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Foreclosure mediation program slow to start in bay area

Court-ordered mediation was pitched as a faster and easier way to ease Florida's mortgage crisis. But it's turning out to be neither fast nor easy.

Faced with the task of setting up a program largely from scratch, Pinellas and Pasco counties won't start offering foreclosure mediation until June 1 at the earliest. Hillsborough County has yet to set a date.

Hundreds of thousands of foreclosure cases clog state courts. In Pinellas, Pasco and Hillsborough, the mortgage default case load exceeds 50,000. It was with that logjam in mind that the Florida Supreme Court issued a December order requiring each of the state's 20 judicial circuits to sponsor mediation sessions between homeowners and lenders.

But judicial circuits are going through formal bidding to hire organizations to manage their mediation programs. The process can take several months.

"Even when it starts it's going to be slow," said Greg Firestone, head of the University of South Florida Conflict Resolution Collaborative, gearing up to provide mediation for the Tampa Bay courts.

"You have to call the borrower. Then the borrower's going to meet with a mortgage foreclosure counselor. Then you try to schedule a mediation. So even if a program starts in July, it's unlikely you'll see mediations in the first month."

But will mediation work? According to the Collins Center for Public Policy, a Miami nonprofit that plans to collaborate with Firestone's group, only half of Florida homeowners sign up for mediation in courts that have experimented with it. Another large group of distressed homeowners — real estate investors without a homestead exemption — aren't eligible for mediation.

Of the homeowners that do use the service, about two-thirds reach agreement with their lenders, usually entailing loan restructuring or interest rate reductions, the Collins Center reported.

Mediation, together with pre-mediation foreclosure counseling, will cost $750, covered by the lender. Sessions should last no more than three hours. But negotiating could be more tedious than mediation fans imagine.

The Supreme Court requires that bank representatives have full authority to approve mortgage workouts with home­owners.

But in many cases, banks just service loans owned by distant investors and have no final say, said Matt Weidner, a St. Petersburg lawyer who defends homeowners in foreclosure cases. "The Supreme Court can order what it wants, but the investors who own these loans haven't signed off," Weidner said of mediation. "It's really a farce."

Firestone acknowledged the problem. To help remedy it, courts plan to change confidentiality rules that up to now have prevented judges from discovering which banks aren't mediating in good faith.

Another potential hiccup: Mediation managers must schedule sessions no earlier than 60 days and no later than 120 days after a foreclosure lawsuit is filed, the Supreme Court says. That has raised fears that mediation is geared more to future foreclosures than to the current backlog.

People hit with a foreclosure suit before Feb. 1, for example, will have exhausted those 120 days before Pinellas and Pasco have mediation in place June 1.

And the foreclosure pileup continues. In February, lenders sued 3,880 Tampa Bay homes for foreclosure, according to RealtyTrac. In January 4,404 properties got initial foreclosure notices.

"Some people think there's another foreclosure wave coming. Certainly, we're not seeing any major slowdown," Firestone said. "To do mediation right, it takes time."

516,711

Florida properties with foreclosure filings in 2009

50,000+

Foreclosure cases backed up in Pinellas, Pasco and Hillsborough

50 percent

Eligible homeowners predicted

to use mediation

$750

Cost of mediation, picked up

by the lender

Foreclosure mediation program slow to start in bay area 03/15/10 [Last modified: Monday, March 15, 2010 11:20pm]
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