal guarantees or federal insurance.  The required one-time mediation would involve both the mortgagor and a housing counseling agency and would be paid for by the lender.  US Federal News (December 30, 2009) (Subscription Required)
• The Florida Supreme Court is creating a state-wide managed mediation program in an effort to help more homeowners avoid foreclosure.  All new foreclosure cases involving primary residences will be referred to mediation once Florida’s 20 judicial circuits issue administrative orders, which may take months.  Homeowners must see a foreclosure counselor to be eligible for mediation.  Lenders are responsible for mediation costs, which are capped at $750.  Tenants can opt into mediation, but must share costs with the lender.  Mediators must be from non-profit organizations which can sustain operations without any payment from the courts.  The program also requires statewide data collection on mediation outcomes.  Bradenton Herald (December 29, 2009) (Subscription Required)
• The governor of New York signed legislation extending to all mortgage borrowers the mandatory settlement conference and other requirements that previously applied only to subprime loans.  But success has been elusive, in part because it is difficult to get homeowners to participate in the conferences.  In one district 25 percent of borrowers were no-shows at the settlement conference, which are conducted by a single judge or his law clerk.  In that district only 28 percent of the conferences held have been successful, but that contrasts favorably with the much larger dockets of Brooklyn and Queens, where less than 10 percent of the meetings have been successful.  Buffalo News (November 28, 2009)
• The Supreme Court of Maine adopted new rules for residential foreclosure mediation, requiring certain financial information to be exchanged and limiting dispositive motions and requests for admissions while mediation is being pursued.  The new rules are effective on January 1.  DSNews.com (December 23, 2009)
• California is considering the creation of a mediation program for home foreclosures similar to Nevada or other states.  Currently, California simply mandates a call between the parties prior to foreclosure.  SFGate.com (November 26, 2009); California Progress Report (November 20, 2009); California Newswire (November 12, 2009); Examiner.com (November 4, 2009)
• The governor of Maryland introduced legislation requiring mediation in home foreclosure cases and requiring lenders to cover the costs.  The state has collaborated with experts and industry representatives to examine how mediation has worked elsewhere.  Hometown Annapolis.com (November 1, 2009); Baltimore Sun (November 20, 2009)
• Concerns are being raised about the mediation program in Nevada, with some homeowners feeling that lenders are not willing to negotiate in good faith.  Senate Majority Leader Harry Reid (D-Nev.) specifically challenged the Bank of America to do more in Nevada, stating that mediators had reported bad faith by the Bank of America in seven of its eight mediations since Nevada’s program was launched in August.  Over 3,400 homeowners have sought mediation in Nevada, with a little over ten percent having mediated thus far; 75 additional mediators are being sworn in to bring the total in the state to 170.  Las Vegas Sun (December 1, 2009); KRNV.com (December 1, 2009); Mercury News (November 25, 2009); Mercury News (December 11, 2009)
• Lenders are increasingly relying on counsel as the foreclosure process in Nevada moves from what they viewed as a streamlined process to one with more uncertainty on how things will unfold in mediation.  While mediation does not require legal representation on either side, lenders see more homeowners appearing with counsel; some law firms are advertising their services to homeowners headed for mediation.  Lawyering up is the natural response, some say, to avoid “bringing a knife to a gun fight.”  LVBusinesspress.com (November 30, 2009)
• The Connecticut governor and legislators are proud of making foreclosure mediation programs mandatory, resulting in additional benefits to homeowners, with nearly 4,500 cases handled in the program through October and a settlement rate of 75%.  Greenwich-Post.com (November 27, 2009)

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