S. Florida judges brace for a possible fallout of the foreclosure mediation program

By October 28, 2011

Weeding out borrowers who have abandoned their homes and enforcing a “good faith” requirement on lenders may improve a foundering statewide foreclosure mediation program.
By Kimberly Miller
Palm Beach Post Staff Writer
Palm Beach County Chief Judge Peter Blanc said weeding out borrowers who have abandoned their homes and enforcing a “good faith” requirement on lenders may improve a foundering statewide foreclosure mediation program.
Last week, a judicial committee recommended the mandatory program be eliminated, suggesting instead that each of the 20 circuit courts be allowed to opt-in to a newly created uniform plan.
While Florida’s Supreme Court justices mull the advice to end their once-heralded 2009 program, chief judges statewide find the ball may soon be in their court as to how to handle foreclosure mediation in the face of bank resistance and weak homeowner participation.
“I agree the process can be approved, as can just about any process,” said Blanc, whose 15th Circuit Court has a backlog of about 23,700 foreclosure cases in Palm Beach County. “It also seems to me that we should spend some time trying to address some of the factors mentioned that can have a negative impact on the mediation success rate.”
The report noted several reasons mandatory mediation has not lived up to expectations, including lenders’ failure to send representatives with full authority to negotiate a settlement and a refusal to consider more than a narrow range of settlement options.
Another concern is that borrowers under siege by companies offering foreclosure prevention assistance were uncertain of the legitimacy of the court-ordered program and didn’t respond to invitations to participate.
Just 14 percent of all eligible borrowers participated in mediation.
Banks pay up to $400 per case for mediation managers to locate borrowers and have them participate in financial counseling – a requirement under the program. Another $350 is paid by lenders to complete mediation.
Blanc said excluding borrowers who have walked away from homes, in effect, giving up the property, could make the program more efficient.
“At the same time, finding a way to enforce a good faith requirement on lenders to fairly consider the full range of settlement options, including short sales and deeds in lieu of foreclosure (not just refinancing), could both streamline the process and improve the outcomes,” Blanc said.
Statewide, 3.6 percent of all cases referred to mediation in a yearlong period beginning in March 2010 ended in a written agreement between the lender and homeowner.
The judicial assistant for Broward County Circuit Court Judge Peter Weinstein said today that he hadn’t read last week’s recommendation yet and couldn’t comment.
Miami-Dade County Circuit Court Judge Jennifer Bailey, who sat on both the 2009 committee that originally recommended mandatory mediation as well as the recent committee that suggested it be optional, said it would be inappropriate for her to comment while the report is pending a Supreme Court response.
“As far as the mediation concept, it was excellent, that wasn’t the problem,” said Chief Judge Steven Levin, who leads the 19th Circuit Court, which includes Martin and St. Lucie counties. “Certainly it has its advantages and has worked to solve cases, but whether that’s enough to keep the program is based on numbers,” Levin said.
Proponents of the program disagree.
Jeffrey Kasky, a Pompano Beach-based attorney and mediator, said a paperwork exchange at mediation often leads to a loan modification within three months.
“In many mediations the borrower says it’s the first time they’ve ever gotten the full attention of the lender,” he said.