Does Criticism of Florida Home Mortgage Mediation Apply Locally?

Here is some food for thought about home mortgage mediation in Florida from a reprint from a recent mediate.com post found at http://www.mediate.com/articles/BensonR1.cfm:

 

The Residential Mortgage Foreclosure Mediation Disaster, Florida Style

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by Roger Benson


November 2011

Roger Benson

The recommendation of the Florida Supreme Court committee to abandon the current statewide, mandatory residential foreclosure mediation program should come as no surprise to anyone familiar with the operation of the program. I am referring, of course, to the mediators who have sat through thousands of mediations and would bear witness to what has actually gone on – if only they could. The analysis offered by the committee to support its recommendation – a low rate of settlement – suggests how poorly conceived was the entire program and how little the committee understands the idea of mediation.

There is only one group that has benefitted from the enormous investment in time, resources and money made by The Florida Supreme Court in its mediation program -banks and other lenders. There is nothing in the mediation program itself that benefits homeowners. The explicit intention of the mediation program was to quickly and efficiently move the flood of foreclosure cases through the judicial system while providing homeowners a stop along the way to see if they could work something out with their lender. The explicit motive for the Supreme Court’s intervention in the foreclosure “emergency” was the assertion that “Florida’s economy will continue to be depressed as long as there are massive numbers of mortgages that have not been resolved by foreclosure.”  Why is that a concern of the Court? What about the hundreds of thousands of men, women and children being dispossessed of their homes?

The mediation program, as conceived and adopted by the Court, was built upon a set of assumptions, expectations and magical thinking that insured that the program would eventually fail. The basic concepts of financing property ownership are ancient and fully evolved in our legal system. In the not so distant past, mortgage foreclosures were routine and seldom contentious. Suffice it to say that things changed; not the law, but the business practices surrounding home ownership and financing. Banks and other lenders have a long history of creating, surviving and then profiting from crises. There is very little in the mediation program that benefits a family facing the loss of their home.

The mediation session was touted as a negotiation between the homeowner, who was presumed to be in default on her mortgage, and the lender. In order for the negotiation to be productive, the borrower and the lender were required to provide certain information prior to the mediation session. The homeowner was required to attend, with or without a lawyer; the lender’s lawyer was required to be present while the lender’s representative could appear by phone. The homeowner was required to have full authority to settle: the lender’s representative was to have reviewed the borrower’s documents and be in a position to negotiate a resolution, which, according to the Mediation Order entered by the court, included the authority to modify the terms of the mortgage. The moment the mediation began, and there is controversy about when it actually begins, the entire process begins to resemble Alice in Wonderland. Nothing that takes place in the mediation ever sees the light of day because the mediation is CONFIDENTIAL. Nothing emerges from the rabbit hole. The Court has created a system that orders people to do things but provides no mechanism to enforce its orders. In fact, the Court is totally in the dark about what is actually happening in the mediation. No wonder that participation has been disappointingly low. If the program worked, i.e. homeowners had a realistic chance to stay in their homes, they would participate. Perhaps the word is out that it is a meaningless exercise, one that is deeply concerned about the welfare of the lenders but has little or nothing to offer homeowners. It is a system that undermines the integrity of the entire judicial system.

In truth, the possible outcomes available to borrowers at mediation resemble a very skimpy menu in a Chinese restaurant. There are a handful of programs sponsored by the federal government. The lenders are expected to push the homeowner’s financial data through the government program algorithm to see whether it qualifies for anything. If not, the lender may have so called “in house programs,” which often require a separate submission of data after the mediation session is concluded. It is very difficult to persuade lenders to agree to a second mediation because it costs them $750.00 and it inevitably slows the race to a final judgment of foreclosure. There is widespread agreement that the government programs have failed to accomplish their goal – keeping people in their homes. The “in-house” programs have not fared any better. There is no definition of negotiation that describes this process. There is no flexibility and there is no discretion vested in the lender’s representative. The committee points out that since the mediation program began “a number of crises occurred…including the robo-signers scandal, the discovery that plaintiffs were filing fraudulent documents with the courts, the collapse of two major foreclosure law firms, civil and criminal investigations of lender and lenders’ attorney foreclosure practices, and the banks’ voluntary moratoria on foreclosure filings.” None of these events have anything to do with the efficacy of the mediation program. They only raise questions about why the judicial system is so invested in viewing the avalanche of foreclosures as an emergency that it is responsible for resolving.

The great awakening that is taking place among Florida’s homeowners should be alarming to citizens, their lawmakers and their judges. Assuming that real estate prices suddenly begin to appreciate at a prudent, realistic rate, it will take hundreds of thousands of homeowners decades before they again have any equity in their homes. More realistically, most underwater homeowners will never get to the surface without the lenders taking a severe haircut on the principal balances (think of the banks that hold Greek government bonds.)   Unless there are effective ways to reset the value of real estate, there really isn’t much to talk about at mediation.

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Biography

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Roger Benson began mediating in 1989 and has been doing so fulltime since 1998. He has been a lawyer since 1973. He has mediated a great many cases involving a broad range of issues. He is a primary trainer in Florida’s 40 hour Supreme Court mediator certification program. He is on a number of national and international panels of mediators. He has been mediating cases in Florida’s residential mortgage foreclosure mediation program for the past year and participated in the University of South Florida Conflict Resolution Consortium’s initial mortgage mediation training.



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Website: www.bensonmediation.com

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 Ken Bowen,   Saint Petersburg Fl    11/15/11 
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I agree with the Committee and with Mr. Benson. The program, in its current form, should be scrapped. While there is value to be had through the program, for both the borrowers and the lenders, it's hardly enough to justify its current incarnation. While I believe a mandatory "face-to-face" (or face-to-phone) meeting between the lender and borrower is a useful event, perhaps mediation is not the proper vehicle for that meeting. Perhaps a settlement conference with some sort of judicial oversight and tightly enforced participation rules might be more effective. What typically occurs during a foreclosure "mediation" does not even remotely resemble mediation, and it seems to me that $750 is awfully expensive for a meet and greet that typically lasts less than an hour. As for the financial counseling, it varies greatly from place to place. Some of the counselors do a good job, others are utterly useless and sometimes create obstacles to settlement. It's also important to note that the programs themselves vary in effectiveness. Some are merely going through the motions, and others put a lot more effort into trying to evolve into an effective process, which is why it might be useful to allow each circuit to design its own program, and each circuit might learn from the others what works and what doesn't. With some changes, I do think the program could be valuable, and I'm hopeful that's what will happen. But, until the problem of "settlement authority" is solved (and I'm not sure it's a problem that can be solved), it's going to be difficult to implement any program to successfully assist in resolving this crisis. -Ken
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 Roger Benson,   Saint Petersburg FL    11/15/11 
 Florida Foreclosure Mediation 
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You make a compelling argument for high quality, free financial counseling to help homeowners understand how they got into the mess and ways to avoid repeating their mistakes. That should include a mathematical assessment of their best path forward, taking into account the extremely limited array of options available to them through the government and lenders. Again, choose 1 from column A or B, your choice.
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 Sandra Upchurch,   Daytona Beach FL  supchurch@uww-adr.com      11/15/11 
 foreclosure mediation in Fl 
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My firm is the administrator for a foreclosure mediation program. That disclaimer aside, I could not disagree with you more. Yes, the mortgage industry made a mess of all of this and yes the lenders are certainly putting up many obstacles which make the mediation program ineffective but I submit to you that homeowners are being assisted and real accomplishments are being made every day. You forget that many (certainly not all) homeowners that find themselves in this situation did not appreciate what they got themselves into when they entered into an unbelievable mortgage deal in the 2005-2006 time frame. The carrot was held out to them and they grabbed it. Oh hindsight is so sweet.... Still others are in this situation because they lost a job due to our failing economy. All borrowers benefit from the program (if they open their mail and opt in to participate) because they have an opportunity to meet with trained foreclosure counselors. These counselors go over their family finances with a fine tooth comb (Suze Ormond style) and learn the harsh reality of their financial situation from a truly neutral and independent third party. They learn how they got in this mess and are enlightened as to how they may get out. Most people, myself included, have not had the opportunity to sit down with someone to get into the nitty gritty of their finances. Even if what they learn is that they must lose their home, they are learning it from an empathetic third party and not a bank rep whose motives are questionable in the eyes of the borrower. Many foreclosure settle before mediation, a few settle at mediation, and many more settle after mediation, perhaps not because of the mediation itself but because of the borrower outreach and educational process. Ending this program is throwing out the baby with the bathwater.
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