How Does The Foreclosure Mediation Program Work?

By Author: Samuel D. Bornstein
Total Articles: 6
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The State of New Jersey recently enacted a residential mortgage Foreclosure Mediation Program (FMP). The Program is a joint effort instituted by the judiciary, the Office of the Attorney General, the Public Advocate, the Department of Banking and Insurance, the New Jersey Housing and Mortgage finance Agency and Legal Services of New Jersey.

Lenders are required to service information and instructions about the program to homeowners at the time the summons and complaint for foreclosure is served. A second notice describing a mediation program is mailed to the homeowner 60 days thereafter by the Administrative Office of the Courts. Still further, the lender must serve a notice of mediation attached to the request for the entry of judgment.

Homeowners have access to housing counselors, attorneys and court-trained mediators in an effort to resolve foreclosure actions by proposing work-out and payment arrangements that accommodate the circumstances of the borrowers and the lenders.

In a recent case, U.S. Bank National Association v. Williams, A-6185-08T2, ...
... the Appellate Division reviewed whether the FMP entitled a homeowner to extend the redemption period following sale of the home. The homeowner alleged that he mediated a workout of the mortgage loan, but was denied an effective means of utilizing the program because he was not represented by an attorney and was not assisted by a housing counselor during mediation sessions.

YOU BE THE JUDGE: Can a homeowner extend the redemption period following the sale of a home in foreclosure if he participates in mediation without an attorney?

The Appellate Division noted that the FMP was designed to aid the increasing number of owners facing foreclosure. When a court has entered the foreclosure judgment and the writ of execution is issued, a homeowner may still request mediation by filing a motion to stay the sale.

The ultimate factor is affordability. The likelihood of achieving a loan workout is crucial. Before mediation, a homeowner must submit designated worksheets and a workout proposal with financial documentation showing proof of income and a tax return. In this case, the homeowner had not paid his mortgage loan for two years and his financial disclosures showed an income shortfall after payment of his monthly expenses. He did not demonstrate an ability to pay the loan, even if modified. There was no evidence that the homeowner was unfairly treated in mediation.

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Author, Samuel D. Bornstein, is associated with the law firm (and has 40 years of experience in representing individuals and a wide variety of businesses from Fortune 100 companies that need specialized assistance to smaller companies that look to the firm as their "in house" lawyer for general day-to-day advice. The firm is experienced with transactional work and litigation, emphasizing corporate and partnership operations, employment.