Foreclosure Mediation Arkansas

Foreclosure Dispute Resolution Overview

Arkansas Law Review Symposium2012

Heather Scheiwe Kulp

HISTORY OF FORECLOSURE CRISIS AND DISPUTE RESOLUTION

Foreclosure Crisis At-a-Glance

THEN (mid 2005 - mid 2008)•Home purchase encouraged for everyone•Predatory lending•Sub-prime mortgages•Blame the borrower•Crisis soon over

NOW (mid 2008 - present)•Down economy impacting everyone•Traditional lending•Prime mortgages•Blame the banks•Crisis through 2014

Alphabet Soup

Why Aren’t More Borrowers Seeking Alternatives?

• Do not understand the process • Do not understand their options• Cannot get in touch with servicer• Do not know who servicer is• Shame

FORECLOSURE “MEDIATION” 1.0

Why Mediation to Manage Foreclosures?

• Communication• Not a “new” process• Self-determination• Decreases default judgments• Servicers do not want to own• Governments need movement

States with Foreclosure Dispute Resolution

Statewide (15)• Connecticut • Delaware• Hawaii• Indiana• Iowa• Maine• Maryland• Nevada• New Jersey• New York• Ohio• Oregon• Vermont• Washington• Washington D.C.

Local (11)• Arizona (ASU area)• Florida (by circuit)• Hawaii (by circuit)• Illinois (by county)• Kentucky (Lexington)• Massachusetts (Boston,

Springfield)• Missouri (St. Louis)• New Mexico (by circuit)• Pennsylvania (Philadelphia)• Rhode Island (Providence,

Cranston, Warwick)• Wisconsin (by county)

First Phase Design

GOAL: set up a meeting between a borrower and a servicer to talk about how to save home•How to create the program (rule-making)•How to make sure the servicers participate (enforcement)•How to schedule mediation (management)•How to make sure mediators know the law (knowledge)

Sample Process

Problems

• Borrowers not requesting• Lenders not participating• Documents• Borrowers not understanding• Documents• Little finality• Documents

FORECLOSURE “MEDIATION” 2.0

Second Phase Design

GOAL: improve program participation and likelihood of positive outcomes•Ensure appropriate cases access the full mediation service and that other cases receive assistance as needed (screening)•Ensure people are prepared to negotiate (preparation, partnerships, and compliance)•Secure a timeline that maximizes opportunity for a beneficial agreement (efficiency)

Problems

• Borrowers not requesting• Lenders not participating• Documents• Borrowers not understanding• Documents• Little finality• Documents

Solutions

Status

• Ended• Florida statewide, New Hampshire

• Added• AZ, IL (counties), MA (Springfield), WA, D.C., OR,

• Expanded• Hawaii: judicial and non-judicial

• Changed• most

Problems

• Person with full authority not participating• Documents• Timeline increased considerably• Documents• Mediators changing roles• Documents• Legal challenges

FORECLOSURE “MEDIATION” 3.0

Third Phase Design

GOAL: ensure compliance, create best opportunity for people to move forward•Create review mechanisms to ensure borrowers and servicers comply •Ensure support for borrowers and servicers to complete document exchange•Streamline all processes to ensure best chance to resolve case before lose opportunity to save it

Evaluation for Effectiveness

• Percent of foreclosures mediated (4-69%)• Percent of mediations reaching agreement

(21-82%)• Percent of foreclosures eligible for mediation

resulting in retention (2-33%)

Status

• Ended• Florida pre-foreclosure

• Added• St. Louis

• Expanded• Illinois (statewide)

• Changed• Not much

Questions?