Tuesday, March 16, 2010

Florida mimics the feds in useless foreclosure help

In December of 2009, Florida’s Supreme Court required the 20 state judicial circuits to sponsor mediation between lenders and homeowners. This was supposed to ease the mortgage crisis. But it was a totally new program and each circuit had to design it from scratch. Pasco and Pinellas will start offering the foreclosure mediation in June and Hillsborough does not know yet when it will be able to start. There are now more than 50,000 mortgage default cases clogging the judicial system in those three counties alone.

First the borrower is contacted. The borrower then meets with a foreclosure counselor. Then mediation is scheduled. The best case scenario is that it would take at least a month after a program begins before the first case would get to mediation. Those with other mediation experience in Florida estimate only half of the eligible homeowners would sign up. Real estate investors without homestead exemptions would not even be eligible for the program.

The entire program of foreclosure counseling for the borrower and then mediation costs $750. This fee is paid by the lender. Sessions are set for no more than three hours.

This just does not sound like a useful or practical program. Three hours to work out an alternate solution to foreclosure with a bank? Really? Has any of these Supreme Court justices tried to convince a bank to do a short sale recently? Have they timed the process?

Another requirement: mediation sessions must be scheduled between 60 and 120 days after the foreclosure filing. How is this going to help any of the cases currently in the system? Does the Supreme Court think there are that many more foreclosures yet to come? Why not find a way to help some of the people that are being foreclosed on right now? Many of the foreclosures now in the system have been dragging on for much longer than 120 days.

A further requirement of the court: bank representatives at the mediation sessions must have full authority to modify the mortgage. The problem is that many of the banks filing the foreclosures are only servicing the loans. The mortgages are often owned by investing companies across the state or across the country. How is that ever going to work? The justices are again showing a severe lack of knowledge of how the modern mortgage system works.

So here is the way I see it. In the face of a poor economy and strangled budgets, the state Supreme Court has forced every judicial circuit in Florida to start a large new program from scratch that is not going to help any homeowners. There is no incentive for the banks to cooperate and it is another colossal waste of taxpayer money.

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