MANATEE -- Florida’s mandatory foreclosure mediation program was canned by the Supreme Court this week after problems in the process led to subpar settlement rates.
Recession-battered homeowners currently in line for mediation remain eligible to complete the program, but no new cases will be heard, leaving area residents fighting to keep their home with one less avenue for recourse.
Attorneys attribute the program’s demise to a lack of cooperation by lenders. Banks point the blame back to underwater borrowers. Judges and program administrators say it’s likely a mix of both, with the cost of mediation simply no longer justifiable.
“It was a great opportunity and a noble experiment, but by-in-large, I don’t think you could say it was a financially positive experience for anyone,” said Circuit Judge Lee Haworth, who helped craft the program as a member of the Supreme Court’s task force. “We just couldn’t show justification to continue.”
Mandatory mediation was established in December 2009 to eat away at the backlog of foreclosures cases swamping the courts, while giving borrowers and banks a forum to communicate. Six months later, the program went live in the 12 Judicial Circuit, which consists of Manatee, Sarasota and DeSoto counties.
Since then, however, participants have reported a slew of problems with the process.
Mediators couldn’t contact many default borrowers, and others simply refused to participate. Lenders were sending representatives to mediation who weren’t authorized to handle issues that surfaced. Almost nobody came to the sessions as prepared as they should have been, Haworth said.
Since its inception, just 3.6 percent of the 78,076 statewide cases eligible for mediation resulted in a settlement, which could include a loan modification, short sale or deed-in-lieu foreclosure.
That tally was almost identical in the 12th Judicial Circuit, where 3.9 percent of the total cases closed with written agreements. Another 17 percent were still pending, according to the latest status report provided by the courts, which looks at 12 months of data.
“There were definitely some people that just couldn’t be helped, but what I saw in the program was lenders not acting in good faith negotiations,” said David Hicks, a foreclosure attorney with clients in Bradenton, Sarasota and Tampa. “There was no reason to make this as convoluted as it was.”
Banks defended their practice by arguing it was impractical to modify loans after borrowers lost most of their income and couldn’t afford payments anyway.
“This was a well-intended program that just didn’t pan out,” said Anthony DiMarco, executive vice president of government affairs for the Florida Bankers Association. “We don’t want to foreclose. That’s not good for anybody.”
Since July 2009, more than 13,600 foreclosure cases have been filed with the Manatee County Clerk of the Circuit Court, records show. A slowdown in filings from some of the nation’s largest lenders this year due to government-ordered foreclosure freezes has reduced the backlogs more than the mediation process, which has taken longer than officials first anticipated, experts said.
Local courts now will work to restore the voluntary consultation process in place before mediation.
“This helped get everyone to talk and do what they needed to do to resolve the whole situation,” said Gregory Firestone, director of the University of South Florida’s Conflict Resolution Collaborative, which locally administered the program in conjunction with the Collins Institute. “The program had a great value to the community in so many ways.”
Josh Salman, Herald business reporter, can be reached at 941-745-7095.
