Panel wants mandatory foreclosure mediation
TALLAHASSEE (AP) – The Florida Supreme Court’s residential foreclosure task force recommended Monday that all cases involving primary homes should be mediated and that judges should expedite cases dealing with vacant and abandoned properties.
The recommendations will go to the justices, who are looking for ways to help the court system cope with a flood of foreclosure cases caused by the national recession and Florida’s housing bust. Florida has one of the nation’s highest foreclosure rates. It was third at 3.4 percent behind Arizona and California in June.
The 15-member panel chaired by Circuit Judge Jennifer Bailey of Miami, did not recommend hiring more judges and staff.
“Given Florida’s financial situation, it would be a foolish exercise … in the absence of any realistic expectation that such recommendations could be funded,” the task force wrote.
The panel suggested dividing foreclosure cases into three categories: primary homes, also known as homesteads; vacant and abandoned properties; and all others.
Managed mediation should be required for homestead foreclosures unless the lender and borrower both agree to opt out or pre-suit mediation had been conducted, the task force wrote.
Alex Sanchez, president and CEO of the Florida Bankers Association, said expediting vacant and abandoned property cases is a good idea, but he predicted mandatory mediation for homesteads would cause more delays.
Sanchez said he cannot speak for other lenders but that banks are in constant touch with borrowers and file foreclosure cases only as a last resort.
“We work with our customers to try to keep them in their homes,” Sanchez said.
Requiring mediation in those cases would just delay the inevitable, he said.
“What if that person then defaults on that mediated deal?” Sanchez asked.
The task force, though, was impressed with managed mediation experiments being conducted by the Collins Center for Public Policy, a think tank, in three judicial circuits covering the western Panhandle, Miami-Dade County and four smaller southeast Florida counties: Martin, St. Lucie, Indian River and Okeechobee.
The overall settlement rate resulting from mediation is 73 percent. When cases settled through foreclosure counseling before formal mediation are included, the rate goes up to 79 percent.
Another recommendation is that borrowers receive certified financial counseling before mediation because they “suffer from a significant imbalance of power when negotiating with their note-holders.” The task force wrote that research shows borrowers are less likely to default again if they’ve been through foreclosure counseling.
Sanchez, though, wants to know who would pay for that.
“Are the taxpayers going to pay for that?” he asked.
The task force recommended that lenders front the initial fee for management mediation but added Florida should explore governmental funding sources as well. It also suggested mediation as an option in the all others category with lenders and borrowers splitting the cost.
Other recommendations include: adopting uniform statewide forms and procedures; creating a central statewide foreclosure Web site to provide basic information now “strewn haphazardly across the Internet”; consumer education on avoiding foreclosure scams; and aggressive prosecution by the Florida Bar of attorney misconduct.