Task Force in Florida Giving Prime Importance to Mandatory Mediation to Stop Foreclosures
Florida courts are drowning in foreclosure cases causing a massive backlog. A task force was set up to recommend suggestions for improving the system and adding more speed to it.
The most attention is likely to be given to compulsory mediation for residential foreclosures. It is being implemented in three judicial courts in Florida. By mandatory mediation conditions the lenders have to meet the borrowers to try and thrash out matters before the judge will entertain the case. In the three circuits where mediation is compulsory the plan has met with 76% success. It has a led to a good number of settlements. Till 12th October out of 1,401 cases, settlements have been reached in 1.072 instances. Ned Pope the director of the programme named CHAMP said “It’s been one of the most successful models.”
According to the mediation programme the borrowers are expected to disclose details of their finances before sitting down to meet the authorized representative of the lender and also another neutral person involved in this mediation. The fee of $750 for this mediation has to be paid by the lender.
Pope said each month the number of foreclosure cases has been growing. It spiked from 261 in May to 1,300 last June. It was over 2,200 in August. The mediators at the centre are responsible for contacting the borrower. But if the underwater borrowers walk away from the property this becomes difficult.
Many of the banks are not happy with this compulsory mediation said Barb Godin of Regions Bank. She said, “It’s rather sad that someone thinks we need this in the industry.” In Florida Regions Bank has on its portfolio $5.5 billion tied up in mortgages. It initiated a programme to assist defaulting borrowers in 2007 October. The plan was operated by 10 persons aiming to help clients in the 16 States where the bank functions. Today it has a staff of 60 running the programme. Godin said that they have assisted 5,356 borrowers in Florida.
Region Bank in Florida is facing defaults on 3.3% of its mortgages in this region. It is 17% across the states. The mortgages it has modified have a default rate of 12%.
Most of the mortgages in Florida are not for primary houses but for secondary ones. As such these are not eligible for compulsory mediation.
Ed Wilburn of Great Florida Bank opined that many lenders have been shy to proceed with loan modification because “it’s a losing proposition.” But lately the lenders are waking up to the advantages of engaging staff and money to help prevent foreclosures and have the houses occupied.
