Our guest blogger is Andrew Jakabovics, the Associate Director for Housing and Economics at the Center for American Progress Action Fund, and Alon Cohen.
The Florida Bankers Association has been pushing hard in that state’s legislature for passage of the cynically named Homeowner Relief and Housing Recovery Act. The Act is pure doublespeak; it speeds up foreclosures, reduces the homeowner’s involvement in the process, and circumvents Florida’s burgeoning foreclosure mediation program and replaces it with an optional informal meeting of the parties. Luckily, the bills have been tabled for this session, but homeowners, housing counselors, and community advocates — who have all vociferously protested the bill — should expect them to reappear.
Attempting to Move Foreclosures Outside the Court
The Act seeks to radically change the foreclosure process in Florida, which is currently a judicial foreclosure state, meaning servicers must file a case in court to foreclose on a property. This gives homeowners the opportunity to appear, present evidence, and – most recently – negotiate with the servicer in a mediation session. The Act would create a new option in Florida – nonjudicial foreclosure, in which the servicer sends notice to the homeowner that it is foreclosing on the property and can do just that around 90 days later.
Worse, even before they actually take possession of the house, the new law would allow servicers who wish to sell the foreclosed property at auction or to market it for sale on the open market to enter the property and put up a “FOR SALE” sign or its equivalent.
Homeowners could shift the foreclosure back to court by submitting a request within 45 days of receiving the notice of sale, but there is solid evidence that opt-in programs reach far fewer people than opt-out ones. (Under the current judicial process, a borrower can opt-out by simply failing to appear in court.) Philadelphia’s foreclosure mediation program sees a participation rate of 75 percent while Connecticut’s program, saw participation rates of 36-39 percent while it was opt-in. (They have since changed to automatically schedule mediation sessions.)
Circumventing Foreclosure Mediation
Moving foreclosures outside the court system would also circumvent Florida’s newly-unified foreclosure mediation program. In late December 2009, the state Supreme Court issued an order requiring all judicial circuits to implement automatic foreclosure mediation programs, based on successful programs in Miami-Dade, Okechobee, and Okaloosa counties. Since May 2009, parties in over 2,000 foreclosure cases have reached settlements that keep Miami homeowners in their homes.
Under the new regime, the parties receive notice of a scheduled mediation when the case is filed; the homeowner may appear with an attorney or housing counselor, and the servicer must have available a representative ready to make a deal. The $750 cost is borne by the servicer. As in any mediation, the parties are just required to meet, not to settle. Settlement is only appropriate if it is in the best interest of both parties.
The Act replaces this with an informal meeting. Under the Act the servicer must schedule an informal meeting if the homeowner requests one. The meeting conditions fall far short of mediation:
• Face-to-face negotiations are important for creating successful outcomes, but the new law would allow the meeting can take place by phone “or other reasonable means,” with the decision left up to the servicer.
• In mediation, the servicer must make available a representative with authority to agree to settlement terms. In this meeting, the servicer’s representative must have only the “authority to terminate the foreclosure if the representative determines that there is no legal basis for foreclosure.” Settlement is not mentioned.
• In judicial foreclosure, the servicer – as plaintiff – bears some of the responsibility to provide financial documentation necessary for settlement negotiations. The Act places this burden squarely on the homeowner, who must provide documentation and prove to the servicer the grounds for a forbearance or modification.
There is No Homeowner Relief in This Act
With a name this promising, we were hoping to find legislation that could help Florida’s homeowners land on their feet while netting maximum value for servicers. Instead, we found Florida Bankers Association pushing an Act that speeds up foreclosures, limits or removes homeowners’ participation in the process, and seeks to circumvent Florida’s recent efforts at proven foreclosure relief through mediation, the better to relieve Florida residents of their homes.