Florida Supreme Court Reconsidering Mandatory Foreclosure Mediation

Posted By Sheryl A. Edwards, Esquire || 5-Oct-2011

Since 2009, mediation has been required in all residential foreclosure actions involving homestead property in Florida through an administrative order issued by the Florida Supreme Court. (Actually, the mediation effort was originally spearheaded by the Twelfth Judicial Circuit's own Judge Lee Hayworth, a trailblazer in the area of the court administration of mortgage foreclosures!)

Last week, the Supreme Court appointed 5 judges and 1 court administrator to a committee set to study the success of the mandatory mediation program and recommend whether it should be continued, changed or eliminated. The Palm Beach Post reports that only 3.6% of all foreclosure cases referred to mandatory mediation between March 2010 and March 2011 resulted in a written settlement agreement between the Lender and the Borrower.

Even though such a small number of cases actually settle at mediation, the program has significant merit. The mandatory mediation program requires that a real person representing the lender appear at mediation, albeit, sometimes only by telephone and typically without real authority to settle the case. Before the institution of the mediation requirement, it was extremely difficult for Borrowers to speak with a Lender to discuss a workout because the Lender would refuse to speak with a Borrower once the foreclosure action was filed. And, the Lender's attorney would not speak with the Borrower because they were hired for only one purpose - to file and complete the foreclosure action. By requiring mediation, there is at least an opportunity to discuss settlement.

In the Twelfth Judicial Circuit (Sarasota, Manatee and DeSoto County) through the mediation program, a Borrower can also request documentation from the Lender to prove that Plaintiff is the owner and holder of the note and mortgage, the Borrower's complete payment history, a statement concerning the Lender's position on the net present value of the loan and the most recent appraisal of the property. This information must be provided to the Borrower/defendant and mediator in order to proceed with the mediation, and thereafter, continue with the foreclosure. By receiving this information early in the foreclosure, a Borrower can better defend the action and, theoretically, work out a real settlement with the Lender at mediation.

Unfortunately, in my experience, the Lender attends mediation only because they are ordered to do so and then only to consider the Borrower's eligibility for a HAMP modification. The Lender's representative attending the mediation typically has no other authority to settle the case. Even though the value of the property has often dropped to less than 1/2 of the outstanding mortgage balance, Lenders typically do not want to work out a principal reduction or allow the Borrower to payoff their mortgage at its current value (although they are more than willing to "take the hit" by wasting thousands of dollars in pursuing the foreclosure to its finality and then selling the property to someone else at less than the Borrower was likely willing to pay for it at mediation!)