Mediation

Foreclosure mediators: Banks pushed us to fail

Posted on Wednesday, March 16, 2011

Florida's Supreme Court sought a foreclosure lifeline in forcing banks and borrowers to mediation. It was hoped a judicial referee could help unclog court dockets and free struggling borrowers.
But in documents obtained by The Palm Beach Post and described in a recent court order, mediators complain lenders and their attorneys are stifling the system by pressuring negotiations to end in a stalemate.
In some cases, mediators report that deals were struck for trial payment plans or to seek a loan modification, but that banks or their attorneys asked for the meeting to be recorded as an impasse.
The motive for a deadlock, homeowner advocates say, is money. Declaring a different outcome stalls the process and could mean a return to mediation if an agreement falls through. At the same time, several of the state's large foreclosure law firms also run title companies, which can pick up business when a home is repossessed.
An estimated 350,615 foreclosures clog Florida courts. Many experts argue it is not until those cases clear that Florida's economy and real estate market will rebound. The mediation program, which is only for homesteaded properties, was designed to reduce judicial workload and give borrowers a chance to save their homes.
More than a year after mediation became a required step, however, barriers including the impasse complaints and trouble contacting borrowers have limited the program's success.
A December report on seven of Florida's 20 circuit courts found just 6 percent of homeowners referred to mediation left the negotiating table with an agreement. One mediation management company says that agreement rate is lower than reality because of how mediations are tallied.
The program has seen similar results in Palm Beach County. Between July and September, 1,949 foreclosures were referred to mediation. Of those, 152 mediations were conducted, with 27 ending in a written settlement.
"Settlement in these cases is not in the economic interest of the foreclosure law firms or servicers handling the foreclosures," said Boca Raton foreclosure defense attorney Ron Kaniuk of Ricardo, Wasylik & Kaniuk. "The law firms not only do the foreclosure work, they do the evictions and the bank-owned home sales and the title work, so if they modify a loan, if they come to a settlement and the foreclosure case ends, their work ends."
According to state business records, at least three of the law firms facing inquiry or investigation by the Florida Attorney General's Office are directly tied to title companies. Kahane & Associates in Plantation, the Law Offices of Marshall C. Watson, and the Law Offices of David J. Stern have title agencies with the same registered agents and same operating addresses.
The attorney representing Stern said he had no comment for this story. The other firms did not respond to messages.
In November, the state Supreme Court changed the reporting form used by foreclosure mediators by removing the option for impasse. The new form allows for three endings : a partial or full agreement, no agreement or adjournment. An adjournment leads to a follow-up mediation, which is scheduled on the spot at no extra cost. Mediations cost $750 and are paid for by the lender.
Because mediations are confidential, detailed accounts of the meetings are forbidden.
The court gave no explanation for the change, noting only that "some managed mediation programs have reported that mediators have been pressured to report an impasse of mediation when an adjournment would be appropriate."
Similar concerns also were included in a September memo to Chief Justice Charles T. Canady from the state courts administrator. She wrote there had been complaints of bank attorneys halting mediations by requiring documents beyond what is required in the Supreme Court order.
Shari Olefson, a Fort Lauderdale real estate attorney who represents banks, agreed that it's in the best interest of the bank to get an impasse if a written agreement can't be reached.
"The lender knows unless they are actively foreclosing that time is on the side of the borrower," Olefson said. "The borrower will ask for another six months to sell the property, but they're not paying the mortgage in those six months."
Olefson blames disorganization and lack of communication between lenders and their attorneys for some of the problems with mediation. Paperwork gets lost, young attorneys who aren't handling the daily dealings of the case are assigned to mediate it, and bank representatives may not have authority to do much negotiation. But borrowers are also culpable, she said.
"The whole mediation system is so people feel they are being given a shot to be heard," Olefson said. "Not all banks are horrible, and maybe the homeowner made mistakes and shouldn't stay in the house."
Lisa and Mitchell Glogower of Jupiter know they've made financial missteps. Mitchell, a chiropractor, retired in 2000 and later lost big in the stock market. A refinanced mortgage put them further in the hole, and now Mitchell is having trouble finding a well-paying job. Lisa's salary as a second-grade teacher isn't enough to pay the mortgage.
The couple had hoped a September foreclosure mediation would lead to a loan modification. They were wrong.
"We figured OK, finally, people want to help the homeowners, but that was not the case," said Lisa Glogower, whose foreclosure was handled by the Marshall C. Watson firm. "I got the impression the mediation was just a set of questions they had to ask and we answered. It was not individualized. It was cut and paste."
And it was declared an impasse.
The Glogowers' home is scheduled to sell at foreclosure auction March 14.
By KIMBERLY MILLER, Palm Beach Post Staff Writer


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