The following article was written by Jack L. Townsend, one of the principals from the court approved mediation programs in Pinellas County, Florida called Mediation Managers, Inc., but first, my editorial comment:
Mediation in foreclosure has been very difficult to show success….up till this point. But, in my opinion, this is largely a function of the newness of the program. It has only been in the last several months that both sides figured out what forms and information is required for the banks to consider. The mediation success is clouded by the same problems that have plagued mortgage modification efforts.
It’s not all the bank’s fault….borrowers bear responsibility for not complying with document requests and for not actively and aggressively pursuing mediation….that must change. Attorneys and all involved must encourage all those in foreclosure to participate.
Our courts are still overwhelmed by the crush of their caseloads and in these budget times, things are only going to get worse….much, much worse. The established mediation programs across the state are an absolutely essential adjunct to our court systems that cannot be curtailed under any circumstances.
I recognize the banks may be dissatisfied with the programs at this point in time, but many of the new foreclosure plaintiff firms are showing real willingness to work with homeowners and are encouraging their bank clients to redouble their efforts at mediation and conciliation.
We must all work together. We can solve these problems and make Florida’s Residential Mediation Program a shining example of cooperation and success. We need to reach out in the spirit of mediation and do what is required to make the programs function with maximum effectiveness:
And Now, The Article:
Myth # 1 -The resource emergency for Florida Court’s dealing with residential foreclosure cases is
over.
When the unemployment rate was at its lowest level in past ten years, 2006, Florida Courts received
73,878 new foreclosure filings. From January 2007 until June 2010 the Florida Court System received
1,094,123 new filings. (2007-180,983; 2008-368,733; 2009 -399,127; 1st 6 mo. 2010-145,280). In the
same time the unemployment rate had risen to over 10%. The numbers of new filings grew as
unemployment skyrocketed and unemployment rates went to very high levels. Consequently,
foreclosure filings outpaced dispositions by over 400,000 foreclosure cases. Last year, when the Circuit
Courts employed additional judges and judicial assistants, and started Circuit Court mediation programs,
gains were made in disposition rates. Yet Florida Circuit Courts have a backlog of approximately 300,000
foreclosure cases. In August 2010, the Organization for Responsible Lending projected 1,482,279
foreclosures for Florida for 2009- 2012. In addition to this grim fact, new foreclosure filings will rise with
high delinquency rates in Florida. In May 2011, Jay Brinkman, chief economist for the Mortgage Bankers
Association, said,” … Florida remains a problem. Twenty-four percent of all mortgages in the country that
are in foreclosure are in Florida and 23 percent of the loans in Florida are anywhere from one payment
past due to in foreclosure … Finally, we need to recognize the increasing divergence in market recovery
attributed to differences in states’ laws. The states with the biggest increases in the number of loans in
foreclosure are Florida, New Jersey and Illinois … ” The emergency facing Florida Court resources
remains imminent and clear.
Myth #2- Residential foreclosures new filings number’s are low and will remain so.
Florida Residential Foreclosure Mediation Programs in Florida’s 20 Circuit Courts are reporting increases
in eligible cases, some up to 30%, since May 2011. The Program Mangers have met in June and July to
institute best practice to prepare for this uptick in filings. Although from late 2010 through mid-spring
2011 there was a temporary lull in new foreclosure filings numbers. Unexpected events explain the lull
when you consider that in this same period two large; state-wide plaintiff/lender law firms closed their
foreclosure practices. With the closure they stopped work on the current cases; stopped new filings and
were removed from the Fannie Mae referral attorney network for new filings. In a letter of March 2011to
the Chief Circuit Judges one of the firms indicated it was ending its participation in 100,000 cases
statewide. Now these firms are replaced on pending cases and the pipeline for new cases through the
Fannie Mae referral attorney network is restored.
Also during the lull time period, all large-volume lenders placed moratoriums on new filings to stop bad
practices plaguing many of their court filings. (I.e. faulty documents, affidavit problems, robo-signing).
The moratoriums are now lifting as the Attorney Generals throughout the nation resolve and settle their
reviews of the bad practices. With the replacement of large plaintiff law firms and removal of
moratoriums the universe of residential foreclosure case filings in Florida is increasing. With the
persistently high unemployment rate it’s inconceivable that the filing numbers will return to 2006 levels
rather new filing numbers will steadily grow.
The Lakeland Ledger reported on July 12, 2011, the New York Times article by Nelson
Schwartz saying, “Tens of thousands of Bank of America’s most distressed borrowers could be evicted
and lose their homes more quickly as a result of a proposed settlement between the bank, which is the
country’s largest mortgage servicer and investors in its troubled mortgage securities….. the fallout for
the nearly 275,000 borrowers who took out those loans depends greatly on how deep they are in the
foreclosure process and whether they earn enough money to dig themselves out… For borrowers who
are unemployed or lack the income to cover a reduced mortgage payment, foreclosure and eviction
could be more immediate … ”
Consequently, residential foreclosure filing numbers are growing and will continue to ramp up over the
foreseeable future.
Myth #3- The Circuit Court case docket backlog is created by rules and procedures found in the
Circuit Court residential foreclosure mediation programming.
The Circuit Court mediation programs throughout Florida are required to start and finish their program
work within the first 120 day period of the lawsuit, which is the same time frame for service of the
complaint to the Borrowers/Defendants. Further, there are several off ramps returning the foreclosure
case to the court docket before the 120th day. Ineligibility returns the case in as little as 10 days after
filing in some Circuit’s programs. Cases are returned to the court docket on or about the 60th day when
the borrower refuses the mediation option or after six attempts through the mail and telephone, with the
contact information provided by the plaintiff attorneys is not contacted; if the borrower does not complete
financial counseling then the case is returned on or about the 90th day after filing. These off ramps return
approximately 50% of the cases to the court dockets within the first 90 days after filing. The statewide
foreclosure mediation program is run in the first 120 days of the foreclosure case. It seems hard to
imagine the backlog coming from the events happening in the first 120 days of a case.
The case backlog focuses on cases sitting on the dockets after service and the mediation time frame for
hundreds of days with many considered inactive. If mediations are in the first 120 days then what longer
term areas are the causes of the current case backlogs in court dockets?
Two primary causes often are lack of judicial resources to handle case volume or failures by the parties to
pursue dispositive motion hearings or trials when the court time is available. The current backlog isn’t
attributable to lack of judicial resources. With the use of additional judicial participants last year and
mediations beginning last year, the resolution/disposition rates that were higher than in years past. A
small gain was noticed when compared to prior years leaving about 350,000 cases in the court system.
The failure of the parties to pursue dispositive motions is looming as the primary reason for the backlog.
The lender moratorium issues mentioned above and other market factors caused Plaintiffs/Lenders to not
pursue dispositive motions and auctions for sale.
Myth #4 The Circuit Court Residential Mediation programs are not removing cases from the
Court’s docket.
Yes, foreclosure mediation does remove cases from the court docket. Several years of poor lending
practices coupled with a significant economic downturn and high unemployment led to 4 years of
extraordinarily high foreclosure filings. It would be unexpected to clear all of these filings with a oneyear
old program directed only at homestead, occupied, residential properties. Yet, every day in Florida’s
20 circuit court residential foreclosure mediations are removing cases from the Court’s dockets through
full and partial settlements. Many more cases are removed from the docket after mediation, with the
mediation being the activity starting the parties toward settlement. Florida Program Managers report an
additional 10 ““ 20 percent post-mediation resolution rate.
Foreclosure mediation is unique in the manner in which resolutions occur. After the successful mediation
of a general civil matter (i.e. Personal injury cases, family law cases, etc.) the final disposition paperwork
generally finds its way to the court docket within 30 -45 days after the mediation. This is not happening
in foreclosure cases since it takes several months to complete short sale scenarios or convert
modifications of payments to permanent financing and voluntary dismissals are filed.
Further, the parties at the foreclosure mediation do not have similar litigation risk factors to evoke the
give and take of settlement negotiations. Banks are perceived as having all of the power and borrowers
have none. So having borrowers precede to financial counseling and then mediation is an extra-ordinary
success. The the parties have a chance at settling their case and it being removed from the court docket.
Myth #5 Residential Foreclosure Mediation should be as successful as other civil circuit case type
mediations.
The one year old statewide early foreclosure mediation program is gaining momentum. It is not a mature
established program like mediation is for other mediated case-types. (i.e. Personal Injury, Family Law,
etc.) Historically, it was rare for homeowner/borrowers to come to court hearings and try to save their
home at a foreclosure final hearing. It was even rarer that a residential foreclosure case was referred to
mediation or a mediated settlement occurred in the foreclosure context.
Why was this so? In years past the number of filings and dispositions was about even year in and year
out. With Plaintiffs having greater power than defendants; Plaintiffs winning primarily by default;
Plaintiffs rarely losing if a full hearing was required; mediation was not thought to be beneficial. But over
the last four years, Florida Circuit Court Judges were challenged to make accommodations for Borrowers
who attended Summary Judgment hearings. As the foreclosure cases increased more and more borrowers
appeared announcing to the Court that banks and their lawyers would not stop and sit down to discuss
saving their homes.
The crisis of accommodating settlement efforts was resolved for the Circuit Judges with the introduction
of the statewide early foreclosure mediation programs in Florida’s Circuit Courts. The settlement
meetings, if any, arranged by Judge’s before there was a statewide program, as well as, the mediations
flowing from the statewide program do not require settlements. It would be natural to assume that
mediations of these cases would show success results similar to other mediated case-types. This
assumption is misplaced and it does not represent the current reality.
Foreclosure mediation successes can be great but will be curtailed so long as the imbalance of power is so
great between the parties. But, through use and experience, foreclosure mediation will provide
significantly more settlement capacity and docket clearing opportunities. It may one day equal the
success of other mediated case-types since it provides the parties attending mediation their best chance at
settlement of the case involving their most valued asset. To grow in success the foreclosure mediation
process must become more accepted and engrained in our court system, the process must gain maturity
from experience, and programs best practices must evolve and coalesce into consistent strategies of
success.
Conclusion
The foreclosure litigation crisis is still upon all Floridians, although a temporary lull in the intensity and
pace of the crisis was in place for early 2011. The lull is like the feeling one has sitting in the eye
of a hurricane. Floridians and their judges are now appreciating the severe consequences of the storm
seen thus far. The business hurricanes in the last five years revolve on home ownership and foreclosure
issues seen by Florida’s Circuit Courts. These storms took several years to brew into their full category 5
existences.
