$25B Settlement on Foreclosure Abuses

Today, federal officials announced a $25 billion settlement with the five largest mortgage lenders over foreclosure abuses. The deal requires the banks to reduce some loans, send out small checks to foreclosed folks, and refinance mortgages for underwater borrowers. Its being billed as the largest settlement involving a single industry since big tobacco in the late '90s. Under the agreement, which was reportedly negotiated for 16 months, B of A, Chase, Wells Fargo, Citigroup, and Ally will reduce loans for nearly a million households. They will also send checks for two grand to about 750,000 Americans who were improperly foreclosed upon. All but one state agreed to the deal-- Oklahoma, whose AG opposed the deal. Lenders that violate the deal could face $1 million penalties per violation and up to $5 million for repeat violators. Interestingly, homeowners can still sue lenders in civil court on their own, and federal and state authorities can pursue criminal charges. The settlement only applies to privately held mortgages issued from 2008 through 2011. Loans owned by Fannie Mae or Freddie Mac are not impacted by this settlement. See news item from Fox here-- http://fxn.ws/yN8oVo and website for the public here-- http://www.nationalmortgagesettlement.com/

Why did things go better out West?

Just as Florida ended its mandatory foreclosure mediation program, the Justice Department praised Nevada's foreclosure mediation program in a recent report saying it provides a road map for other states to follow in addressing the continuing fallout from the housing crisis. Nevada, much like Florida, has some of the highest numbers of foreclosure filings in the country. In the report, data recorded by program staffers shows that since that program started, 13,813 Nevada homeowners participated. Of those, nearly 3,900 homeowners obtained loan modifications that allowed them to stay in their homes. More than 2,000 others agreed to foreclosure alternatives, such as short sales. Much like Florida, remaining participants of failed mediations blamed lender required documents or representatives without authority to take action. A drop-off in filings following robo-signing scandals may have skewed success, as well. However, the Justice Department apparently evaluated how states addressed the foreclosure crisis and singled out Nevada's program for developing policies and procedures other states could implement. See article - http://bit.ly/wg9N7O

Starting tomorrow in Seminole: 300 Foreclosures in 3 days

Tuesday, Seminole County's Chief Circuit Judge says he'll hear three days of foreclosures at 30 seconds a case, though last year Judge Dickey processed about 125 foreclosure cases an hour, many of which were dismissed or continued. For a time last year, the State of Florida paid retired senior judges to hear foreclosure cases to clear dockets. Since the program's demise, dockets are clogged again, especially with the Supreme Court of Florida also dropping its mandate last month for foreclosure mediation after reports that it was ineffective. Unfortunately, according to the Office of the State Court Administrator, almost seventy percent of cases mediated from March 2010 to March 2011 did not result in any agreement between the borrower and the lender. However, a U.S. Justice Department report recently concluded that mediation can resolve more cases-- if the programs are structured effectively. Without a government driven program for banks and homeowners to mediate foreclosures, it's now up to individual judicial circuits to decide about foreclosure mediations. Some circuits, such as Volusia, have no plans to ensure that banks offer mediation. Others, such as Seminole and likely Orange, will continue mandatory mediation. See article: http://thesent.nl/zQcPz6

Assessment Workgroup for the Managed Mediation Program for Residential Mortgage Foreclosure Cases Recommends Changes

Though Florida’s mandatory mortgage mediation programs have likely fared better in achieving work-outs than statistics indicate, an Assessment Workgroup for the Managed Mediation Program for Residential Mortgage Foreclosure Cases warns that a new wave of foreclosures will languish if additional resources are not provided to the courts. The group, created by Supreme Court Chief Justice studied results indicating that only 3.6 percent of eligible cases were actually settled in foreclosure mediation since December 2009 for homesteaded properties. Therefore, it is probable under the group's recommendations, that the mandate for a statewide managed mediation program will end, while allowing for circuits to opt in, under a potentially revised administrative order, to resolving cases in their own local programs. However, the group did say it was probably too early to conclude the mortgage mediation program was a failure and noted many difficulties were because lenders were reluctant to participate. “The public comments received provided evidence that servicers on a broad scale resisted providing representatives at mediation with full authority to settle and refused to consider more than a narrow range of settlement options, most of which were of little value to borrowers,” the report said. “Servicers had economic incentives not to settle and to keep foreclosure cases in limbo to avoid the expenses that accompany home ownership.” Apparently, a substantial number of cases apparently settled after an impasse was declared at mediation, probably because of the document exchange and counseling that occurred at mediation. This was evident in the Orange County program-- at least anecdotally-- and some permanent modifications were made after temporary agreements were reached at mediation, which is no longer an option, now that "no agreement" style orders are required. Pre-suit resolutions are also hard to develop data on to show success in lender - homeowner negotiations. Florida Bar News story: http://bit.ly/rUTgII Read full report here: http://www.floridasupremecourt.org/pub_info/documents/Foreclosure/10-21-2011_Workgroup_Final_Report.pdf

Low rate of success leaves foreclosure program future in doubt

In a piece by the Palm Beach Post this week, Florida's almost two year-old mandatory foreclosure mediation program is under scrutiny by the state courts administrator because of its limited success. According to results presented to members of the state House Civil Justice subcommittee, there is only a 25 percent success rate statewide. Homeowner advocates and some mediators reportedly complained that banks are sabotaging mediations, so the program will be deemed a failure and removed from the already lengthy judicial process. Attorneys, judges and banks apparently continue to disagree over what the numbers really mean... http://bit.ly/oZ3X5G Meanwhile, according to the Miami Herald, Governor Scott intends to remove the courts from the foreclosure process citing lack of court involvement in other states... http://goo.gl/cgzvD

Nationally, not many Foreclosure Mediation programs succeeding

Approximately 25 foreclosure mediation programs now exist in 14 states, but it is believed by some that they are not be as helpful to troubled owners as originally touted, such as in Maryland.

Unlike here in Orange County, FL, Prince George’s County, MD had only 56 successful home loan modifications before this summer through that state’s mediation program in an area devastated by the foreclosure crisis. A majority Black area heavily targeted by sub prime lenders in the boom years, that county is now staggering under the weight of abandoned homes and plummeting prices. One borrower reports to NBC that the mediation process there was a "gimmick" just to go through the formalities before desiring to foreclose.

Fortunately, here in Orlando under the program administered by the Orange County Bar Association, the lenders have been more serious on the whole about negotiating work-outs with owners who have demonstrable income and seek to stay in the home. Some HAMP modifications have been seen in the mediations conducted locally with qualified loans.

On the whole, however, there are troubled areas as mentioned above in Maryland and in diverse states like Nevada and New Hampshire (where in more than 100 cases, only 14 have reached settlements: http://bit.ly/oB7usW ).


http://today.msnbc.msn.com/id/43811197/ns/business-real_estate/

Orlando Foreclosures

In 2010, Orlando continued to rank among the top 10 U.S. metro areas for foreclosures during the first half of the year — outpacing even Miami.

When the Supreme Court of Florida ordered mediation programs to be managed by agencies outside of the court system, the Orange County Bar Association became one of the neutral managers maintain a rotating list of Certified Circuit-Civil Mediators, each of whom has completed extensive additional foreclosure training.

When filing foreclosure actions on owner-occupied or Homestead property and the homeowner elects to participate in the mediation program, both sides are required to attend the mediation, including the lender's representative with full settlement authority (though this is often done on the telephone).

Thus far, I was pleasantly surprised to have been able to successfully explore work-out style resolutions in my assigned cases as Mediator.

What has been your experience to date as a neutral or counsel to a party in this process?