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Residential Mortgage Foreclosure Mediation

 Mediation Case Study

 

– Case Description

Residential Mortgage Foreclosure mediations number in the millions over the past decade. Many government programs for home retention options for homeowners, such as loan modifications, have now expired. Banks, however, are much more streamlined and smarter than when the crisis started 10 to 15 years ago. Most lenders today have their own programs that mirror the government options available a few years ago. Further, if your loan is backed by institutions such as Fannie Mae, Freddie Mac, or the Federal Housing Authority (FHA), there are still programs in place to assist you. 

Mediation Summary

Homeowner lost her job two years ago, and could not afford to pay her mortgage for over a year. She was unemployed for over 9 months, and could not catch up on all her payments to the bank, even though she could afford the payment as it was before she stopped payment.

The Bank, filed a Foreclosure Action based on the homeowner’s default, or failure to pay, 9 months of the mortgage. The Court Ordered mediation.

The Bank had several programs that the homeowner could apply to for assistance. All these programs required that the homeowner provide a “financial package” including paystubs, bank statements, and various forms required for the Bank to review her for options. All documents had to be faxed to the Bank, at which time, once the package was complete, an Underwriter would review the numbers for any home retention options that would allow the homeowner to keep her house.

The homeowner provided all the documents requested, and two weeks later, the bank asked for more documents. She then provided those, and 3 weeks after that, the bank asked for a new form that had to be signed by the Homeowner. She then provided that form.

This back and forth continued for two and a half months, while the Foreclosure case in Court continued also. Finally, the bank told the homeowner that the bank statements and paystubs had expired, as they were older than 90 days, and she had to provide new ones.

Homeowner’s attorney decided to ask the Court to refer the case to mediation. When the case got to me, the Bank was willing to review the homeowner for all options, but the package had never been completed.

I worked with the attorney for the homeowner, and the attorney for the bank, to ensure that communication was effective between all. After a week, the homeowner was able to provide a complete package to the Bank, which then sent it to underwriting for a decision.

There were several mediation calls throughout this process which I was involved in to assist the parties in clarifying what documents were needed, and the homeowner’s current financial situation.

Mediation was scheduled 60 days out from when I received the referral, to allow time for the bank to render a decision we could discuss, rather than meet only to gather documents.

Thirty days after the documents were complete, two weeks prior to our scheduled mediation, the bank returned an approval, and offered the homeowner a Trial Payment Plan (TPP) she could afford. All past payments were rolled into the loan (capitalized), the interest rate was dropped to market rate, and the term of the loan was extended out to 40 years so that an affordable payment could be created for the homeowner.

The parties both were extremely grateful for my services in assisting them to communicate, gather the required documents, set proper expectations on what programs were and were not available, and assist in the execution of the settlement documents.

We never met in person for our mediation, yet the case was settled.

The each paid their share of my mediation fee, I filed a Final Report with the Court stating an Agreement had been reached, and after the three months of the payment were made by the Homeowner, the Bank dismissed its Foreclosure complaint.

 

Process

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Confusion and lack of communication delayed what could have been a speedy positive result for all.

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The parties settled with the assistance of the mediator without ever meeting in person.

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Homeowner's mortgage was lowered to current market rate, and extended to 40 years.

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Foreclosure lawsuit was dismissed, and homeowner was able to keep her house.

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Mediator helped facilitate communication between the parties.

Final Result

Homeowner was extremely grateful not only of my assistance, but of the bank’s willingness to help her in her time of need. All it took was a few phone calls, some clarifications and documents, and a little understanding to get everyone through the process. 

Over 2,000 Mediations Conducted

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