The Florida Supreme Court has ordered a review of its 18-month-old mandatory foreclosure mediation program. Should a similar process come to Wisconsin?
In July 2011, Wisconsin had the 10th highest foreclosure rate in the United States, only four spots behind the State of Florida. Several initiatives in Wisconsin have attempted to inject mediation into the foreclosure process, with varying amounts of success. Purely voluntary processes are flailing – with lenders refusing across the board to even attend the voluntary mediations. More suggestive processes are seeing varying amounts of success.
However, it seems that the Florida program has also been slow to gain ground. (The Florida program requires that lenders try to reach a mediated agreement prior to seeking judicial involvement.)
A recent report from Florida shows that only 3.6% of these mediations are resulting in written agreements. This is a far cry from the generally stated 85% national success rate for mediation in general. Why such a vast disparity?
First, the 3.6% number is of all cases, not just the cases in which the borrowers agree to take part in the mediation process. (As stated above, the program is compulsory for the lenders – it is voluntary for the borrowers). The settlement rate jumps to nearly 25% when the mediation is actually accepted by both parties.
Second, the nature of foreclosures has an inherent power imbalance. Mediators are trained to be cognizant of a power imbalance and must work hard to make sure that the power imbalance does not affect a party’s ability to self-determine an outcome. With the mountain of paperwork that they must sign between the promissory note, mortgage, rights of assignment, and other forms, borrowers may feel that there is nothing that they can do – perhaps due to a lack of knowledge of options.
Third, having worked as counsel for banks in a foreclosure, I know that the bank is often not interested in “creative” solutions. Deed-in-lieu of foreclosure and maybe a payment plan – this was the limit of the creativity the banks would normally show in a foreclosure situation. And why should they show more? The law, the contracts, and the facts are all in their favor. There is little need to negotiate.
However, is a 25% success rate that bad? Getting 1 in 4 contested foreclosures out of the court system is a great thing. In July 2011, there were 4,534 foreclosure filings in Wisconsin. Even at 3.6% success rate, there would be 163 fewer foreclosures per month.
Editor’s note: Marquette University Law School has a Milwaukee Foreclosure Mediation Clinic.
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