Leigh M. Bertrand, Esq.
I recently had a chance to attend a seminar on Maine’s new mediation requirement in foreclosure proceedings. Here’s what I learned:
On January 1, 2010, the new law (which can be found at 14 M.R.S. §6321-A and Civil Rule 93 of the Maine Rules of Civil Procedure) went into effect. Basically, it requires that all mortgage holders filing complaints for foreclosure against owner-occupied residences, include a one-page notice to the homeowner(s) that states, at a minimum, that failure to answer the complaint will result in a foreclosure of their property, give a sample answer and envelope in which to mail that answer back to the Court, and give a description of the new mediation program.
Once an answer to a foreclosure complaint is filed with the Court, all foreclosure proceedings, including motions deadlines, are stayed. This means all activity stops while the mediation process takes place. In Maine, there will be one or two Courts in each county which will take over the mediation process in the case. This means even if your case was filed in your District Court, the mediation may take place elsewhere in the county.
The first step of the process is an informational session which the homeowner will be required to attend. At this session, a judge assigned to the case will be present, as will a housing counselor and a representative from legal services. In addition, the mortgage holder may also be present. This session is designed to educate the homeowner on the mediation process and the new laws as well as to identify the information that the mediator will require to be produced by the homeowner and the mortgage holder. After this session, the Court will produce a Scheduling Order outlining deadlines for producing information, providing additional information, as well as setting the mediation date. In addition, the homeowner will be given a financial package to fill out and return to the mortgage holder. York County Community Action is ready willing and able to assist homeowners in filling out the financial package completely and accurately. Their website is: www.yccac.org.
Parties will have three weeks following the information session to exchange information and the mediation date is usually set for six to seven weeks after the exchange of information. It is important that all information that is requested is filled out accurately and completely and exchanged by the deadline.
The mediation session will include a mediator (often a former judge, attorney or bank professional), the homeowners and a representative from the mortgage company with authority to restructure the loan. The mediator will ask for evidence that the mortgage holder is indeed the holder of the note. The mediator will have already prepared a FDIC spreadsheet in order to determine the Net Present Value (NPV) of the property and whether a loan modification is feasible given the income, hardship of the homeowner, and characteristics of the existing loan. Basically, the goal is to show the mortgage holder that they stand to loose less by modifying the loan than by foreclosing. Even if it appears that there is no feasible way to modify the loan, there may be some options available to homeowners that would allow them to remain in the property while attempting a short sale or other remedial measure.
Finally, there are some important points that homeowners should remember in this new process:
- It is very important that homeowners accurately, completely, and timely fill out and return all requested financial information;
- This process forces mortgage holders, with authority to deal, to engage in a meaningful conversation about options with a mediator present, rather than homeowners speaking with a multitude of customer service representatives at a call center;
- If the homeowner’s hardship is not likely to change in the future, a loan modification may not be an affordable or sustainable option;
- FHA and USDA loans are often the hardest loans to modify. In fact, FHA loans which are in arrears in excess of 12 months cannot be modified;
- Remember that there are many creative alternatives which may allow homeowners to remain at the property for little or no payments while they attempt a short sale.
Some important websites: