Ethiopian Review

Pushing someone out of his house in a foreclosure action takes a lot of court time. And Florida’s foreclosure crisis has swamped our state courts. The problem is so acute that a task force was recently empaneled by the Florida Supreme Court to make recommendations on how to manage the growing burden. The panel’s answers were a win-win — ideas that would help troubled homeowners stay in their homes and reduce the volume of foreclosure actions moving through the system.

As St. Petersburg Times staff writer Molly Moorhead recently reported, judges who preside over foreclosure actions hear a constant refrain from homeowners that they cannot reach anyone in their lender’s office to negotiate a loan modification, or when they do their paperwork gets lost. The complaints reflect a national problem. Loan servicers and lenders don’t have the staff to handle the flood of requests for loan modifications, and in some cases loan servicers see financial incentives in pushing foreclosures.

But the state’s court system is in a perfect position to force lenders to come together with borrowers and, with the help of a professional mediator, seek a resolution before someone’s primary residence is sold.

This is already the approach taken in a series of pilot projects managed by the Collins Center for Public Policy in Florida’s 1st, 11th and 19th judicial circuits. Under the Collins Center model — the one recommended by the task force — all homesteaded property owners facing foreclosure are given an opportunity to meet with a financial counselor who educates the homeowner on realistic options. The homeowner is then prepared for the next step, a managed mediation session with the lender. According to the Collins Center, in the short time the program has been in operation in those judicial circuits, there has been a combined settlement rate of 73 percent.

But the costs of the Collins program at $750 per case are objectionably high to Pinellas-Pasco Chief Circuit Judge Thomas McGrady, even if the fee is borne initially by the lender. He says that in most residential foreclosures the homeowners do not bother contesting the foreclosure and that requiring mediation in all such cases would be a waste of money.

This is a valid point and one the Florida Supreme Court should consider as it determines whether to adopt the recommendations of the task force. But ultimately, the benefits of settling almost three-quarters of foreclosure actions have to be worth some added initial financial outlays by lenders. And many more homeowners would likely participate in foreclosure proceedings if they thought there was a chance they could keep their home.

Among the biggest hurdles for homeowners seeking loan modifications are understanding the technical paperwork and financial options, and communicating with their lenders. A mandated mediation program with premediation financial counseling could cure those difficulties.

(tampabay.com)