The residential foreclosure task force of the Florida Supreme Court has recently recommended that all foreclosure cases involving primary residences in the state be mediated. This could be great news for Florida homeowners who have fallen behind as well as those who have not since the value of everyone's home is directly affected by foreclosures.
In the current economic climate and housing market...all it takes is one event to shift a homeowner from always paying on time, to no longer being able to pay. We've seen it over and over with our work on Jacksonville short sales. The loss of a job, a medical emergency and other unexpected events can launch a homeowner into the abyss that results in the eventual loss of their home.
This is not just happening to people who were "irresponsible" or "bought more than they could afford." It doesn't matter how responsible you were in the purchase if you find yourself in a situation where you have to sell and your home has fallen dramatically in value.
Here is the Wall Street Journal, Associated Press article from August 17, 2009 that caught my attention:
Florida Court Wants Mandatory Mediation on ForeclosuresNow here is the problem. Mr. Sanchez who is the President and CEO of the Florida Bankers Association is not telling the truth. I do not know if he knows he's not telling the truth or not. His statements could be made in good faith. Banks in general are not telling you the truth. Banks are working with homeowners only as an exception...not the rule.
Here is an excerpt from the Wall Street Journal article referenced above:
Alex Sanchez, president and CEO of the Florida Bankers Association, said expediting vacant and abandoned property cases is a good idea, but he predicted mandatory mediation for homesteads would cause more delays."
Mr. Sanchez said he cannot speak for other lenders but that banks are in constant touch with borrowers and file foreclosure cases only as a last resort. "
We work with our customers to try to keep them in their homes," Mr. Sanchez said.
Requiring mediation in those cases would just delay the inevitable, he said.
"What if that person then defaults on that mediated deal?" Mr. Sanchez asked."
- Mandatory mediation for homesteads WOULD cause more delays. Hopefully Mr. Sanchez is correct on this one. Since banks "file foreclosure cases only as a last resort" and "work with our customers to try to keep them in their homes" according to Mr. Sanchez, they should be okay with this...after all the bank is concerned about the homeowners...right? So what's the rush?
- Banks are NOT in constant contact with borrowers. Borrowers who have fallen late can attest to that. But their story is not being told.
- Banks do NOT File Foreclosure cases only as a last resort. Working with short sales it is a constant struggle to stay on top of what is happening with the foreclosure case. Bank negotiators are often sitting on a loss mitigation file for a delinquent borrower while the foreclosure department, along with an outside law firm, is zooming towards foreclosure. Short sale real estate agents know that we have to constantly request delays in foreclosure sale dates. Most banks we have seen refuse to delay the sale date until a couple days before the sale date. We have had one go to foreclosure sale after we had a short sale approval issued by the loss mitigation department with a date given for closing which was after the sale date. The closing went through with the permission of the lender who recorded a release then months later the bank recorded a deed transfer back to the VA. We have homeowners having to pay attorneys to fight the foreclosure to give them enough time to complete a short sale or attempt a loan modification.
- Banks do NOT work with customers to try to keep them in their homes. We've had homeowners who were trying to achieve a loan modification who were told that the foreclosure sale date could not be cancelled because there was a pending modification but that a short sale contract was the only thing that could delay the sale. A short sale is better for everyone than a foreclosure, but it is not "trying to keep them in their homes."
- The statement "Requiring mediation in those cases would just delay the inevitable" is a ridiculous statement. Studies show that most of the loan "modifications" that have happened so far have not resulted in a more manageable payment for borrowers. The most common one we've seen and heard about (if they are lucky enough to get any modification at all) is switching the person from an adjustable rate to a fixed rate...with the resulting payment being around the same amount. Why don't the banks try true and meaningful modifications for a change? This kind of statement is deceptive.
Foreclosure is bad for ALL Florida homeowners, not just the homeowner it is happening to. Banks, after foreclosure, are selling the homes for less than fair market value in most cases we've seen. This leads to the continuing deterioration of market value of the homes of all Floridians. It also sets the trap wider, just like a spider expanding their web, so when the next person loses their job, they also find out they can not sell and payoff their mortgage. Then they are launched into the abyss from which they can't escape.
People are losing their homes, families are having their lives torn apart...and Mr. Sanchez's concern is over who is going to pay for the recommended mediation and/or counseling and that it will delay the foreclosure process? It appears that he doesn't think the banks should have to pay and he even asks "Are the taxpayer's going to pay for that?" My question is did the banks mind when the taxpayers paid for the bailouts? Did the banks say, "Are the taxpayers going to pay for that?"
It's time to move past the blame and focus on the solutions to the problem. If foreclosing on homeowners was a little bit harder (and more expensive) to do, maybe they would think harder about alternate solutions. These solutions, involving modifications or short sales, can be beneficial to the homeowner and the bank's bottom line. Solutions need to happen to provide much needed stability to everyone who owns a home in Florida.
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