| Numerous states and cities have passed laws | | | | true. |
| requiring mediation between mortgage companies | | | | Why have Settlement Conferences Failed? |
| and people facing foreclosure. The purpose of this | | | | They found that mortgage companies were not |
| mediation is for the people facing foreclosure and | | | | complying with the law. |
| their mortgage company to meet with an | | | | The law is explicit. It says that mortgage |
| arbitrator. At this meeting they try to modify the | | | | companies are to send attorneys to these |
| existing loan and reduce the payment to a level | | | | settlement conferences. These attorneys are to |
| that people can afford to make on a monthly | | | | bring the proper documentation on the case with |
| basis. By doing that people can save their homes | | | | them. They are also to have the power to |
| and foreclosure can be avoided. | | | | negotiate a settlement for the mortgage |
| In some instances this mediation is mandatory | | | | company. |
| and in other instances it is voluntary. | | | | Actually the lawyers sent by the mortgage |
| The first of these laws were passed in 2008. So | | | | companies had little knowledge of most cases. |
| far there have been very few reports on how | | | | They frequently did not have the facts and didn't |
| effective these laws have been on accomplishing | | | | have the history of what had transpired. They |
| what they were designed to do. | | | | also did not have the power to make a deal on |
| New York's Mandatory Foreclosure Settlement | | | | behalf of the mortgage company. |
| Conference Program | | | | If the mortgage company made a previous offer |
| New York was one of the first states to pass a | | | | to modify a loan, the lawyers only had a copy of |
| law in August of 2008. The law created a | | | | it 3% of the time. More concerning was the fact |
| mandatory Foreclosure Settlement Conference | | | | that lawyers were aware of previous offers |
| Program for people with subprime mortgages | | | | made by the mortgage companies only 6% of |
| who were facing foreclosure. The law was | | | | the time. |
| supposed to provide these people a chance to | | | | Not only did the attorneys not have the power to |
| negotiate directly with their mortgage company at | | | | make a deal for the mortgage company, they |
| a settlement conference. It was hoped that the | | | | only had a phone number of a representative at |
| negotiations would result in a loan modification | | | | the mortgage company who had the power to |
| acceptable to each. | | | | do this on 13% of the cases. In many other |
| In October of 2009 the Center for New York | | | | instances the attorneys only had a general phone |
| City Neighborhoods (CNYCN) released a report of | | | | number for the mortgage company. When they |
| a study it had done on the results of the | | | | called those numbers, they frequently remained |
| mediation program in New York City. CNYCN is an | | | | on hold for a long period of time. Some ended up |
| organization established in early 2008 with the | | | | being transferred to other people. Others were |
| express purpose of connecting people facing | | | | told that the person with the authority to make a |
| foreclosure to free legal housing counseling and | | | | decision was unavailable. |
| legal services. The housing counseling and legal | | | | Many times settlement conferences were delayed |
| services would help them save their homes. | | | | because the attorneys could not act. Only 2% of |
| The law establishing the Foreclosure Settlement | | | | the time did the court request that someone |
| Conference program did not require that the | | | | capable of making a decision for the mortgage |
| settlement conferences be tracked. It also did not | | | | company appear on the next scheduled date. |
| require that the results of these conferences be | | | | The law did not make clear how the courts were |
| recorded. | | | | supposed to enforce the provisions of the law. No |
| In the research for their Report, CNYCN sent | | | | penalties were specified if either a person facing |
| volunteer court observers to individual settlement | | | | foreclosure or a mortgage company violated any |
| conferences from June 2 to July 31, 2009. These | | | | provisions. The law did not even provide for |
| observers reported on what happened during the | | | | additional staffing for the courts to handle the |
| conferences. They also reported the decisions | | | | additional work created by the law. |
| reached. Employees of CNYCN then reviewed the | | | | As a result the staffs of the courts in New York |
| findings of the court observers and compiled their | | | | City have been overwhelmed. There are very |
| report. | | | | few guidelines on how they are to implement the |
| From June 1 to July 31, 2009 there were 795 | | | | law. They also have had minimal training in what |
| settlement conferences. Settlements were only | | | | they are supposed to do. They don't even know |
| reached at 21 of these conferences. That is a | | | | what powers they have to enforce it. |
| mere 3% of the total. Closer analysis reveals that | | | | Very rarely have the courts penalized mortgage |
| loans were modified at 6 conferences. Temporary | | | | companies for not complying with the law. In only |
| Forbearances were granted at 6 others. At 4 | | | | 5% of the 795 cases did the courts figure out |
| there were no discernable outcomes. At the | | | | how far apart the parties were. They requested |
| remaining 5 the mortgage companies agreed to | | | | the mortgage companies to furnish payment |
| consider loan modification. However, there was no | | | | histories on only 8% of the cases. Without having |
| follow up on these 5 to see if the loans were | | | | a payment history the person facing foreclosure |
| actually modified. | | | | and their representative had no way to make an |
| So there was only resolution at 12 of the | | | | informed decision on the terms of any settlement. |
| conferences, the 6 with the loan modifications and | | | | A major concern pointed out in the CNYCN |
| the 6 with the temporary forbearances. That is | | | | report was that under the provisions of the law |
| 1.5% of the 795 conferences. | | | | the fees for the lawyers representing the |
| The Settlement Conference Program - A Total | | | | mortgage companies had to be paid by the |
| Failure | | | | people facing foreclosure. They even had to pay |
| The 795 conferences took place in Brooklyn, | | | | these fees when the lawyers were not |
| Queens, the Bronx and Staten Island. With true | | | | adequately prepared and did not have the power |
| settlements being reached in only 1.5% of the | | | | to negotiate in good faith. |
| conferences, the mandatory Foreclosure | | | | On December 15, 2009 the governor of New |
| Settlement Conference Program in New York | | | | York signed a bill extending the mandatory |
| City has been a total failure. One would have to | | | | Foreclosure Settlement Conference Program to all |
| assume that if studies were done in other parts | | | | people facing foreclosure. It is not clear if all of |
| of the state the findings would have been similar. | | | | the issues identified in the CNYCN report were |
| Why is the mandatory Foreclosure Settlement | | | | corrected in that extension. |
| Conference Program failing? It is a mandatory | | | | There are no statistics on how many people |
| program. Was the design of the law faulty? | | | | facing foreclosure lost their homes because their |
| The purpose of this type of mediation is to give | | | | mortgage companies refused to negotiate in good |
| people facing foreclosure a chance to sit down | | | | faith at the settlement conferences. For every |
| with a representative from their mortgage | | | | person who did lose their home the cost was |
| company and work out a modification to their | | | | tremendous not only to them and the investors in |
| existing loan. This modification may lower their | | | | their loans but also to their neighbors and the |
| monthly payment and extend the duration of | | | | other citizens of the state of New York. It is too |
| their loan. The people would be able to make their | | | | late to go back and correct this in any instance |
| new lower payment consistently. The foreclosure | | | | where it occurred. The state legislature should |
| process would stop. The people would save their | | | | correct the deficiencies in the law to prevent this |
| homes. | | | | from happening in the future. |
| The state legislature in New York assumed that | | | | Every other state and city which has foreclosure |
| avoiding foreclosure would be beneficial for all | | | | mediation in place should review their programs |
| parties. So the people facing foreclosure and their | | | | carefully to make sure that they are operating as |
| mortgage companies would welcome these | | | | intended and are helping people facing foreclosure |
| settlement conferences as a way to do this. | | | | save their homes. Appropriate corrections should |
| The findings of CNYCN were that this was not | | | | be made to any that are not. |