Foreclosure Mediation: Worthwhile or a Waste of Time?

Mediation is an effective way to resolve disputes. Florida Courts require the parties to a lawsuit to attempt to settle the dispute at mediation before the trial starts.  There are many benefits to mediation - it is private, the proceedings are confidential, if successful it reduces the costs to each side of the case and enables the parties to “think outside the box”.  The mediator is a neutral third party (in Florida they must be licensed) that facilitates the discussion and helps the parties explore alternative ways of resolving their dispute.   In short, mediation has a lot of benefits and I highly recommend it for the vast majority of cases.

The Florida Supreme Court mandated mediation for all circuit court residential mortgage foreclosure cases involving homestead property.  The Florida Supreme Court initiated a task force review of foreclosure cases in 2009 and the findings were not surprising, at least not to community association board members dealing with delinquencies.  The task force recommended mediation to manage “the massive volume of residential mortgage foreclosure cases”.   

Mediation increases costs for the mortgagee (at least $750 for the program plus attorney’s fees), delays the process and may actually work against the borrower that participates in the program in the long run.

First, the program coordinator must contact the borrower.  The borrowers typically don’t respond, so a second notice is sent and sometimes even a third notice is sent.  That all takes time.  Once contact is established the borrower must meet with an approved mortgage foreclosure counselor, that takes more time.  Then the borrower must assemble and provide certain financial information to the mediation program coordinator before mediation will be scheduled. 

“Pro-se” borrowers (borrowers without legal counsel) often are not aware they may request documents from the mortgagee, such as:

  • Evidence it owns and holds the note and mortgage sued upon;
  • An account history showing the application of all payments by the borrower during the life of the loan;
  • The mortgagee’s determination of present net value of the mortgage loan; and
  • The most current appraisal of the property.

A reporter for the Palm Beach Post found foreclosure mediation only had a 6% success rate.  The article quotes a report indicating program coordinators established contact with less than half of the borrowers that qualified for the program.  Less than half of those borrowers actually participated in mediation.  All of this must take place before the Court will act on any notice for trial, motion for default final judgment, or motion for summary judgment filed in the case. 

Fannie Mae recently announced its plan for pre-litigation mediation in Florida.  Fannie Mae requires mortgage servicers to refer delinquent mortgage loans to one of its approved attorneys along with contact information for a primary liaison/team that can make decisions regarding loan modifications or other avenues for resolution of the delinquency.  If the circumstances meet Fannie Mae’s mediation requirements, the servicer must offer mediation to the borrower.  It can fine servicers for failing to comply with the program.

Will pre-litigation mediation speed up the foreclosure process or produce even longer delays?  Its hard to predict, but borrowers that have encountered difficulties contacting anyone at the lender or mortgage servicer now at least have another chance to save their home or negotiate a solution.

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