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Mediating foreclosures -- a Tale of Two States

The current recession has affected the various states in different ways, but almost all states are reeling from an increase of foreclosure lawsuits.  In Florida, one of the most populous states where the real estate bubble hit spectacular highs and now is hitting incredible lows, a state Supreme Court task force has recommended that courts mandate mediation in any residential mortgage foreclosure action where the homeowner is still in the home and wants to stay there.  Some counties and judicial circuits in the state are already doing just that.  If the homeowner enters any kind of answer or appearance in the lawsuit, judges in those circuits are requiring mediation before scheduling a hearing in the case.  Some of those circuits are requiring the mortgage lender to pay all of the mediation fees. 

Meanwhile, in Wisconsin, a medium size state where the real estate bubble was never quite so large, a bill has been proposed that would require mediation in all foreclosure cases where the homeowner wants to stay in the home.  In the meantime, Marquette Law School is providing free mediation services for homeowners who want to save their homes from foreclosure in Milwaukee County. 

A recurring complaint by homeowners facing foreclosure is that they have tried to renegotiate their mortgage but have been unable to contact anyone to talk to at the bank.  A foreclosure lawsuit is the lender’s way of getting the delinquent mortgagor’s attention, as well as the first step toward an eviction.  The states and courts now seem to be giving the mortgagor the means to get the lender’s attention, and to start the ball rolling toward renegotiation of the mortgage.  No matter how large the state or how severe the backlog of foreclosure cases, mediation is rapidly becoming the tool of choice for states and courts.  Paying for the mediators’ time is a continuing problem, but the cost of foreclosure to homeowners, lenders and the states is undoubtedly greater than mediation fees.  If  homeowners can stay in their homes, they save the stigma of a foreclosure, the lender saves the expense and loss of a forced sale, the state keeps a paying property taxpayer in the home so there is less likelihood of vandalism, and the courts reduce their foreclosure case backlog.  Given those benefits, coming up with the cost of mediation should not be too difficult.

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Reader Comments (1)

To get a third angle, here is a blog on Nevada Foreclosure Mediation

September 23, 2009 | Unregistered CommenterJim

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