The Supreme Court of Florida recently made a decision to amend civil procedures in foreclosure mediation cases, HousingWire reports.
The change prevents mortgage servicers from sending representatives to mediation unless they are empowered to consider any and all proposed settlement offers made at the table and agree to them on their own authority, without consulting someone else.
Foreclosure defense attorney attorney Daniel Consuegra said he and his colleagues favor the change, the source reports, because it encourages serious, good-faith negotiation and could encourage lenders to participate more actively.
The rule will also require banks to file a certification of authority 10 days prior to mediation, which will include a written notification for the court that names the parties who will be representing the mortgage servicer. It will also explicitly confirm that representative's authority.
According to Consuegra, this will end a tendency, during such mediation, for representatives to respond to offers by indicating they must seek approval. In many cases, he notes, a representative may only have authority to deal with certain proposals, which can stretch out the negotiating process or lead to evasion. For example, they may be prepared to evaluate a settlement involving the Home Affordable Modification Program, but be unable or unprepared to consider a died-in-lieu if the borrowers wish to offer one.
"When they first created this, the mediations were seen as something that was being done as an opportunity for the parties to get together and discuss mediation," one expert told the source. "It arose out of the need to get the parties together. We looked at it as forced loss mitigation. Over time that has kind of eroded and more defense attorneys, borrowers and mediators feel unless you are willing to discuss more than modification, you don't have settlement authority."
On the other hand, some experts noted the change might be ineffective at best, or detrimental at worst. On the one hand, mortgage servicers only have so many qualified personnel available. Mandating that they must be present for mediation may extend the amount of time it takes in individual cases and for a bank to meet the needs of every borrower seeking mediation.
At the same time, the inability to delay and think things over could be bad for both mortgage servicers and borrowers, HousingWire states. The two parties, with less room for consideration, may find mediation efforts become more adversarial.
Some experts are concerned that the rule change will promote inflexibility and the threat of sanctions for non-compliance could exacerbate that tendency, creating a mindset less conducive to working out settlements that satisfy all involved. The rule also does not force mortgage servicers to agree to a settlement, so it could simply result in a faster end to mediation without a better result, according to the source.