October 20, 2011
FORECLOSURE MEDIATION PROGRAM
By: James Orlando, Associate Analyst
You asked a series of questions about the foreclosure mediation program. The questions and answers appear below.
More information about the program is available at http://www.jud.ct.gov/foreclosure/.
When was the program created?
The Judicial Branch's foreclosure mediation program was established in 2008 by PA 08-176. It has been amended several times since then. The program appears in the statutes at CGS §§ 49-31k to -31o.
What changes did the legislature make to the program in 2011?
During the 2011 regular session, the General Assembly passed legislation extending the program by two years, until July 1, 2014, for foreclosure actions with return dates on or after July 1, 2009 (PA 11-201 (§§ 2, 4); PA 11-51 (§§ 31-32)). PA 11-201 also made other changes to the program. For example, it (1) extended the program to properties owned by religious organizations; (2) generally prohibited the parties from making motions, other than those related to the mediation, for the eight months following the return date; and (3) increased documentation
requirements (PA 11-201 (§§ 1-4)). Some of these changes are described in more detail below. For a complete summary of the changes made by PA 11-201, please see the public act summary.
Which borrowers can participate in the program?
The program is available to owner-occupants of one-to-four family residential real property who use the property as their primary residence. As of October 1, 2011, it is also available to religious organizations. In either case, the property must be located in Connecticut and the owner must also be the borrower under a mortgage on the property.
Is the program mandatory?
The program must be available to qualifying borrowers facing foreclosure, but a borrower can chose not to participate.
When a lender or other mortgagee brings a foreclosure action that qualifies for the mediation program, it must notify the borrower of the program by attaching specified documents to the foreclosure writ, summons, and complaint. The court must also notify the borrower about the program after the mortgagee returns the writ to the court.
The law requires borrowers seeking mediation to file certain forms, including an appearance and mediation certificate form, within 15 days of the foreclosure action's return date. The court schedules the first mediation session after (1) receiving the borrower's forms, (2) confirming that the borrower is eligible for the program as outlined above, and (3) confirming that the borrower sent a copy of the mediation certificate form to the plaintiff. If a borrower chooses not to file the forms, the court will not schedule a mediation session. However, the law allows the court to refer a qualifying foreclosure case to the mediation program any time after the borrower has filed an appearance.
How many mediation sessions does the law require? How long does the process take?
If a qualified borrower files the required forms, there will be at least one mediation session. After that session, the mediator must determine if the parties would benefit from further mediation (see below for the mediator's role).
The mediation period begins when the court sends notice to each party scheduling the first mediation session. The period concludes no later than 60 days after the foreclosure case's return date, unless the court extends it. On a showing of good cause, the court can (1) extend the mediation period for up to 30 days on the court's own motion, the motion of any party, or the mediator's written request or (2) shorten it on the court's own motion or the motion of any party. In practice, the mediation process typically involves multiple sessions over several months.
How does mediation affect the underlying litigation?
PA 11-201 placed additional limits on what can transpire during the foreclosure case during the mediation period. Under prior law, during the mediation period, a court could not enter a judgment of strict foreclosure or foreclosure by sale until the mediation period had expired or otherwise ended, whichever was earlier. PA 11-201 extended this restriction to 15 days after the mediation period ended, if it ends fewer than eight months after the action's return date.
The act further limited what can transpire during the litigation for a period up to eight months from the return date. During this period, the parties cannot make a motion, request, or demand with respect to each other, other than those relating to the mediation. This restriction does not apply to a mortgagor's motion to dismiss challenging the court's jurisdiction or a mortgagee's response to such a motion. If the mortgagor makes any other type of motion, request, or demand with respect to the mortgagee within the eight-month period, the restriction no longer applies to either party. The act specifies that these provisions do not affect any motions made, or defaults or judgments entered, on or before June 30, 2011.
Under PA 11-201, in foreclosure actions with return dates on or after July 1, 2011, after the eight-month or 15-day periods described above, mortgagees may simultaneously file motions for (1) default and (2) judgment of strict foreclosure or foreclosure by sale with respect to the mortgagor. This applies despite any contrary law.
The law provides that none of the mortgagor's or mortgagee's rights in the foreclosure case are waived by participating in the mediation program. Determinations by a mediator under the program cannot form the basis for appealing a foreclosure judgment.
Does the program require lenders to modify the mortgage?
No, the program does not require the lender to modify the mortgage or change the payment terms without its consent.
Who conducts the mediation and what is the mediator's role?
Under the program, mediation must be conducted by Judicial Branch employees meeting certain qualifications. The mediators must:
1. be trained in mediation and all relevant aspects of the law, as the chief court administrator determines;
2. have knowledge of the community-based resources available in the judicial district where they serve; and
3. have knowledge of the Connecticut Housing Finance Authority's (CHFA) mortgage assistance programs.
Within two days of the end of the first mediation session, the mediator must determine if further mediation would benefit the parties. The mediator must file a report with the court and mail copies to the parties. The mediation terminates automatically if the mediator does not think it will be beneficial to continue.
If mediation continues, the mediator must file a second report within two days after mediation ends, but no later than the termination of the mediation period set forth above. The report must describe the proceedings and the issues resolved and not resolved. This filing automatically terminates the mediation period. If certain issues have not been resolved, the mediator can refer the borrower to community-based services in the judicial district, but this cannot delay the mediation process. (It is not clear how the referral would delay the process, as submission of the report terminates the mediation.)
At any time during the mediation period, the mediator can also refer a residential borrower to CHFA mortgage assistance programs, but this does not stop the lender from going to judgment if it has satisfied the mediation requirements.
Does each borrower have to appear at mediation sessions?
Generally, the mortgagor and mortgagee must appear at each mediation session and must have authority to agree to a proposed settlement. Under PA 11-201, if there are multiple mortgagors, only one must appear at mediation sessions after the first session unless there is good cause for all to appear. If only one mortgagor appears, the others must be available during the session to participate by speakerphone and there must be an opportunity for the mortgagors and their attorneys to engage in confidential discussions.
The mortgagee's attorney can appear instead of the mortgagee, as long as the attorney has the authority to agree to a proposed settlement, the mortgagee is available to participate in the mediation session by speakerphone, and there is an opportunity for the mortgagee and his or her counsel to engage in confidential discussions. A court may not award attorney's fees to a mortgagee for time spent in a mediation session if it does not comply with these requirements, unless the court finds reasonable cause for the failure.
What are the statistics for program participation and outcomes?
According to Judicial Branch statistics, in FY 2011, foreclosure mediation certificates were filed in slightly under 50% of eligible cases (5,066 of 10,217).
From the program's inception (July 1, 2008) through May 31, 2011, 10,781 cases completed mediation. 52% of the cases (5,606) resulted in a loan modification. The total settlement rate was 80%, including (1) 65% (7,021) staying in the home and (2) 15% (1,602) moving from the home (including agreements for a short sale, a deed in lieu of foreclosure, or an extension of the law day or sale date) (CT Judicial Branch Statistics, Foreclosure/ Mediation (FMP), available at http://www.jud.ct.gov/statistics/FMP/default.htm).