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Residential foreclosure mediation- what’s California doing?
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Mediators are being called upon in Baltimore, Maryland to ensure that lenders are making a “good faith” effort to re-negotiate loan terms, the Baltimore Sun recently reported, following closely in the steps of many states and cities working to use mediation programs to help quell the foreclosure crisis.
Residential foreclosure mediation programs give borrower-homeowners and their lenders the opportunity to work out new, mutually beneficial loan terms with the help and facilitation of a neutral third party, and have been heavily encouraged and supported by legislatures and courts across the country.
In fact, the American Bar Association—through the ABA House of Delegates—adopted Resolution 300 this past August, supporting “federal, state or territorial legislation, regulations, or court rules that promote the use of mediation to assist in resolving disputes that could lead to foreclosure of mortgages on residential real property, and foreclosure cases that are already pending in federal, state or territorial courts” (www.aba.org).
The Superior Court of the State of Delaware created a Residential Mortgage Foreclosure Mediation Program this past summer, Iowa Mediation Services joined forces with the Attorney General’s Office to offer mediation services for residential mortgage foreclosures in 2007, New Jersey has a foreclosure mediation program through its court system, and Philadelphia and Nevada have mandated mediation for mortgage foreclosure situations.
Time for California to Jump on Board?
California is yet to create an effective mediation program for residential foreclosures. Rather, the state simply mandates a teleconference between the parties before foreclosure and has more recently instituted delays in the foreclosure process in a narrow range of situations to ensure the possibility of “comprehensive loan modification” before foreclosure.
The failure to create a successful mandatory mediation program is often attributed to California’s status as a non-judicial foreclosure state. This means that loan servicers don’t need to involve the court in foreclosing on properties and thus, unlike many of the other states whose court systems have incorporated mediation programs into the foreclosure process, California does not have a built in mechanism for mandatory mediation programming.
Nevada proves that hypothesis wrong, however, as it instituted a comprehensive mediation program in July, ensuring that its non-judicial foreclosure system utilizes—in fact, mandates—constructive negotiation sessions between the lender and borrow before foreclosure.
Andrew Jakabovics and Alon Cohen, authors of “It’s Time We Talked,” suggest that requiring mediation might “give the appearance of converting foreclosure in California or Nevada into a quasi-judicial process, and thus meet with greater resistance from servicers,” but note that there is “no legal bar to doing so.” Put simply, nonjudicial foreclosure laws are governed by statute and therefore the legislature has the power to amend or create foreclosure statues to require mediation before foreclosure.
Practitioners, it’s time to get involved in the discussion and encourage your representatives to include mediation as an essential tool for stemming the foreclosure crisis.
For more articles about mediation, go to: http://www.examiner.com/x-28098-SF-Workplace-Mediation-Examiner
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