Orlando Area Real Estate News

Florida’s troubled homeowners and their lenders will increasingly meet at the bargaining table under a state supreme court order issued today 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.

Monday’s 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.”

Each circuit court will approve its own mandatory program, and will have some leeway in how it is managed.

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 prior to 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.

“We’re not interested in forcing people to settle, but there seems to be an inability to communicate between the borrower and the lender,” said 11th Circuit Court Judge Jennifer Bailey, chairwoman of the statewide task force.

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

Court-ordered mediation may remedy that. But no one thinks it’s a final solution, and some aren’t even sure it’s a good idea.

Sharon Bock, Palm Beach County’s comptroller and clerk of the circuit court, said she’s concerned that while 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 believes 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.

Real estate attorney Wiener said the order does benefit the homeowner.

“It’s making a judgment call. Who do the courts want to help? If we are going to help, we’re going to help the homeowners,” Wiener said.

A handful of circuit courts began requiring foreclosure mediation earlier this year, including the 19th, which covers Martin, St. Lucie, Indian River and Okeechobee counties.

The Collins Center for Public Policy handles mediation for the 19th Circuit Court.

Of 2,850 mediations the center has handled, about 2,000 resulted in settlements reached out of court.

“I’m optimistic, but this is not a cure all,” said 19th Circuit Court Judge Shields McManus. “There are a lot of investment homes being foreclosed on and there are a lot of cases that don’t settle because the people simply have no way to pay the mortgage.”

Florida by the foreclosure numbers

* 13 percent of Florida home loans were in foreclosure through September. * 6 percent of home loans were at least 90 days delinquent in September. * In November, 53,000 foreclosures were filed on Florida homes.

Source: RealtyTrac, Mortgage Bankers Association & the Palm Beach Post

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