Monday, November 21, 2011
Foreclosure Mediation Could End
With a backlog of approximately 350,000 foreclosures and more on the horizon., there are many in Florida that are calling for a quick removal of the state’s foreclosure mediation program. A recent judicial committee determination echoed the need for removal of the mediation program on the basis that it hasn’t resulted in more people staying in their homes nor has it reduced the considerable bottleneck of foreclosures clogging the courts.
The program was instituted in 2009 by the Florida Supreme Court, ordering the judicial circuit courts to mediate sessions between defaulted homeowners and lenders. Lenders paid $750 for each hearing in the hopes that it would lead to a successful loan modification, such as a lower interest rate or an extension.
However, statistics show that successful mediations have occurred in less than four percent of all statewide cases – the dismal success rate was blamed on borrowers’ inherent mistrust of the program, lenders not willing to settle in mediation, and officials not publicizing the program. It was noted that loan servicers often sent representatives to mediation sessions that did not have full authority to settle. Further, the representatives that were sent refused to consider more than a narrow range of settlement options, most of which were of little value to borrowers. In the end, only 14 percent of all eligible borrowers participated in mediation.
A judicial committee has recommended changes to the program that would allow a judge to send foreclosure cases to mediation on a case by case basis.
Although foreclosure activity slowed through the first half of 2011, as of September one of every nine foreclosures nationwide was in Florida. It is likely that any perceived slowing of the foreclosure rates in Florida is due to the swelling of the foreclosure logjam and does not actually indicate any decrease in foreclosures.