AN ACT CONCERNING FORECLOSURE PROCEDURES.

The bill makes the foreclosure mediation program established pursuant to PA 08-176 mandatory, rather than optional. To that end, the bill changes the mechanism by which borrowers are notified and makes other conforming changes.

The bill specifies that no judgment of strict foreclosure or foreclosure by sale can be entered before July 1, 2010 unless the mediation period has expired or otherwise terminated, whichever is earlier, or the mediation program is not otherwise required or available (see COMMENT).

By law, lenders must appear in person at the first mediation session and be authorized to agree to a proposed settlement. If the lender's attorney appears instead, he or she must have such authority, and the lender must be available by phone or electronic means. The bill specifies that the court cannot award attorney's fees to any lender for time spent in the first mediation session if the lender does not have a person with authority available during the session in person, by phone, or electronic means. This appears to contradict existing law, which requires the person with authority to be present.

By law, the lender has to inform the borrower about the mediation program by attaching a notice of availability of foreclosure mediation and a mediation request form to the front of the foreclosure complaint. Since the bill makes mediation automatic, it requires lenders to attach instead (1) a notice of foreclosure mediation, (2) a foreclosure mediation certificate, and (3) a blank appearance form, all in a chief court administrator prescribed form. The foreclosure mediation certificate must require the borrower to provide enough information to allow the court to confirm that the defendant in the foreclosure action is actually an owner-occupant of a one-to-four family residential real property located in this state who is also the borrower under a mortgage encumbering the real property, which is the primary residence. The bill also specifies that the notice and certificate should actually be attached to the front of the writ summons, which typically appears in front of the complaint.

Generally, when the lender serves the borrower in the foreclosure action, it must return the writ to the court. After the lender returns the writ to the court, the bill gives the court three days to issue a notice of foreclosure mediation to the borrower. The notice must tell the borrower to file the appearance form and foreclosure mediation certificate with the court no more than 15 days after the foreclosure action return date (the date by which the lender must respond to the foreclosure action). When the court receives the borrower's forms, if he or she meets the above-referenced requirements, the court must schedule a foreclosure mediation date and notify all appearing parties two business days after the forms are received (see COMMENT). If the forms are not returned by the deadline, the court cannot schedule mediation. However, the bill allows the court to refer a person meeting the requirements to the program any time they appear in a foreclosure action.

By law, and under the bill, mediations are allowed to begin up until June 30, 2010 (and therefore continue after that date). However, it appears that this provision allows actions that continue after June 30, 2010 to go to judgment without meeting the bill's requirements.

The section on scheduling the first mediation session appears to conflict with another section of the bill which, except as noted above, requires the notice scheduling the first mediation to be sent no more than two business days after the foreclosure action's return date. It is unclear in what situation this timeline would apply. Additionally, the provision is unworkable in conjunction with the first timeline because the trigger for the scheduling (the borrower's filing of an appearance the certificate) is not required until 15 days after the return date.

Yea

Nay

(03/10/2009)