Happy Anniversary Follow Up

Posted by kevin on November 29, 2014 under Foreclosure Blog | Comments are off for this article

In my previous blog, I told of a mortgage modifcation application that is pending for over a year. For me, the telling point of the whole episode was when the point of contact person told me that Freddie Mac owned the loan. Brought back chilling memories.

A few years back (before Guillaume), I got a case dismissed on the day of trial for failure to comply with the Fair Foreclosure Act (Notice of Intent requirements). The Judge held open the dismissal so that my clients could go to mediation which is what they wanted. (Note that my other argument was that plaintiff sold the note to Freddie Mac and therefore lacked standing. In chambers, my adversary vehemently denied that charge.)

Well, we were assigned a HUD counselor (who was excellent) and started the process. The mediator was nice but powerless as all mediators are in the NJ program. The mediators basically defer to to the servicer who runs the show other than scheduling. Note that unless something very egregious happens, the judges do not get involved. I have heard stats at meetings that 35% of the parties in mediation get mods. I think they get those numbers from the same place that they get the Obamacare enrollment numbers.

At any rate, at the first session, we are told that Freddie Mac was not ready to proceed. So much for the veracity of my adversary. By session 6 we were still getting nowhere since Freddie Mac said it was not ready to make a decision. In a letter to my clients and the HUD counselor, I suggested that the only way that we would be able to get a reasonable decision was through escalation. That is the fancy term that MHA uses for an appeal. At the 8th or 9th session (about 10 months into the process), Freddie Mac turned my clients down with some bogus rationale. I was terminated by frustrated clients, and the clients then went the escalation route with the counselor where they finally got their mod well after a year into the process.

Traditionally, judges in NJ have been excellent at the arm twisting and sausage making that goes into the settlement process. For some reason, however, State court judges have shown a reluctance to jump into the settlement fray on foreclosures. Why? I do not know. But one thing I do know is that if those judges took their usual hands on attitude toward settlement, there would be a lot more loans being repaid, while at the same time court calendar’s would become more manageable. But what do I know? I’ve only been doing this for 35 years.

Blessing in Disguise?

Posted by kevin on April 4, 2013 under Foreclosure Blog | Comments are off for this article

In a prior blog, I informed you that the mediation program was being cut back because it ran out of funds. Bad thing, right? Well, my grandmother used to tell me that God closes one door only to open another. I am hoping that is the case with the mediation program.

As my website states, we fight foreclosures. Why? Because we like to fight? We hate the lenders? We live to litigate? No, because by pushing back, we hope to get a better settlement.

There is certainly room for settlement. Properties all over NJ are underwater, particularly in urban areas in Passaic, Hudson and Essex Counties. People from all over NJ got mortgages that they could not afford based on inflated property values that may or may not have been legit in 2006, but certainly bear no resemblence to reality in 2013. In other words, you may owe $500,000 on a house that is worth only $300,000. If the lender throws you out on the street in a foreclosure, then the lender has to sell the property. No one today will pay more than $300,000 (and probably less) for a property whose fair market value is $300,000. It is irrelevant that $500,000 is owed. Moreover, many of my clients don’t want to make a deal where they owe twice what the house is worth because it will take 20 years to dig out. So, why don’t the lenders make a deal based on fair market value? (I have theories on that which I will share with you in future blogs- but let’s stick with this point.)

One of the reasons for lender intransigence is that their lawyers perceive that the courts are not beating them over a head with a hammer to be reasonable. Up until now, the judges have been pretty much invisible in settlement negotiations. Now, I am not blaming the judges entirely. Chancery judges got hit with a tsunami of foreclosure lawsuits with little help. They were buried. The mediation program pretty much sidestepped the judges, who historically have been the architects of settlement in the NJ court system. Mediators try hard but the lenders know that they have no teeth. So, in effect, the lenders or, more appropriately, their servicers have taken over the process and not for the benefit of the borrowers.

Now, mediation is in trouble. There is no funding for lawyers helping borrowers or HUD counselors. Pretty soon there will be no money for mediators. How can that be good? I’ll tell you. If no one else is left, the judges will be forced to step into the fray. Just yesterday at a discovery conference, a judge in Bergen nearly floored me when he said that he is available for settlement conferences. Believe me, I have not heard that often in the last 3 years. In the Guillaume case, the Supreme Court said that, historically, chancery judges have the power and flexibility to make case by case determinations relating to the Fair Foreclosure Act. Why not use that power, experience and flexibility to effect reasonable, practical settlements?

Maybe the right door will open.

Foreclosure Mediation Program

Posted by kevin on March 23, 2013 under Foreclosure Blog | Comments are off for this article

New Jersey instituted a mediation program a few years back. The Courts claim that around 40% of the people who apply for mediation get some type of resolution. Now, resolution is a vague term and I do not know whether resolution = modification or can include short sales or deeds in lieu of foreclosure. In other words, I cannot vouch for the purported success rates claimed by the program.

That being said, two recent events impact on the mediation program. First, effective March 1, 2013, the program was de-funded. NJ was using some of its money from the $25 billion settlement to fund the mediation program. Those moneys have been used up, and not replaced by the Christie Administration. HUD counselors and ‘Free” attorneys for borrowers are no longer being paid so they stopped taking on new clients as of 2/28. My understanding is that mediators are still getting paid but that will end also. The judiciary wants lawyers to volunteer to be advocates for borrowers or mediators. One of the judges at the last Bench-Bar conference questioned how long the program will be available.

The second event is that the courts are setting time limits on applying to the program. Before, you could apply anytime before final judgment was entered. That could extend the foreclosure process for months. Now, a homeowner has 60 days from the service of the summons and complaint to file for mediation. After the 60 day period, you can get mediation only upon court order. If you read the prior blog, you will note that courts are clamping down on borrowers who are trying to set aside default judgments. The later you file your motion, the less the chance that the court will set aside the default judgment. You should expect the same treatment with getting orders to allow mediation after the 60 day window closes. In other words, the later you wait, the less likely the court will allow you to take advantage of mediation

What has not changed is that the mediation program is available to only homeowners who reside at the premises which can contain no more than three units.

What is interesting is that the federal HAMP program, as a result of the $25 billion settlement, does not allow a lender/servicer to go forward with a sale or start a foreclosure if the borrower has asked for a modification until a decision has been reached as to whether a modification will be granted. That is called double tracking. However, NJ does not seem to have any problem with double tracking since the mediation notice specifically states that a request for mediation will not stop the progress of the foreclosure action.

Mediation Follow-up

Posted by kevin on February 20, 2013 under Foreclosure Blog | Comments are off for this article

In a previous blog, I alerted you of the unpleasant fact that the NJ Court Mediation Program is running out of funds. I have heard nothing official in the last 10 days. However, I was advised that a major HUD counselor is not taking on any new mediation clients.

One thing is for sure (or at least appears to be sure)- Judges do not want to run the mediation program. Now, that is understandable since the judges have to deal with their own out of control calendars. But, on the other hand, what has been lacking in the mediation program? There is no stick for servicers who continue to jerk borrowers around. Wouldn’t or couldn’t a few tough judges straighten that problem out in short order?

Maybe good old fashion settlement conferences can work in the foreclosure arena.

NJ Mediation Program Over?

Posted by kevin on February 6, 2013 under Foreclosure Blog | Comments are off for this article

NJ set up a mediation program for residential property in foreclosure. To qualify, the property must be owner occupied, and a foreclosure complaint must have been filed already. According to the judges who run the foreclosure bench-bar conferences, about 40% of cases in mediation reach some form of resolution. What “some form of resolution” is, I am not exactly clear. I know that I have not received any permanent modifications through the mediation process.

That being said, mediation does have some good points. First, the servicer has to appear (telephonically but that’s better than nothing) at each hearing. So, you have a live body on the other end of the phone who has read your submission most of the time. Second, the mediation process takes time, and time is the ally of the homeower.

Now, that does not mean that it is not frustrating. You submit papers, get no feedback, and then on the day of the mediation, you are told that the documents are “stale”, or some documents are missing, or that no decision has been made. Mediators try to make the servicers move the case, but the mediators really have no muscle. The only person who can effectively get the attention of the servicer to expedite the process and make meaningful offers is the judge. However, judges have been reluctant to step into that role. (Perhaps they are too overburdened with their court calendars.)

Rumors have been swirling around the last few months that the mediation program will be cut or discontinued because of a lack of funding. At the bench-bar conference last week, it was announced that the mediation program will end in the beginning of March, 2013 unless the Chief Justice can come up with additional funding. Of course, the CJ does not have the ability to print money, so he is looking to the Governor for money. I have not heard anything from the governor’s office on this.

There has been some talk about lawyers running the mediation on a pro bono (free) basis. Frankly, I do not see any attorney doing more than 1-2 cases on a pro bono basis. Moreover, I do not see many HUD counselors working for nothing either.

Stay tuned. This may get intersting.