Tag: Mediation

Shortcomings of the Residential Mortgage Foreclosure Mediation (RMFM) Program recognized by Panel

Posted on by Emil Fleysher

Florida Residential Mortgage Foreclosure Mediation Program (RMFM) is failing to help modify loans in foreclosure.

In fact, Florida Supreme Court Chief Justice Charles Canady assembled The Assessment Workgroup for the Managed Mediation Program (RMFM) in September. It was in response to news that only 3.6% of cases eligible for mediation had settled in almost two years; since the start of the program. Furthermore, the group has recommended the abolition of the mandatory foreclosure mediation program. And, replacement with a plan that allows courts to opt into the program. This conclusion ran counter to a majority of public opinion which suggested the program should continue.

The group’s findings and their conclusion do not come as a surprise. In my experience, not a single settlement has been reached at one of these mediations. Among the many problems with the mandatory mediation program is that it has to take place at the beginning of the litigation process. At this early stage, little is known about the case. And, there is not enough time to establish who the party with authority to enter into a settlement is on the plaintiff’s side.

Two Additional Major Weaknesses

Furthermore, the group identified two additional major weaknesses… low borrower participation and a lack of economic incentives for lenders. Banks avoid settling with borrowers in mediation because foreclosure lets them tap the Federal Deposit Insurance Corp.; which guarantees the original mortgage amount. Also, servicers have an economic incentive to avoid settling because they earn fees while a foreclosure case in ongoing.

The vast number of mediations has had the effect of clogging the courts. The proposition of the Bills occurred to streamline foreclosure law and having an opt-in system would further help clear out the clog. But some have asked if there should really be a rush to fix the clogged system. A family that will be homeless is better off if they can stay in their home for an extended amount of time. And, banks hesitate to take possession of foreclosed homes because of the expenses and liabilities they take on. Presentation and implementation of a change in the current mediation requirements will happen sometime next year.

If you have questions about Foreclosure, Loan Modification, or Bankruptcy, please feel free to call my office at 954-484-9987. Or, send an e-mail to info@fleysherlaw.com, or complete the contact form below.

Can a Mediation Save your Home from Foreclosure?

Posted on by Emil Fleysher

In 2009, Florida Supreme Court issued an order mandating foreclosure mediation for all residential homesteaded properties. In other words, upon filing a foreclosure action on a primary residence, the banks now have to attend mediation with the borrower. This is before the case can proceed, or at least provide the borrower with the option. Under this order, borrowers have the right to ask their lenders for a “plaintiff’s disclosure” before mediation. It can include four things. Firstly, a payment history. Secondly, a current appraisal of the property. Thirdly, the bank’s estimate of the mortgage loan’s present net value. Lastly, documentary evidence proving the bank owns and holds the mortgage note.

Design of Mediation Program

The mediation program is designed to function as a fast track for mortgage loan modifications where the borrower was unable to get results working directly with the servicer outside of the court system. The documents required of the borrower are essentially identical to those required under the Making Home Affordable Modification (HAMP) program. The difference is that the bank’s attorney is supposed to provide an accounting of the loan. And, a “Net Present Value” of the property which should facilitate a smoother more transparent negotiation. There is a mixture of reports as to whether the bank’s attorneys are providing this information accurately and promptly.

However, the more frustrating problem is that the plaintiff/bank/servicer’s attorney may not have the authority to settle. That is because its client does not have the authority to settle. Sound confusing? It is. It is often the case that the servicer is bringing the foreclosure action on behalf of the true owner of the loan/note (usually another bank or Real Estate Investment Trust). Without a grant of authority from the true note holder, the servicer’s attorney is powerless to enter into a settlement agreement at mediation.

Statistics and Results

The statistical results of this mediation program are so far, scattered and inconclusive. A December analysis released by the Florida Supreme Court showed about 6 percent of cases referred to mediation statewide result in written settlements for homeowners. Although, the inclusion of all circuits did not happen. For example, the report shows that 12 percent of mediations ended with written settlements last month in Broward County. But, no figures are available for Palm Beach County. Furthermore, the report did not provide any details as to the number of cancellations of mediations or postponing and for what reasons. I am hoping that a more thorough and inclusive report will be issued at the end of 2011’s first quarter.