In December 2009, the Florida Supreme Court ordered that lenders and borrowers be allowed to file for pre-suit mediation prior to initiating the foreclosure process. This pre-suit mediation program, dubbed Residential Mortgage Foreclosure Mediation, fulfills Florida’s mediation requirement for all foreclosure matters and allows lenders and borrowers to voluntarily attempt to obtain a resolution. The goal of the program is to help homeowners keep their homes and give them a fresh start financially.
The program was initially available only in state courts. However, in recent months the Federal Bankruptcy Court enlisted bankruptcy trustee Laurie Weatherford’s help in creating a similar program to help homeowners in the federal bankruptcy courts. Bankruptcy judges had grown concerned with the number of debtors who were entering their court rooms owing more on their mortgages then their properties were worth, and seriously behind on their mortgage payments.
The federal program works in conjunction with Chapter 13 bankruptcy proceedings. Chapter 13 proceedings can often allow homeowners to keep their homes by working out a debt repayment plan with their creditors.
How does the Mortgage Mediation Program Work?
The program requires the borrower and lender to come together to work out a resolution. In the first stage, the lender and borrower select a mediator. Mediators are neutral parties who work with the lender and borrower toward a resolution. Once a mediator is chosen, the lender and borrower, and often the borrower’s attorney, sit down together and try to find a solution that keeps the homeowner in their home.
Many times the lender will agree to modify the current mortgage. A mortgage modification often lowers the current interest rate on the loan and can reduce the monthly payment. It is even possible that the borrower may receive a reduction in the mortgage principal to reflect the current value of the property.
The program is in the beginning stages and has helped a few hundred homeowners avoid foreclosure. It is hoped that the program will grow and expand to assist more homeowners in the future.
If you are facing a foreclosure it is a good idea to seek legal help to determine if a program like this one can help you keep your home. An experienced bankruptcy attorney can assess your current situation and help you make the decision that is in your or your family’s best interest.
Source: Herald Tribune, “Mortgage modification may remedy foreclosure crisis,” 12 November 2011