Q: My daughter and her husband are considering using the foreclosure process to free themselves from their financially upside down home. I know that many people are in the same situation but I have heard that the process is not simple and there may be a way for them to save their home. I understand that mediation is involved. How does this work?
A: Foreclosure actions on homestead properties are subject to the Residential Mortgage Foreclosure Mediation program, RMFM. All homestead mortgage foreclosures filed on or after July 15, 2010, must be handled through this program. The purpose of this process is to try to get an agreement between the lender and the homeowner.
The first step is to identify the actual owner of the mortgage since most mortgages are sold to other lenders after the original loan is put into place. This lender is responsible for paying the fees of the program. The homeowner does not pay fees.
The homeowner begins the process by meeting with a foreclosure counselor to complete a borrower's financial disclosure packet electronically no less than 30 days before the mediation. Twenty-five days before the mediation session, the borrower must ask in writing for the lender's disclosure and pertinent information. Amended forms must be provided by the lender five days before the mediation and three days prior the lender must submit all information to the electronic repository.
The mediator will meet with both parties, usually in separate rooms, to see if an agreement about payment can be reached. Also present will be the RMFM program manager who will take attendance and confirm that everyone who is present has the authority to negotiate and settle. If an agreement is reached, it is signed by all parties and the mediator will report this to the court within ten days of the session.If no agreement is reached, the mediator will only report that no agreement has been reached.
There are strict rules about this process and what the mediator can and cannot do. He or she cannot give legal advice to any of the parties involved. There are several issues that may not be well understood by the average homeowner and the mediator cannot explain these. For example, he or she cannot reveal that the homeowner can be held liable for a deficiency if the house is resold for less than the balance of the mortgage.
This process is one that really requires legal representation for the homeowner. In fact, seeking legal advice about the process should be a preliminary step before facing foreclosure.
Attorney Sylvia Heldreth is a Certified Specialist in Real Estate Law. Her office is located at 1215 Miramar St. in Cape Coral.
This article is not intended as specific legal advice to anyone and is based upon facts that change from time to time. Individuals should seek legal counsel before acting upon any matter involving the law.