Update on Home Foreclosure Mediation

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Here is another update on the development and operation of foreclosure mediation programs throughout the United States written by Mediate.com News Editor, Keith Seat.

• The residential foreclosure crisis continues in Florida, with a backlog of 350,000 cases, but a judicial committee appointed in late September by the Florida Supreme Court recommended that the court end its foreclosure mediation program so that the state’s 20 circuit courts could join a newly-created uniform mediation program or merely require mediation on a case-by-case basis.  Problems contacting homeowners resulted in the current program reaching only 42% of eligible borrowers and only 14% participating in mediation, which is mandatory only for lenders.  About one-fourth of the cases actually mediated reached agreement during mediation, however in additional cases proponents note that paperwork exchanged at mediation often resulted in loan modifications within three months.  But overall only 3.6% of cases referred to mediation in Florida reached agreement, resulting in the court’s current examination of the program.  In addition to lack of participation by borrowers, there has been little enforcement to motivate lenders who have been resistant to mediation; many banks are unwilling to work hard in mediation, saying that they tried to find solutions prior to initiating foreclosure.  Options for improving Florida’s mediation program include requiring borrowers to participate, considering sanctions for noncompliance, exploring reduced fees (currently $750 paid by lender) with borrower contributions, and tracking post-mediation settlements.  The Palm Beach Post (September 26, 2011); The Palm Beach Post (October 21, 2011); The Palm Beach Post (October 25, 2011)
• Analysis of home foreclosure mediation programs in New England by the Federal Reserve Bank of Boston emphasizes the importance of requiring participation by both lenders and borrowers and initiating the mediation process as early as possible.  Automatic enrollment of qualifying households, such as the mediation programs in Philadelphia and Connecticut, have participation rates around 70%, while programs with only an opt-in provision for borrowers top out at about 20% participation, as in Nevada.  Maryland has had only a 10% participation rate in its voluntary mediation program, while New Hampshire’s voluntary program has only achieved 14 agreements in over 100 mediations in its first 18 months.  The report also notes that mediation programs do less well in the early stages when dealing with a backlog of foreclosures.  Importantly, in Connecticut, nearly 80% of homeowners who completed the mediation program over a three year period kept their homes (64%) or made a “graceful” exit (15%) by way of short sales or the like.  The report cites Connecticut’s program, which also incorporates two sources of financial assistance for homeowners, as a model for the rest of the country.  Other programs also are noteworthy, including Nevada with an 89% success rate (but only 20% participation), and Philadelphia with 84% success.  Housing Wire (September 29, 2011); The Day.com (September 30, 2011); Research Report (September 2011)
• The Massachusetts Bankers Association has raised objections to a new mandatory mediation foreclosure ordinance for homeowners in Springfield that went into effect on September 13.  Among other challenges, bankers are concerned about vagueness, such as daily fines being imposed on banks that do not engage in “good faith” negotiations, and requiring banks to consider the issue of debt forgiveness.  Mass Live.com (September 26, 2011)
• The constitutionality of the Foreclosure Mediation Program in Nevada is being challenged under both the U.S. and state constitutions in an appeal asserting the Takings Clause of both constitutions and other grounds.  However, the appeal is to the Nevada Supreme Court, which runs the state Foreclosure Mediation Program, so the case may end up in federal court.  Nevada Journal (October 27, 2011)
• Foreclosure activity in Nevada, including foreclosure mediation, is being delayed while lenders adjust to legislation (AB 284) that went into effect on October 1 to deter robo-signing and require additional information and safeguards.  Reno Gazette-Journal (October 29, 2011)
• In Missouri, a group called Communities Creating Opportunities is seeking to enact state legislation to require mediation prior to home foreclosure.  Currently, Missouri homeowners can be evicted in as few as 38 days after receiving a foreclosure notice.  Fox4KC.com (October 18, 2011)

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Gorgegirl ,   Hood River Or	dorothy@gorge.net      11/15/11
Foreclosures
If they want to keep people in their homes, the simple way is to allow homeowners to combine their first and second mortgages. This is why so many homeowners are under water. If the lender with the First would pay off the second and basically refinance without income and credit verification as long as the homeowner doesn't exceed 125% of the value and has been current on their payments at the going rate. This would require a smaller monthly payment and give homeowner more money to spend for improvements and necessities. Add New Comment

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