Florida requires mediation in foreclosure disputes

Florida's troubled homeowners and their lenders will increasingly meet at the bargaining table under a new state supreme court order that aims to reduce a foreclosure overload.

The administrative order written by Chief Judge Peggy Quince creates a statewide program that requires mediation on all homesteaded properties before a foreclosure hearing is held.

It guarantees homeowners will have an audience with their lender to discuss whether a loan modification or short sale is an option instead of foreclosure. It also means lenders will be doing more work on the front end of the foreclosure process, and paying for it.

The order makes lenders responsible for paying a maximum mediation fee of $750 per case, which would help pay for the mediator and cover administrative costs. Judges hope the mediation requirement will reduce the thousands of foreclosure cases clogging the system, a situation called "horrifying" in an August report issued by Florida's Task Force on Residential Mortgage Foreclosure Cases.

"Right now, we have a court system that is going to break with the volume of foreclosures," said Boca Raton real estate attorney Marlyn Wiener. "We're at a meltdown point and have to find new ways to manage the situation."

In Palm Beach County, more than 27,550 foreclosures were filed between January and November this year — nine times the amount filed in all of 2004. For the 2009 calendar year, 52,000 foreclosure cases were filed in the Broward County court system, up from roughly 45,000 in 2008, according to Clerk of Courts Howard C. Forman.

"It's a good thing. … I applaud the ruling," Forman said on Tuesday, from the state's 17th Judicial Circuit, which doesn't have a foreclosure mediation program.

Mandatory mediation won't lighten the foreclosure load right now, but it could give people in financial straits who are heading to foreclosure a "fairer shake," Forman said.

An administrative order from Chief Circuit Judge Victor Tobin would be the 'trigger' needed to start the mediation ball rolling in Broward, Forman said.

Each circuit court will approve its own mandatory program and will have some leeway in how it is managed, according to the ruling. The main parts of the order, however, are the same statewide.

Every residential homesteaded property foreclosure will be referred to mediation, unless the lender and borrower agree otherwise. There are also waivers in the event a homeowner cannot be located or refuses mediation.

The homeowner must be referred to foreclosure counseling before mediation. The mediation must take place no earlier than 60 days and no later than 120 days after a foreclosure suit is filed. And the mediation must be provided by a nonprofit organization with mediators specially trained and court certified in mortgage foreclosure matters.

Judges say they often hear homeowners complain that they couldn't reach their lender or that their paperwork was repeatedly lost.

Sharon Bock, Palm Beach County's comptroller and clerk of the circuit court, said she's concerned that although it may alleviate judge workload, it could increase paperwork for her employees.

Foreclosure mediation has been optional in Palm Beach County for at least a year. Bock thinks mandatory mediation isn't a role the court should play.

"This process moves the courts from calling balls and strikes, from creating a level playing field, into the realm of a social service agency, picking sides," she said.

Three circuit courts began requiring foreclosure mediation earlier this year: the First Circuit in the Panhandle, Ninteenth Circuit in Martin County and the Eleventh Circuit in Miami-Dade County.

Rod Petrey, president of the Collins Center for Public Policy, the nonprofit organization that's handling these mediations, said results are mixed.

Since the program began in April or May, he says 20,000 cases have been referred to the center for mediation. But Petrey says he suspects that not all lenders are sending all the cases that qualify.

"I don't have 100 percent compliance, but every little bit helps," he said.

Of those 20,000 cases, Petrey says two-thirds have been settled out of court and the borrower has been able to avoid foreclosure.

Florida is at the center of the foreclosure problem. In the third quarter of this year, the state's 12.74 percent rate of home loans in foreclosure was the nation's highest, according to figures from the Mortgage Bankers Association. That means 441,440 Florida home loans were in foreclosure at that time.

Source: http://www.sun-sentinel.com/business/fl-mediation-stp-20091229,0,6841063.story

Sun Sentinel staff writers Harriet Johnson Brackey and Arlene Satchell contributed to this report.