Few Take Advantage of State's Foreclosure Mediation Program

Daytona Beach News Journal
November 7, 2011
By:Tom Knox, Staff Writer

DAYTONA BEACH -- When Florida mandated a residential foreclosure mediation program two years ago, its creators hoped that joining lenders and borrowers together would plug the stream of foreclosure cases that swamped the court system.

Photo right: Sandy Upchurch, mediator in the states foreclosure mediation program, looks through one of several file cabinets full of foreclosure case files. (N-J | David Tucker)

That hasn't come close to happening, lawyers and bankers say.
Instead, many borrowers are leery of the free program's legitimacy, and few that actually go to mediation reach an agreement, as some lenders seem unwilling to work toward a deal.

Last month, a statewide judicial committee led by Daytona Beach-based judge William Palmer of the 5th District Court of Appeal sent the Florida Supreme Court its recommendations on the foreclosure program. It recommended the elimination of the mandatory program. Instead, each of the state's 20 circuit courts should create their own local option, it suggested.

Sandy Upchurch manages the foreclosure mediation program in the state's 7th Judicial Circuit, which covers Volusia, Flagler, Putnam and St. Johns counties. Participation numbers in the circuit, as in the rest of the state, are low. At her office in Daytona Beach, three drawers in a filing cabinet are filled with foreclosed residents who never responded to her staff's multiple attempts to reach them.
"The reason why they're not buying into the program in bigger numbers is they know they're underwater and don't want to save their house," said Upchurch, of the firm Upchurch Watson White and Max. "Or they have no money at all and can't afford a lawyer, and don't believe we're actually a free service."

Reaching homeowners is one of the biggest issues for the program. Just 33 percent of eligible homeowners responded to solicitations from the program from October 2010 to May 2011, and only 26 percent of those who responded actually went to mediation. Many homeowners think the mail and phone calls sent by mediators are just more advertising from an unscrupulous attorney and not a state-sanctioned free service. And if they do open the mail, its contents are full of complicated legal jargon. A few months ago Upchurch worked with the courts to insert simpler information in the mailing.
"This is a glossy thing, it says this is your right," said Laura Roth, chief deputy clerk and general counsel for the Volusia County clerk's office. "We're hoping to get more participation."

The committee's report and Upchurch both say the low-success rates are a little deceiving, though. Some cases are settled after mediation but aren't counted in the mediators' numbers.

Chief Judge William Parsons of the 7th Judicial Circuit gave his input to the committee. Mediation resolves cases about 85 percent of the time in other types of civil cases, he said.

"Mediation is a very, very successful tool," he said. "But the problem with foreclosures is they don't have the money to pay the bill, to pay the credit card, so they don't have a solution that's attractive to the lender."

Before the program was mandated in 2009, the court set up its own program with lawyers mediating cases for $150 an hour. The current program charges lenders $750 to see the mediation through its end, but Parsons said lenders tend to tack that charge on to the borrower's bill at the end of a successful mediation.

"My preference would be that they discontinue it or allow circuits where it doesn't appear to be working the opportunity to opt out," said Parsons, whose 2,700-case docket is filled with 1,500 foreclosure cases.

The state has a backlog of about 350,000 foreclosures, the judicial committee says, and expects another surge to come next year. Volusia and Flagler count have a combined backlog of more than 7,100.

After a borrower agrees to the program, an approved counseling agency such as Daytona Beach-based Community Legal Services of Mid-Florida sets up an appointment to educate the homeowner on finances. Spokesman Larry Glinzman said he commonly hears complaints from clients after mediation that lenders show up to mediation unprepared. "...That's one of the problems," he said.

Anthony DiMarco, executive vice president of government affairs with the Florida Banker's Association, said that lenders work with the information they have. David Bridgeman, president of Pinnacle Bank in Orange City, said his bank has few residential mortgages, but has been through mediation for commercial foreclosures. He hasn't come away impressed.

"When mediation has been used by us on the commercial side, it has not yielded any fruit for us or the borrower," Bridgeman said. "It is just another step in the process."

Stephen J. Braun, an attorney in DeLand, has represented six borrowers in mediation, one of which was successful. Most of the time, he said, the lender hired an attorney just for the mediation who had little prior knowledge of the case. There was no give-and-take that usually takes place during mediation. "It was a good idea," he said, "but it just didn't work."

Upchurch has a few ideas on how to improve mediation. Lenders sometimes cancel appointments shortly before they're scheduled to begin, saying they don't have enough of the borrower's paperwork. She suggests sending a document to the bank 10 days before mediation, certifying that they have the right documentation or, if not, listing what they need.

She also would like more of an assurance from lenders that the borrowers' contact information they provide to the mediators is as accurate as possible. That way, her staff is more likely to reach homeowners.

At a glance:
Foreclosure mediation statistics for Volusia, Flagler, Putnam and St. Johns counties from October 2010 to May 2011:
Homeowners eligible for mediation: 2,494
Homeowners who responded to mediation solicitation: 827
Mediations conducted: 217
Mediations that ended in agreement: 36
SOURCE: Upchurch Watson White and Max

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