Q What Is the NJ Foreclosure Mediation Program?
Empirical evidence suggests that about 40% of cases that go through the FMP get resolved within three (3) months of mediation. This is huge! First, not all homeowners qualify for a modification. Second, we already noted that by the banks own statistics only 10% to 20% of loans in foreclosure get modified. This means that your odds of getting a modification are at least doubled when you participate in the FMP. One of the reasons is that a trained mediator with background in the foreclosure process and mortgage underwriting will “weigh in” and actively push the parties toward a resolution. Unlike a Judge, who has to police the procedural rules of Court, and must maintain detached and disinterested equanimity, a mediator can take the homeowner’s side and frequently does. Anyone in New Jersey facing a foreclosure of their home who is serious about keeping it should participate in the FMP. As lawyers, we highly recommend legal counsel, both in fighting the underlying lawsuit and in dealing with the foreclosure mediation process. However, the single most powerful tool in fighting a foreclosure is the FMP. Even more important than hiring a lawyer is getting a package together and participating in this court-sponsored program. Don’t miss out on your best chance of working out a modification and saving your home!! Additional information and links to forms are available on the foreclosure section of our website.
The FMP is designed to provide homeowners with options regarding mortgage modification and restructuring. The FMP's flexibility allows homeowners to request loan modification through mediation even after an entry of final judgment and up to the conclusion of a sheriff's sale. See Gonzalez v. Wilshire Credit Corp., 207 N.J. 557, 581, 25 A.3d 1103 (2011). Access to the FMP is available where: 1) the property is the homeowner's primary residence; 2) the homeowner is the borrower on the mortgage being foreclosed; and 3) the property is an owner-occupied one to three-family residential property. See Sturdy Sav. Bank v. Roberts, 427 N.J. Super. 27, 43, 46 A.3d 632 (Ch. Div. 2012).
Eligible 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 distressed borrowers and the financial interests of lenders." See New Jersey Housing and Mortgage Finance Agency, Request for Proposals for Legal Services for the New Jersey Judiciary's Foreclosure Mediation Program, 1 P 1.1 (Dec. 29, 2008).
If the homeowner wishes to participate in the FMP, homeowners are required to assemble and provide certain financial documentation prior to participation in the program. This approach allows the mortgagee, mortgagor and mediator to arrive at mediation sessions with the information necessary to reach an informed and appropriate resolution, if possible. First, the debtor must file a Mediation Request Statement with the New Jersey Office of Foreclosure. Following preliminary approval, homeowners seeking to participate in the FMP must submit a Foreclosure Mediation Financial Worksheet. See Foreclosure Mediation Financial Worksheet (Oct. 2012), available at http://www.judiciary.state.nj.us/civil/forms/11269_hud_njhmfa_med_financial_wkst.pdf.
Mediation is devised to help homeowners and lenders reach a mutually agreeable resolution in an effort to avoid foreclosure. Mediators have "an active role in promoting candid dialogue 'by identifying issues [and] encouraging parties to accommodate each others. [sic] interests'" in an effort to reach a settlement. State v. Williams, 184 N.J. 432, 447, 877 A.2d 1258 (2005) (quoting Michael L. Prigoff, Toward Candor or Chaos: The Case of Confidentiality in Mediation, 12 Seton Hall Legis. J. 1, 2 (1988)). A study of a New Jersey court-mandated mediation program found that nearly 40% of matters diverted to mediation were resolved during mediation or within three months thereafter, most "with little or no discovery" and without the large cost to disputants. See New Jersey Civil Complementary Dispute Resolution Newsletter, Evaluation of the Presumptive Mediation Program, at 2 (Sept. 2008, Vol. XII, Issue 2), available at http://www.judiciary.state.nj.us/newsletters/cdr_12_02.pdf.