Homeowners May be Able to Prevent Foreclosure through Mediation Program
Article provided by David G. Volman, Attorney at Law, L.L.C.
Visit us at http://www.volmanlaw.com/
It is no secret that Connecticut has been hit hard by the subprime mortgage disaster. As unemployment rates in the state top 8 percent and more hardworking people lose their jobs, the rate of foreclosure and bankruptcy in the state has risen as well. In 2008, the state ranked 8th in the country in foreclosure rates, joining ranks with Nevada, Florida and California. By the end of June 2009, 1 out of every 17 mortgages in Connecticut-- or 6 percent of total mortgages -- were at least three months delinquent.
In the midst of one of the worst housing market crises ever to hit the nation, the Connecticut legislature took action to provide homeowners and lenders one more chance to keep homes out of foreclosure. In 2008, the General Assembly passed a law creating the Foreclosure Mediation Program.
2008 Foreclosure Mediation Program
Under the program, lenders and homeowners could choose to enter mediation to try to resolve delinquent mortgages. For some, this may include restructuring mortgage payments. Other issues appropriate for mediation include:
-Forbearance agreements
-Reduction of interest rate
-Reinstatement of the mortgage
-Short sale
-Deed in lieu of foreclosure
The mediation is handled by a judicial branch employee with knowledge in real estate and foreclosure law. The mediator is a neutral third-party who acts as a facilitator of the meetings. The lender's attorney must be present at the mediation conferences as well as everyone listed on the mortgage. The homeowner, however, also has the option of having an attorney appear in his or her presence.
Lenders are required by the law to send notice of the program to homeowners at the same time they send out the foreclosure complaint. Although participation in the program does not stay or prevent foreclosure, lenders are prohibited from seeking final judgment for a foreclosure action until the mediation has been completed, or until the time period for requesting mediation has ended. Typically, homeowners have up to 15 days after receiving the notice to request mediation. The actual mediation may not last more than 60 days, unless extended by a court.
Even though participation in mediation was strictly voluntary, it had promising results: 60% of participating homeowners were able to keep their homes out of foreclosure.
2009 Changes to the Program
Despite the encouraging early results, only a little over one-third of those eligible to participate in the Foreclosure Mediation Program actually took advantage of it. This past summer, the General Assembly amended the Foreclosure Mediation Program and made it mandatory for all qualified residential homeowners with a foreclosure return date between July 1, 2009 and June 30, 2010. Currently, no new mediation requests will be accepted on or after July 1, 2010.
In addition to making the program mandatory, the legislature also changed the eligibility requirements for the program, which now include:
-The homeowner must be the one named on the mortgage
-The homeowner must live in the home
-The home must be a one-to-four family primary residential property
-The home must be located in the state of Connecticut
The legislature also included a provision that specified anything discussed or disclosed during mediation, including the homeowner's financial documents, is confidential and not subject to disclosure to the judicial branch.
Mediation Benefits Everyone
Some have argued that by making the program mandatory, the legislature has increased state expenses, which may make it difficult to continue the program. With mandatory mediation, more judicial branch employees must be tapped to act as mediators. Banks and other lenders also will have increased expenses as they have to delegate more employees (and attorneys) to participate in the mediation. Mandatory participation also may burden homeowners who are not interested in mediating an agreement or participating in the program and view it as a waste of their time.
Despite the increase in operating costs for all sides, the mediation program has more benefits than detriments. It is in everyone's best interest to keep homes out of foreclosure. Lenders do not want to take title to homes. Banks are not equipped to manage property - their business is managing money. They end up with homes they cannot sell and cannot keep up. And as repairs go undone and the property falls into disarray, so does its value and the value of the neighbor's house.
Foreclosed homes drive down property values in the community. There is nothing worse than having an empty house falling into disrepair right next door or even down the street. And foreclosure can have devastating financial consequences for homeowners. A foreclosure on a credit report will remain there for at least 7 years, and can hurt a homeowner's future chances of securing financing to buy another home. Simply put, homes have the most value for everyone when they remain in the homeowner's hands.
Conclusion
For more information on your legal options for keeping a home out of foreclosure or handling other types of debt, contact an experienced attorney.
Article provided by David G. Volman, Attorney at Law, L.L.C.
Visit us at http://www.volmanlaw.com/
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