Should I Participate in Foreclosure Mediation?

Cook County, Lake County, and Will County all offer foreclosure mediation programs with varying results. At its heart, mediation is the court-sanctioned opportunity for the homeowner to sit down with the foreclosing bank’s representative and hash out an agreement to either permit the homeowner to stay, via a loan modification, or permit the homeowner to walk away without a personal deficiency, via a short sale, deed-in-lieu, or consent foreclosure.

Out of the three programs, Lake County’s appears to be the most effective. Lake County was actually created by the Chancery Division of the 19th Judicial Circuit Court along with a non-profit organization called the Affordable Housing Corporation. The AHC administers the mediation. Part of the success of Lake County’s program is due to the fact that it was created after Cook County’s program, and therefore some of the pitfalls of that program have been avoided.

All three programs begin the same way. The Court provides an opportunity to go to mediation before the foreclosure process really takes off. The summons and complaint often includes a mailer alerting the homeowner to the mediation program. To attend the program in Lake County, the homeowner need only contact the AHC to start the process, whereas in Cook and Will Counties the homeowner must show up to the initial case management hearing and request that the court send the matter to mediation.

Once in the program, the homeowner is required to submit a complete application to the foreclosing bank before the actual mediation date. In Lake County, the AHC obtains the documents from the homeowner and then submits it to the bank. In Cook and Will County, it is the homeowner’s responsibility to get a complete application to the bank before mediation.

If the bank receives a complete application, they can then provide some sort of answer to the homeowner at the mediation session. Ideally, this would be a loan modification. However, it often does not work that way, and the bank may instead show up to the mediation and simply ask for more documentation and schedule a new mediation session, or may deny the homeowner for any loss mitigation and terminate the mediation session.

The mediators can send notice to the court if one party is not participating in the mediation in good faith. The court may issue an order directing the party to participate, or may even sanction the party if the conduct was awful enough. A tip for a homeowner or a homeowner’s attorney: be sure all documentation asked for from the bank has been submitted, and keep evidence of the submission. Always consider that you may have to prove that all documents were submitted as banks often “lose” loan modification documents or state they never received them.

Mediation is a great tool to work out a loss mitigation option, and for 99% of homeowners it is worthwhile to attend.

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