What is New Jersey Foreclosure Mediation?
I created the video here addressing that question. If you want to understand further, the following is a deeper dive into the topic.
So what is it?
The foreclosure mediation program is a mediation handled through the court system and set up by Chief Justice Stuart Rabner of the New Jersey Supreme Court. The goal of the program is for the Court to have a role in the mediation of foreclosure litigation.
Do I need a lawyer? Do I need to actually pay anyone to help me with the Mediation Program?
NO! Absolutely not. That is one definite benefit. You do not NOT need an attorney to go through the mediation program. You can and should do this yourself. Save your money.
If you are nervous or anxious or scared about the whole legal process and want representation to help you, then do hire someone, but understand that attorneys are not a required part of the process. It is designed to help you help yourself without the expense of a lawyer or other person you might pay to help you.
Does it work?
That is a really interesting question, and it is actually a lot more complicated than you would think. The reason why it is a difficult question to answer is that the borrower is already entitled, per federal law, to submit applications for ‘loss mitigation.’
(Loss Mitigation is the industry term for any negotiated resolution, which includes modification but also includes deed in lieu, short sale and any other negotiated resolution of a foreclosure case.)
So, because you are already entitled to what the mediation process provides, when the mediation results in a modification, did it work? Or were you simply given what you were already entitled in the first place?
Should I apply for the mediation program?
Again, a very complicated question. It seems simple, and thinking just on the surface it is simple: Do I apply or not?
You want to ask me that question? I am going to ask you a question back: What do you want? What is your goal? What is your financial situation?
And similar questions.
The reason why I am going to ask those questions and one of the reasons why the simple question as to whether you should apply for mediation is complicated, is the federal law that gives you the right to apply for loss mitigation (modification) has special and specific rules as to your rights during the mortgage servicer review of that modification application.
Would you stop being a stupid lawyer and just start answering the damn question already? Jeez!
I’m trying! I can’t help being a lawyer. It’s what I do.
But seriously, there is a very large flaw in the mediation program. Initially people were using it to delay the sale of their property by submitting for the mediation right before sale.
Oh, heaven forbid! How dare they?
And so the plaintiff’s bar, meaning the lawyers representing the banks and mortgage servicers, put enough pressure on the Foreclosure Clerk’s Office that things were changed to limit when in the foreclosure process the mediation program would be allowed to start.
And here is where push comes to shove: I am not in favor of having my clients apply for modification (or other loss mitigation) except when it is most advantageous for my clients to utilize their right to review of an application for loss mitigation. And since the mediation program is not permitted without judicial permission to enter the program after a certain date in the foreclosure process, that often does not meet my preferred schedule for when is best for my clients to apply for modification.
OK, I get that. But when should I ask for Mediation?
That question really is when should you apply for a modification? And that answer depends on a number of factors.
Let’s say you are amongst the very, very vast majority of homeowners who talk to me. If you are, you are a person or couple or family that fell on hard times that were temporary. They might have been quite a long period of time, but you and yours are back to a monthly income that allows you to pay your bills again as they existed before you ran into trouble.
So, if you are those people, shouldn’t you apply for a modification immediately?
In most cases, I advise NO.
You should, instead, Answer the Foreclosure Complaint (which you can do on your own – I have a video and a blog post about that) and put together a strategy for resolving your debts that have built up during your downturn and save some money.
It is so important, in my view, to utilize the foreclosure process to delay things so that you can get yourselves into a good financial place before modifying your loan, through mediation or otherwise.
That means considering a Chapter 7 Bankruptcy, or negotiating a short payoff of some debts, or maybe it is just using the mortgage payment you can now afford to put against credit cards, medical debts, car loans … whatever it is that is on your balance sheet. (Please seek help from a financial professional or an attorney in understanding how best to do this.)
The last thing I want is for consumers to negotiate a modification, get into a payment plan that with all their other debts they can only barely handle, hit one problem and be back in the soup again.
So can you wrap this up, please? This is getting a bit long.
The goal of the mediation program is to put people back into their mortgage and end the foreclosure.
The goal of every good attorney representing people in foreclosure or other financial distress is to get them out of financial distress and into a financially healthy place. Occasionally that involves the mediation program (because you can do that on your own with paying attorneys or other experts) and oftentimes the mediation program is not the right way to go.
It’s complicated, and I hope this helped you understand the system a little bit better.