RESIDENTIAL MORTGAGE MEDIATION – Consumer Bankruptcy

By Constance d’Angelis, Esq.

On January 31, 2013, the Chief Judge of the U.S. Bankruptcy Court for the Middle District of Florida, Judge Jennemann issued an Administrative Order[1] requiring that anyone who would mediate residential mortgages complete an 8-hour course regarding modifying residential mortgages in bankruptcy.

One of the reasons for this requisite education resides in the fact that the frequency and effectiveness of mortgage modifications in bankruptcy is increasing rapidly.  This article discusses how the mediation procedure operates in the Tampa Division, and the effectiveness of the Bankruptcy Court Mortgage Mediation process.

MORTGAGE MEDIATION PROCESS

Mortgage Mediation is available to Debtors within the Chapter 13, Chapter 7 and individual Chapter 11 cases. The real property must be residential; and, in most cases the real estate is the homestead of the debtors. Even if a debtor went through the mediation process in a state court foreclosure action, it will not rule out participation in Mortgage Mediation in the bankruptcy court. Nor will bankruptcy court-ordered mediation preclude state court foreclosure mediation.

Generally, the court will grant a motion for referral to mediation and direct the Debtor and Creditor to participate in Mortgage Mediation; and under some circumstances may appoint the mediator. [2] The motion may be ore tenus or sua sponte on the Court’s own motion at a hearing. The Court determines that the dispute between the Debtor and Creditor could possibly be resolved through mortgage modification mediation. [3]

The Court’s Order sets forth specific requirements, and duties of the Mediator, Debtor and Creditor.

If an attorney for the Creditor has not appeared, then within 14 days the Creditor shall file a designation on the record as to who will serve as the Creditor’s representative in the Mortgage Mediation process.[4] If the Creditor fails to so designate pursuant to the Court’s Order the Court may grant sanctions.

Within 21 days the Creditor is obliged to supply the Debtor, or counsel, with the Creditor’s loan modification requirements.

The Debtor, or Debtor’s counsel is required to transmit a list of financial documentation to the Creditor’s representative. The specifics are set out in the Court’s Order. These Debtor requirements apply to both represented and pro se debtors. [5]

The Creditor must review the financial documentation at least 14 days prior to the scheduled mediation and notify the Debtor if there are additional or updated financial records needed. The Debtor has three business days to supply those records.[6]

The Court either sets a specific date within which the mediation is to be concluded or requires the mediation to occur within 60 days. [7]

The Mortgage Mediator is responsible for coordinating a mutually convenient date, time and place for the mediation, and authorizing whether the mediation may be convened through electronic means.[8] In most of the mediation conferences the Creditor representative and counsel are allowed to appear by telephone. Increasingly, there are requests for Debtor and Debtor counsel to appear telephonically, as well. Often, after meeting for the initial mediation; and if the mediation conference is recessed until a later date and time, all parties and counsel may appear electronically.

In the Tampa Division, the parties split the Mediator’s court ordered fee of $350.00 for two hours of mediation. If the mediation continues beyond two hours, the Mediator is entitled to his/her normal hourly rate.[9]

Debtor’s counsel may charge the Debtor additional fees by filing an application for compensation.[10]

There are numerous differences between the divisions within the U.S. Bankruptcy Court for the Middle District of Florida with respect to the court orders associated with Mortgage Mediations.[11] If you are an attorney who practices in the other divisions or in the Northern or Southern Districts it is beneficial to familiarize yourself with those specific orders.

RESIDENTIAL MORTGAGE MEDIATION EFFECTIVENESS:

Although the Tampa Division does not keep statistical records, the Orlando Division Chapter 13 trustee compiles and maintains data regarding mortgage modifications. According to this data, the rate of success in the Mortgage Mediation process is approximately 70%. Additionally, the number of modifications from the inception of the Orlando Residential Mortgage Mediation program has risen from 60 in 2010 to 719 in 2013, data through November 2013.

In addition, the number of cases in November 2013 increased 28% compared to November 2012.

This upward trend in modifications appears to apply to loans being modified without debtors filing motions for mediation.

As mentioned, there are differences in the Mortgage Mediation process between the Districts, and the Divisions within the Districts. In an attempt to create a more cohesive system, Laurie Weatherford, Chapter 13 trustee in Orlando is convening a Residential Mortgage Modification Mediation Summit set for February 27, 2014.

Wherein, “The goal of the Summit is to create procedures or practices that can be adopted statewide for the good of the various programs.   If we could create a State Wide program it would be good for all of the participants.”

There are many positive reasons to continue the focus on mortgage loan modifications. If the loan modification is successful, all parties involved benefit:  the homeowners are allowed to remain in their homes and have an affordable monthly mortgage payment, the lender has a performing loan, the neighborhood does not have a foreclosed property decreasing the value of the surrounding properties, and the real estate market maintains some degree of stability.

Constance d’Angelis, Esq. has the distinct honor of being sworn into The Florida Bar by the legend Chief Judge Alexander Paskay in September 1983. She has been a member of the U.S. District Court for the Middle District of Florida since that time. Constance is a Mortgage Mediator in the U.S. Bankruptcy Court, Middle District of Florida, who mediates the modification of residential mortgages in bankruptcy.  Ms. d’Angelis is responsible for Modifying Residential Mortgages in Bankruptcy, which is an accredited CLE course and approved as Mortgage Mediator Certification Training, available at CLEanytime.com. She is a regular speaker at continuing legal/mediation education courses.

This article is freely available for reprint, provided the resource box is included.