Government-owned mortgage giants Fannie Mae and Freddie Mac are considering whether to force loan servicers in South Florida to go to mediation with some troubled homeowners before a foreclosure even begins.
The initiative would be a major new step in the process for those borrowers who cannot make their mortgage payments in Broward and Palm Beach Counties. The new procedure has recently begun in Miami-Dade for some loans.
“The writing is on the wall that foreclosures aren’t going anywhere,” said foreclosure defense attorney Roy Oppenheim. “If they are willing to engage in meaningful alternative dispute resolution, that’s good news.”
Currently, borrowers complain that they can’t get their banks to talk to them in many cases or they get caught in a maze when trying to modify their mortgages. Most mediations only happen after a foreclosure case is filed. Borrowers can ask their lenders to go to mediation in Broward before the foreclosure process begins, but there’s no requirement that they do so.
Once a foreclosure case is filed, Florida courts since last July have forced all lenders and borrowers to go to mediation for homesteaded properties.
These mediations have so far resulted in few property owners reaching an agreement with their lenders.
A major obstacle, mediators say, has been finding borrowers and getting them to participate.
Ned Pope, director of the program at The Collins Center for Public Policy, which runs the mortgage mediation program in Miami-Dade, said he is looking for better results with the pre-filing mediation program – begun last month by Fannie Mae in Miami-Dade only. It would start the mediation process quickly, about two months after a borrower stops paying the mortgage.
That jump start is a “game changer,” he said. “By the time (a foreclosure case) gets to the courts, it is eight or nine or 10 months down the road,” Pope said. The new procedure kicks in just 65 days after the loan is delinquent. “If we reach more borrowers, that will allow us to reach more settlements,” Pope said.
Fannie Mae said it was requiring all of its loan servicers to participate in the pre-filing mediation program – for homesteaded properties -- in judicial circuits like Miami-Dade where The Collins Center, a statewide public not-for-profit group, handles mediations.
A spokeswoman for the mortgage giant said it is “assessing” taking the program to other judicial circuits, including Broward and Palm Beach.
“Fannie Mae’s primary goal is to help struggling borrowers avoid foreclosure by reaching out to them early in the delinquency phase and providing information on retention and other foreclosure alternatives,” said Fannie Mae spokeswoman Janis Smith.
Brad German, a spokesman for Freddie Mac, said Monday it is considering a similar program in which attorneys handling Freddie Mac loans would begin mediation before a legal case is filed. The program is being considered for “high intensity” foreclosure areas, including South Florida, he said.