Waupaca County judges have launched a new program that may help financially troubled borrowers stay in their homes.
The Foreclosure Mediation Program took effect at the beginning of the year. It offers homeowners who have defaulted on their mortgages an opportunity to resolve their foreclosure case. In some cases, the loan may be reinstated and new payment terms negotiated.
Devised by the Marquette Law School, the program is used by more than a dozen counties in Wisconsin.
One of the primary objectives of the program is to open a line of communications between the borrower and the lender. Most of the foreclosures filed in Waupaca County do not involve local banks, but mortgage holders in other states.
“We see a lot of foreclosures where the mortgagor comes in and says, ‘We can’t talk to anybody.’ This is a way of hopefully opening some communications between the mortgage company and the mortgagor,” said Judge John Hoffmann.
Natalie Fleury, program coordinator for dispute resolution at Marquette Law School, also pointed to the program’s goal of ensuring a clear exchange of relevant information between the parties. She noted that borrowers often reported difficulty when trying to reach anyone at the company regarding their mortgage.
“One of the things that makes foreclosures so complicated is determining who actually has the loan,” Fleury said. “With the mediation process, you’re not just sending information off into a void. The homeowner is sitting down with somebody in real time and the information is being exchanged directly.”
Experience from other counties where the program has been implemented indicates that about 20 percent of homeowners who face foreclosure will choose to participate in the voluntary mediation program, Fleury said. About 80 percent of the lenders will choose to participate after a homeowner has requested mediation.
Fleury estimated that about five to six borrowers in foreclosure in Waupaca County will apply for mediation each month.
Hoffmann said three homeowners had applied for mediation as of Jan. 14.
Beginning the first of this year, all homeowners who receive a foreclosure summons also receive information about the program and an application form.
Those facing foreclosure have 20 days to respond to the summons and 15 days to apply for mediation. The application form must be sent to the courthouse, along with a $25 application fee.
Court staff then contact the mortgage holder regarding the application. The lender has the option of declining or entering into mediation.
Once the case has been accepted for mediation, the homeowner pays a $75 fee and the lender pays a $100 fee.
Only borrowers who actually live in their homes can participate in the program.
After being accepted into the program, the homeowner will meet with a financial and housing counselor. The counselor will discuss programs that may be available to avoid foreclosure and help the homeowner prepare a proposal for a meeting with the mediator and the lender.
In Waupaca County, Wayne Knutson with the Financial Information and Service Center is the certified counselor for the foreclosure mediation program.
“We look at what they owe, how they got into this situation and whether it’s a short-term problem that can be fixed in a few months,” Knutson said. “We look for solutions that are going to fit within their financial means.”
Knutson noted that sometimes a borrower’s financial problems may be solved simply by renegotiating their monthly credit payments, which in turn may free up hundreds of dollars for their mortgage payments.
“We look for the best solution for a client to keep the house. But if it’s not financially feasible, we will not give them false hope,” Knutson said.
Knutson said his primary role is to provide financial education and help the borrower prepare the documents needed for mediation.
The final step of the process is the meeting between the lender and the borrower. A mediator and the lender’s attorney will also be at that meeting. Many times, the out-of-state lender is present by phone.
Fleury said the mediator’s role is to be a neutral, third party who makes sure that all the information that both parties need is being communicated in a clear manner and is up-to-date.
“Hopefully, they can work out some sort of agreement so we don’t end up with more empty homes in the community,” Hoffmann said.