Oppenheim Law

Foreclosure mediation program's low rate of success leaves its future in doubt

News   •   Sep 21, 2011 06:13 EDT

The Palm Beach Post Money

September 21,2011

Foreclosure mediation program's low rate of success leaves its future in doubt

Florida's landmark mandatory foreclosure mediation program is under scrutiny by the state courts administrator because of its limited success.

Statewide, just 3.6 percent of all cases referred to mediation in a yearlong period beginning in March 2010 ended in a written agreement between the lender and homeowner. In Palm Beach County, which didn't begin its program until July 2010, 1.6 percent of the 4,632 referrals ended in a written agreement.

The results, which were presented Tuesday to members of the state House Civil Justice subcommittee, are higher if only homeowners choosing to participate in the program are considered. Under that benchmark there was a 25 percent success rate statewide and 18 percent in Palm Beach County.

Still, speakers on Tuesday estimated that 70 percent of traditional civil court mediations end in agreement, leaving questions as to why the program required by the Florida Supreme Court is lagging.

"We are looking at it in my office and trying to make some decisions about the future of this program," said State Courts Administrator Lisa Goodner, who called the agreement rates a "big concern."

Homeowner advocates and some mediators complain that banks are sabotaging mediations so the program will be deemed a failure and removed from the already lengthy judicial process.

But others said the program, which is paid for by the mortgage lender, is just experiencing growing pains.

"With anything new it takes awhile for people to figure it out," said 4th District Court of Appeal Judge Burton Conner, who was on a statewide foreclosure task force that recommended mediation. "It has historically rarely been used in foreclosure. It's a huge cultural change."

One hurdle has been difficulty in contacting the borrowers. Statewide, 59 percent of eligible borrowers were unreachable. Of those who could be contacted, just 14 percent participated in a mediation session.

In Palm Beach County, 60 percent of borrowers were unreachable. Of those contacted, 29 percent - 419 borrowers - attended a mediation.

The Palm Beach County Bar Association, which runs the program for the 15th Circuit Court, estimates homeowner contact has improved in recent months with just 30 percent of homeowners remaining not found.

Proponents also argue Tuesday's report isn't an accurate account of all outcomes.

"What's not captured is borrowers who didn't complete the program because they reached a resolution before mediation," said Meredith Trim, director of the program for the Palm Beach County Bar.

The mediation program was ordered by the Florida Supreme Court in December 2009 to reduce foreclosure caseloads and aid borrowers. Outcomes for homeowners can include loan modifications, deeds in lieu of foreclosure and agreements to conduct a short sale.

But South Florida foreclosure defense attorney Roy Oppenheim said most banks want to look only at modifications, for which homeowners may not qualify.

"You have someone on the phone from the bank and the only thing they have is a computer monitor in front of them and the only thing they can do is modify," he said. "It's not mediation; its modification or bust."

Retired Circuit Judge Thomas Bateman, an attorney with the Tallahassee-based Messer, Caparello & Self law firm, also is concerned lenders are not operating in good faith.

"From my personal experience I feel (the lenders) want the program to show terrible numbers with the thought being it will eventually go away," Bateman said. "They're just going through the motions."

That's not true, say bank representatives.

Wells Fargo issued a statement Tuesday saying Florida homeowners often have already been assessed for foreclosure alternatives before entering mediation.

"Our experience is that many of the customers entering the program have extreme financial hardships or severe delinquencies that make finding an affordable option difficult," the statement said.

Anthony DiMarco, executive vice president of government affairs for the Florida Bankers Association, said there is no conspiracy to sabotage the mediation program.

"I have never heard anyone even intimate that someone was trying to do that," he said.