The Palm Beach Post has posted an article that discusses how the Florida Supreme Court has been trying to force banks into mediation with the intent to save struggling homeowners from foreclosure. But in recently acquired documents, it has come to light that the banks and lenders have been doing their best to make negotiations end in a stalemate so they won’t lose money by not foreclosing on homes.
In some cases, mediators report that deals were struck for trial payment plans or to seek a loan modification, but that banks or their attorneys asked for the meeting to be recorded as an impasse.
The motive for a deadlock, homeowner advocates say, is money. Declaring a different outcome stalls the process and could mean a return to mediation if an agreement falls through. At the same time, several of the state’s large foreclosure law firms also run title companies, which can pick up business when a home is repossessed.
There are over 350,000 foreclosures currently in Florida courts and experts in the field argue that the housing market can’t improve until all of those foreclosures are dealt with. The mediation program (which is only for homestead properties) was started with the intent to “reduce the judicial workload” and give homeowners a chance to avoid foreclosure. This mediation program became a mandatory step over a year ago, but difficulties like not being able to contact borrowers have hampered its success.
A December report on seven of Florida’s 20 circuit courts found just 6 percent of homeowners referred to mediation left the negotiating table with an agreement. One mediation management company says that agreement rate is lower than reality because of how mediations are tallied.
The program has seen similar results in Palm Beach County. Between July and September, 1,949 foreclosures were referred to mediation. Of those, 152 mediations were conducted, with 27 ending in a written settlement.
“Settlement in these cases is not in the economic interest of the foreclosure law firms or servicers handling the foreclosures,” said Boca Raton foreclosure defense attorney Ron Kaniuk of Ricardo, Wasylik & Kaniuk. “The law firms not only do the foreclosure work, they do the evictions and the bank-owned home sales and the title work, so if they modify a loan, if they come to a settlement and the foreclosure case ends, their work ends.”
In November the Florida Supreme Court removed the option for impasse, allowing for three possible solutions: adjournment, no agreement, or partial/full agreement. Adjournments lead to a follow up hearing at no charge; mediations are $750 that is paid by the lender. The court says the reason for this is because mediators are often pressured to report an impasse when an adjournment is more appropriate.
Disorganization and bad communication between lenders and their attorneys is responsible for a large part of the difficulties with the success of the mediation program. For example, paperwork can get lost, a young attorney who isn’t familiar with the case can be assigned to mediate it, or the bank representatives don’t have the authority to effectively negotiate.
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