I am just returning from UNLV’s wonderful conference on Conflict Resolution in a time of Economic Crisis. We (myself & Natalie Fleury, our program manager for dispute resolution here at Marquette) were part of a panel talking about foreclosure mediation around the country. Speakers on our panel discussed Ohio, Florida, Nevada in addition to ours. And the differences were fascinating.
Key questions for me as we continue to develop our program here (and then start writing about programs around the country) include whether foreclosure mediation should be mandatory or voluntary (and why does that matter?) If the program is mandatory (like in Nevada) the lender must agree to mediation when the homeowner requests it. In our program, the mediation is voluntary. Proponents of mandatory mediation argue that lenders must do this to help the homeowners; proponents of voluntary mediation argue that self-determination is key for both sides and will produce better participation. Interestingly—and we will have to see how the numbers fall out over time—it looks like we in Milwaukee have about 18% of all foreclosure filings requesting mediation and only a small number being declined by the lender; this number is higher than Nevada which looks like only 11% of their cases are requesting (mandatory) mediation.
Another key question is if the mediator should report if the parties (either side) do not act in good faith (and what is the definition of good faith)? Mediation purists argue that this reporting duty is both a breach of confidentiality and the mediator’s neutrality—both of these breaches poison the process. Those in favor call this “mediation with a kick” and argue that the good faith duty is necessary to counterbalance what is otherwise a very unbalanced set of parties. So I am curious to hear what those involved in mediation in other areas would have to say about these two issues….
This question of “good faith” participation is one very slippery slope. Maybe I’ve been watching too many Olympics, but asking mediators to determine bad faith is treacherous. Look at what is happening in Texas as they try to mediate health insurance claims :
http://www.dallasnews.com/sharedcontent/dws/bus/stories/012610dnbusmediation.3b675e4.html. The mediators are worried that if they blow the whistle on insurance companies that do not meet an unclear standard of good faith participation they will not be invited back to mediate. Even if they mediate again, what happens to the environment of open dialogue?
In foreclosure mediation I think there are ways for judges to get at many of the issues related to bad faith, such as showing up unprepared, by requiring particular paperwork be presented in court, etc. There are ways to keep mediators out of the position of making decisions that will poison the ability of individual mediators to mediate in the future and of participants to engage in a confidential process in the future.
” (and what is the definition of good faith)? ”
Very good question. A more important question
is who is the “lender”? 94% of mortgages are sold into the secondary market within 24 hours of underwriting. Usually the “lender” then becomes the “servicer” with no pecuinary interest in the mortgage. A mortgage is between a borrower and a creditor—-no one else.