Florida courts order lenders to attempt mediation to stop foreclosure
The Florida Supreme Court’s has ordered that lenders and property owners in default attend mediation to ease the foreclosure crisis
When the Task Force on Residential Mortgage Foreclosure Cases began studying the problem last summer, Florida ranked third, with an estimated 456,000 pending foreclosure cases statewide.
By November, the state had the second-highest rate of foreclosure. The crisis has sapped the state’s economy, overwhelmed the courts and devastated families. Yet the Legislature has done nothing, and many economists call the Obama administration’s effort a failure.
By adopting the task force’s recommendation for a statewide managed mediation program for all cases involving homesteaded property, the Florida Supreme Court hopes to encourage settlement of cases early in the foreclosure process and reduce court involvement.
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“The court approves this recommendation,” Chief Justice Peggy Quince wrote, “as the best method to open communication and facilitate problem-solving between the parties to foreclosure cases while conserving limited judicial resources.”
Borrowers must attend foreclosure counseling before mediation. Studies show that those who get counseling are less likely to default again. Lenders must pay for the mediation — capped at $750 — but can recoup the fee.
A not-for-profit organization will provide mediation services, eliminating the need for court involvement. Three judicial circuits, including the one for the Treasure Coast, have established similar programs and report a settlement rate of 73 percent from mediation.
The court’s action may help Floridians stay in their homes, but the ultimate solution must come from the federal government. President Obama’s $75 billion Making Home Affordable program, rolled out last spring, was supposed to help 3 million to 4 million homeowners on the verge of losing their property.
By the end of the year, however, the program had put just 728,000 loans in trial modifications, and only 31,382 had been modified permanently. Nationally, there were more than 300,000 foreclosure filings in November alone.
The problem, as Albany (N.Y.) Law School Assistant Professor Ray Brescia points out, is that “too few mortgages are being modified on fair and sustainable terms.” Many borrowers who work out loans default again because they are so far under water that staying in their homes makes little financial sense.
Lawmakers must force lenders to reduce the loan principal. “In order for modifications to work, borrowers need to see equity in their homes and reduced monthly payments, and they need a stake in preserving the borrower-lender relationship that comes with having equity in the home,” Mr. Brescia wrote. “To ‘encourage’ lenders to reduce mortgage principal requires legal interventions, both through legislation and litigation, at the state and federal level.”
Rather than bow to pressure from financial industry lobbyists, lawmakers should make help for homeowners and the economy their priority.
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Source: http://www.palmbeachpost.com/opinion/editorials/foreclosures-and-florida-courts-have-stepped-in-where-170275.html
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