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Economy & Business

Madison County foreclosure mediation process helps some residents keep their homes

This article first appeared in the St. Louis Beacon, Aug. 14, 2012 - The Madison County Residential Mortgage Foreclosure Mediation program is headquartered in a former hospital building in Wood River, but there are no miracle cures to be found here for the foreclosure ills that have plagued the nation since the financial crisis of 2008.

Many county homeowners do, however, find solutions — or at least answers — regarding their individual cases through this mediation process that was implemented in 2011 for Madison and Bond counties by the Third Judicial Circuit Court.

Program administrator Linda Jun said that in best-case scenarios, homeowners and lenders work out loan modification or repayment plans, but she finds that even homeowners who aren’t successful in working out a home retention plan often walk away with a clearer understanding of what happened.

"I think it’s a good thing," Jun said. "It’s a vehicle for parties to come together outside of the court process to have a conversation."

More than 50 cases have been resolved positively through the program with a loan modification, repayment agreement, or some other retention option, Jun said.

In July, a financial eligibility requirement that had attempted to screen applicants was removed and now any Madison or Bond county homeowner who is being sued in foreclosure may opt into the mediation program. About 300 homeowners requested mediation between June 2011 and June 2012.

The Madison County mediation process has some similarities to a proposal being considered by St. Louis County. A public hearing on that bill is being held at 4:30 p.m. Tuesday, before the 6 p.m. St. Louis County Council meeting.

In a nutshell, here’s how the Madison/Bond county program works:

* Information about the mediation program is included with court documents delivered to a homeowner being sued for foreclosure.

* The homeowner has a 30-day window to opt in to the program, without needing judicial approval.

* The home must be the homeowner’s primary residence.

* The program requires an exchange of documents before mediation.

* Mediators are attorneys in Madison and Bond counties who volunteer their time.

* The administrative cost of the program is borne by the plaintiffs (lenders) who pay an additional $150 filing fee when they file foreclosure complaints.

Jun said the mediation information given to homeowners also includes resources for free housing counseling and legal assistance.

Before a mediation date is set, a pre-mediation process serves as a structure to allow parties to exchange information. The process is terminated if either side doesn’t show up or participate, Jun said.

Many cases are resolved during the pre-mediation process because parties are able to come to an agreement, once information is shared, she noted.

The program is the first in southern Illinois, though other programs have been implemented by courts in Cook, Peoria and McLean counties.

'A focusing event'

For homeowners facing foreclosure in the St. Louis metro area, the experience differs drastically, depending on whether they live west or east of the Mississippi River. In Missouri, a "non-judicial" state, the foreclosure process moves much quicker than in Illinois, which is a "judicial" state and requires court action on foreclosures. In Missouri, as in other non-judicial states, lenders must follow documentation procedures in foreclosures that do not require judicial review.

Glen Carbon attorney Kim Kirn, who has served as the mediator in five cases in the Madison County program, said the process creates what she refers to as a "focusing event."

"It’s forcing everybody to take a timeout from this mechanical process that can happen in Missouri really quickly — in Illinois it is a longer process. Mediation slows down that process, but not unreasonably,’’ she said.

During the mediation hearing, homeowners can come alone or with housing counselors or attorneys to represent them. The lender’s attorney is present, along with a representative of the lender who has the authority to agree to a settlement. Because many lenders are national entities, they are allowed to participate by telephone.

Kirn said the process allows both sides to clear up misunderstandings and for homeowners to update their financial situations. A new job or source of income, for example, might convince lenders that the homeowner can, in fact, make a mortgage payment. The process is conducted in lay terms, not banker’s terms.

"To me it’s a focusing event that makes the lender look at this individual property and this individual homeowner and ask, ‘Can we make this work?’ And many times they can," Kirn said.

Kirn is a mediator with U.S. Arbitration and Mediation Midwest and the American Arbitration Association. She served on the committee that proposed the Madison County foreclosure mediation program.

The Madison County program has no power to require a settlement but finds strength in the fact that Illinois is a judicial state and the mediator will report to the court.

"I can’t force a lender to make a modification. I can’t make a lender forgive principal, for example, but I do report back to the court whether the parties participated in good faith. If I report 'not good faith,' the court is able to sanction that party and, of course, the strongest sanction the court could enter would be to dismiss the foreclosure action. As a mediator, that’s pretty strong," she said.

Kirn said that contrary to public perception, banks are not forgiving principal in loan modifications, while adjusting interest rates and penalties.

“That has not been my experience. The banks have not reduced principal one penny,” she said.

Homeowners have mixed responses

Kirn said the mediation process helps homeowners who can feel that they are on a treadmill: resubmitting the same financial documents over and over again. She requires lenders to designate a specific contact person so that homeowners aren’t speaking to different representatives every time they call.

"If you don’t force both sides, but particularly the lenders, into mediation, you never get that single point of contact. You never get that focusing event," she said. "If we can resolve it, that’s great. If we can’t, there’s no penalty. If it does work we’ve saved everybody a whole lot of time and trouble."

Kirn, who co-authored an article on foreclosure mediation programs in a recent issue of the St. Louis Bar Journal, said the impetus in Madison County was the fact that similar programs had been established elsewhere. Chief Circuit Judge Ann Callis saw the value and established a committee representing the voices of interested parties: attorneys who represent lenders, homeowners and the real estate industry.

She said that local attorneys have responded to the call to serve as unpaid volunteers.

"It’s an important thing for our community, and it was really wonderful how many good, experienced lawyers — senior attorneys — were willing to give up their time to become a mediator and to work on these cases" she said.

Jun said that homeowners have had mixed responses to the program.

"The result does in some sense determine how they feel about it," she said. "For those people who have had a really hard time getting in touch with their banks they come to this process and they know who to turn their packet in to. They get the paperwork straightened out, and if they get approved for modifications with payments they can afford, they’re thrilled. But some homeowners come in with expectations that this mediation program is somehow going to save their houses. Some of those people walk out feeling more frustrated because the mediation program doesn’t have the power to save anyone’s house. It’s only to facilitate a process."

Jun said some homeowners have said that even though they didn’t save their homes they at least got answers.

"They got more information than they would have otherwise and have a better grasp of the process and the future," she said.

Jun, 28, a graduate of Washington University Law School, said her job to set up the program had been funded through the AmeriCorps program. She is leaving for a new job in New York, and the program will be taken over by arbitration administrator Kathy Harris.

"It’s hard to leave a program I started," Jun said. "It’s been a long journey and I’m proud of where it’s come."

Jun said that as a neutral party to the process she has sometimes been frustrated by both lenders and homeowners.

"Sometimes it is the banks and their lack of ability to communicate with the homeowners," she said. "On another day, it's the homeowners' unrealistic expectations or their inability to get their documents and ducks in a row."

She said that the economy and personal finances are ultimately the keys in successful mortgage modifications.

"People are going through all sorts of crisis and unlike maybe five years ago where you could rebound from that, it’s not the case anymore," she said. "Jobs aren’t easy to be had if you do get laid off. Children still need to eat and go to school, and that costs money. People are living on tight budgets. It’s not a simple situation on either end. That’s the reality. Foreclosure has many faces and many names and these are people’s stories."

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