Wednesday, June 23, 2010

In Re Noesk

In the now infamous In re Nosek action, the U.S. Court of Appeals for the First Circuit recently held that a sanction imposed under Bankruptcy Rule 9011 against the mortgage loan servicer in the amount of $250,000 was unreasonable where the mortgage loan servicer incorrectly stated in a filing that it was the holder of the note.

Ameriquest originated a loan to the borrower in this action, which it then assigned to an asset securitization trust for which Norwest Bank acted as trustee. When the borrower defaulted, Norwest filed a foreclosure action that was eventually stayed by the borrower’s bankruptcy. In the bankruptcy action, Ameriquest filed a proof of claim in its own name and moved for relief from the stay. Ameriquest’s motion incorrectly stated that it was the “holder of the first mortgage” on the debtor’s property when, in fact, Norwest was the holder.

When the mistake was revealed by a later filing, the bankruptcy court, sua sponte, imposed a fine of $650,000 in Rule 9011 sanctions against Ameriquest, Norwest and Ameriquest’s counsel. Ameriquest appealed to challenge the $250,000 in sanctions that were assessed against Ameriquest individually.

Ameriquest admitted that it violated Rule 9011 but contended that the sanctions were unreasonable. The First Circuit agreed with Ameriquest, finding the sanctions excessive.

First, the appellate court held that, “nothing indicates that Ameriquest’s claim that it was the holder of the mortgage was a deliberate falsehood or intended in any way to mislead the court.”

In addition to being neither intentional nor self-serving, the First Circuit also held that, “the bankruptcy court has not identified any actual prejudice from the inaccurate claim.” The First Circuit determined that while the mistake by Ameriquest could have been consequential in some cases, in this matter the false statement had no effect in this case.

The First Circuit therefore reduced the $250,000 sanction to $5,000 after taking into account legal fees incurred on appeal.

In Re Angelo Divittorio 05-20854 Eastern Div MA

The U.S. Bankruptcy Court for the District of Massachusetts, Eastern Division, recently held that: (1) a debtor failed to state a claim under the Massachusetts Consumer Credit Cost Disclosure Act (“CCCDA”) based on an alleged inaccuracy in the disclosure of an interest rate reduction feature contingent upon future timely payments; and (2) the debtor waived his CCCDA claims against a mortgage lender and its successors and assigns by signing and subsequently defaulting on a loan modification agreement which included specific waiver language.

After a debtor filed his Chapter 13 bankruptcy petition, the mortgage loan on his primary residence became the subject of a significant amount of litigation. The debtor first opposed the loan servicer’s motion for relief from stay, and the parties eventually entered a modification agreement as to the loan. The modification agreement included a release provision pursuant to which the debtor agreed that by executing the modification he "irrevocably waived and relinquished" any claims of any kind related to the loan documents in existence at the time of the modification, whether known or not known, against all prior and subsequent parties or predecessors in interest to both the loan servicer and the loan investor.

The debtor redefaulted by falling behind on his modified payments. He then sent a notice of rescission and shortly thereafter filed the instant adversary action against the loan investor for rescission of the mortgage loan under the CCCDA. The debtor sought rescission of the loan in part on the grounds that the APR disclosure provided at the closing of the loan was inaccurate because it was calculated presuming the borrower would eventually qualify for an interest rate reduction feature that would kick in only after the debtor made twenty-two timely payments, that this presumption was not clearly and conspicuously disclosed, and that the presumption was not statistically likely to come about. The bankruptcy court granted the investor’s motion to dismiss the adversary claim. The debtor appealed and the district court remanded the matter back to the bankruptcy court for reconsideration.

On remand, the investor filed a motion for summary judgment to be consolidated with its prior motion to dismiss. The investor argued in its summary judgment motion that (1) the debtor should be judicially estopped from asserting any loan origination claims because he failed to assert those claims earlier in his bankruptcy schedules; and (2) that the debtor waived his claims against the investor through the release provision of the modification agreement. This opinion followed.

The bankruptcy court first addressed the motion to dismiss, finding that the FRB's Official Staff Commentary to Regulation Z is silent as to whether a lender can factor an assumption of timely payments into an APR calculation at the time of assumption and ultimately holding that the debtor failed to state a claim under the CCCDA because the TIL disclosure was “based upon what the regulations required,” and the debtor was wrongfully attempting to re-characterize a time-barred predatory lending claim as a rescission claim in recoupment under the CCCDA.

The court next looked to the judicial estoppel claim made by the investor in its motion for summary judgment, finding that the investor “failed to satisfy one of the mandatory conditions …of judicial estoppel,” namely, that the party “succeeded in the prior proceeding.” In this matter no relief, such as a discharge, had been granted in the prior proceeding, such that application of judicial estoppel was not appropriate.

The bankruptcy court did, however, rule that the debtor had waived his CCCDA claim through his execution of the loan modification agreement. The bankruptcy court agreed with the investor’s contention that the waiver provision under TILA, 12 C.F.R. § 226.23(e)(1), which provides that a consumer may waive his or her right to rescind if the extension of credit is a bona fide personal financial emergency, applies only to the initial three-day rescission period and does not any extended period arising from the failure to provide material disclosures.

Further, the bankruptcy court found that, contrary to the debtor’s assertions, it is possible to waive the right of rescission after the expiration of the initial rescission period but before the underlying claim is raised. The bankruptcy court reviewed the few cases on this issue and disagreed with those cases that applied a hyper-technical standard with respect to TILA violations, which has been rejected by the First Circuit. The bankruptcy court applied the First Circuit’s “totality of circumstances” approach to determining the validity of waivers as "knowing and voluntary," ultimately finding that in this matter the debtor’s “possession of the loan documents put him on inquiry notice of his purported CCCDA claims.” The bankruptcy court also found that the language in the release at issue referencing claims arising in connection with the “making, closing, administration collection, or the enforcement … of the loan documents,” was clear and conspicuous and should have compelled the debtor, who was notably represented by counsel, to investigate the possibilities of such claims.


The Supreme Court, taking on a case affecting the rights of credit card customers, agreed yesterday to settle banks’ duty to give advance notice before raising the interest rate they will charge when a card user defaults on a payment, according to a SCOTUS Blog analysis. The Court granted certiorari despite the advice of the federal government that the case should be returned to lower courts to consider the Federal Reserve’s views. The government suggested that the case had little continuing importance, but bank card-issuers disagreed. A series of lawsuits, aimed at perhaps half of the entire credit card industry, followed a Ninth Circuit ruling that a customer had to be notified in advance if a card issuer was going to raise a rate due to delinquency or default — even though the contract with the issuer already had indicated that such a change would follow. Chase Bank USA (now a part of JPMorgan Chase & Co.) took the case on to the Supreme Court, saying that it was already clear that the Federal Reserve did not require any such notice. (In 2009, the Fed, later backed by a new law from Congress, imposed a 45-day advance notice requirement before implementing a default rate increase, but that only applies to increases that would go into effect after last August, and not the ones at issue in Chase Bank USA v. McCoy, et al., 09-329.) The case will be heard and decided in the term starting Oct. 4.


The Obama administration's marquee foreclosure-prevention initiative continues to struggle, as government data released yesterday shows that fewer homeowners are enrolling in the program and more are losing their federal mortgage aid, the Washington Post reported today. Lenders enrolled homeowners into the mortgage relief effort, known as Making Home Affordable, at a slower pace last month after federal officials tightened the qualification process. Since the program's launch last year, nearly 340,000 homeowners have received a permanent loan modification that lowers their mortgage payment for five years. However, a growing number of borrowers are failing to move from the program's initial stage into a permanent loan modification. Lenders have said that many homeowners are failing to make the reduced loan payments and others have not been able to prove they qualify for mortgage assistance. The number of borrowers dropped from the program, about 436,000, eclipses those who have been helped, according to Treasury Department data. More than 100,000 borrowers lost their mortgage aid in May.

Californa to Legalize Pot- Not Just for Medical Use

Fourteen states now allow the cultivation and use of marijuana for medical reasons. Besides California, they include Michigan, New Jersey and Colorado. Last month, the District of Columbia Council approved a law to allow people with HIV, glaucoma, cancer and other chronic diseases to buy medical marijuana from a small number of dispensaries in the city. Also last month, a group of about 100 medical-marijuana workers in California voted to join the United Food and Commercial Workers Union. The group includes growers and sellers.

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Battles in California over Mortgages

State legislators in California are considering a bill that would redefine the obligations of many defaulting homeowners, the New York Times reported yesterday. The legislation introduced in the winter by the real estate lobby would have largely shielded foreclosed homeowners from debt collectors. However, by the time it passed the state Senate on June 3, the banking lobby had succeeded in scaling it back. Now the bill goes to the state Assembly, where a committee will take it up next week, and bankers intend to continue lobbying. The original legislation said that borrowers who took cash out of their houses would be shielded as long as they used the money for home improvements. In its current form, the proposed law is not quite so forgiving. The bill that passed the California Senate by a lopsided vote of 30 to 4 would protect former homeowners up to the amount of their original loan. Lenders in California rarely chase foreclosed borrowers for deficiency judgments. Pursuing such cases in court can be an arduous process, and few of those in foreclosure have the assets or incomes to make it worthwhile. However, by raising the possibility of a court fight, they can negotiate favorable terms when agreeing to loan modifications and workouts, surrenders of deeds and sales for less than the full amount owed.

See the follow story:

Monday, June 21, 2010

Operation Stolen Dreams

Court rebuffs two lenders that foreclosed same loan


Court rebuffs two lenders that foreclosed same loan
June 21, 2010 By: Paola Iuspa-Abbott

By the time Glazy and Jose Ruscalleda realized that two different  lenders were foreclosing on their condo mortgage, they were almost out of time.

While their lawyer fought a foreclosure action by American Home Mortgage Servicing, the couple was unaware that HSBC Bank USA was about to ask a judge to sell their home at a public auction.

DBR TV: Attorneys John H. Ruiz and Karen Barnet-Backer “I had no idea what was going on with the lenders,” said Glazy Ruscalleda, 31. “I didn’t think that anything like this could happen.”

Their story illustrates the unintended consequences of the intricate world of mortgage-based securities and the many hurdles homeowners and their attorneys are encountering during the foreclosure crisis.

The Ruscalledas got a break this month when a state appeals court said a bank should start over with its foreclosure action.

“It is not uncommon for two lenders to be suing the same person on the same note,” said Fort Lauderdale foreclosure defense attorney Carol Asbury. “What happens is the loans are sold and sold — sometimes even
before the ink is dry — two to three times.”

That inevitably creates confusion, said Asbury, who is not involved in this case. During the housing boom that ended in 2007, lenders made loans that were later sold multiple times to investors led by trusts, like the
one administered by HSBC. But lenders didn’t always pass along the proper documentation, including notes and mortgages. Now, trying to prove who owns what can be difficult, increasing the risk of homeowners losing their homes to the wrong lender.

The confusion for the Ruscalledas began in October 2008 when HSBC sent the couple a letter alerting them of its lawsuit. They ignored the notice because days earlier they had received a similar letter from American Home Mortgage.

“We don’t know anything about the court system so we assumed it was the same lawsuit,” Ruscalleda said.

The couple did not show the HSBC letter to the lawyer they hired to fight American Home Mortgage.
Uncontested, the HSBC case moved forward. Weeks before Miami-Dade Circuit Court Judge Mark King Leban was to rule on giving HSBC permission to sell the couple’s condo at a public auction, the Ruscalledas learned of the hearing. Their lawyer, Karen Barnet-Backer, had learned about the hearing during a search of public records.

She soon learned that American Home Mortgage had sold and assigned the couple’s $159,920 mortgage to HSBC, as trustee to a pool of investors, in December 2008. It is not clear why HSBC sued the Ruscalledas in October 2008, before the assignment of mortgage and days after American Home Mortgage sued the couple over the delinquent loan. American Home Mortgage now services the loan for HSBC.

An HSBC spokeswoman declined to comment on the Ruscalleda suit but said the role of HSBC as trustee for loan securitization trusts is “nominal” when it comes to the trust’s assets.
“Under the agreements that establish the trusts, other companies are designated as servicers to handle matters such as mortgage foreclosures, loan modifications, evictions and sales of foreclosed trust properties,” said HSBC spokeswoman Juanita Gutierrez.

Boca Raton attorney Heidi Weinzetl with Shapiro & Fishman, who represented HSBC, didn’t return a phone call. Christine Sullivan, a spokeswoman for American Home Mortgage, said in an e-mail the confusion began when an unnamed law firm incorrectly named her company, not HSBC, in the initial foreclosure suit, Sullivan
said the firm took nine months to seek a dismissal after the problem arose. Meanwhile, another law firm was given the case and correctly named HSBC when it refiled the action.

Barnet-Backer, of the Law Offices of La Ley con John H. Ruiz in Miami, unsuccessfully tried to halt the HSBC foreclosure last year. The attorney said she pleaded with Leban to transfer the case to the judge
handling the American Home Mortgage case. She also argued that HSBC didn’t own the mortgage on the Ruscalledas’ condo when it filed the foreclosure suit so it didn’t have the right to take the couple’s

“My goal is not to cause a delay in the litigation process,” she said. “It is to protect my clients’ rights, to make sure that if the bank is going to foreclose on them, that they do it the right way, that they have the right to enforce the note and the mortgage.”

On March 24, 2009 — the day after American Home Mortgage dismissed its foreclosure suit — Leban granted HSBC’s request to sell the condo and scheduled a public auction for July 22, 2009. The company did not explain its reason for seeking the dismissal.

In April 2009, the couple appealed the ruling to the 3rd District Court of Appeal on the grounds that the twin foreclosure suits hurt their defense.

The Ruscalledas were able to postpone the public sale by filing for bankruptcy protection, an action that temporarily places foreclosure suits on hold. U.S. Bankruptcy Judge Robert Mark discharged their
bankruptcy case in December and authorized the bank to sell the condo. A new auction date has yet to be set, Barnet-Backer said.

“We don’t want the condo for free,” said Glazy Ruscalleda, an office manager for a company that services ATM machines in Miami. “We want lower mortgage payments … We want a loan modification.”

Her husband, Jose, 33, is unemployed and her salary can’t cover their $1,500 mortgage payment, she said.

The Ruscalledas bought the two-bedroom condo in Hialeah in 2006. They paid $199,900 for the 1,000-square-foot unit now appraised by Miami-Dade County at $96,000 for tax purposes. The couple stopped
paying their mortgage in early 2008.

The couple scored a victory earlier this month when the appellate court reversed the final judgment granted by Judge Legan.

The 3rd DCA ordered the trial court to start the HSBC suit over and allow the Ruscalledas to respond to the complaint and defend themselves.

“We go back to square one, as if they had just been served with the new lawsuit,” said Barnet-Backer, who represented the couple with attorney John Ruiz.

The appellate court ruled “the trial court abused its discretion by denying” the couple’s requests to postpone the final summary judgment hearing and transfer the case.

Now, the Ruscalledas have a new opportunity to fight for their home. Barnet-Backer is already preparing her clients’ defense. She will argue HSBC has no right to foreclose on the loan for two reasons:

■ It didn’t own the loan at the time it filed for foreclosure.

■ American Home Mortgage, the first to file the foreclosure action,
was the only one with jurisdiction to seek a judgment against the

HSBC could move to dismiss the case and re-file it now that it owns the mortgage.

While the 3rd DCA sided with the Ruscalledas, the ruling fell short of addressing one of the biggest issues in the foreclosure defense front: a lender’s legal standing.

Barnet-Backer said the 3rd DCA likely feared a statewide legal backlash if it had addressed the issue of standing.

“I think they were concerned … that an opinion of such magnitude, as to the standing issue, would resonate across the state [and] would have a significant impact,” she said.

Foreclosure defense lawyers frequently demand lenders prove they own the note and the assignment of mortgage before they file a foreclosure lawsuit. If they don’t provide proof, they are not entitled to
foreclose on the property.

Miami-Dade Circuit Judge Jennifer Bailey, who was not involved in the Ruscalledas’ case, said some clarification on the issue is needed.

“There isn’t an appellate opinion that I am aware of that says point blank you need a note and an assignment of mortgage or you need a note or an assignment,” said Bailey, who since last year has headed a
Florida Supreme Court task force on residential mortgage foreclosures.

For now, Judge Bailey said she follows case law that says “the mortgage is collateral to the note; so, if you have the original note, you have the right to foreclose and it is not essential to have an assignment of mortgage.”

The decision is a 2004 opinion from the 4th District Court of Appeal in WM Specialty Mortgage V. Alan F. Salomon.

Paola Iuspa-Abbott can be reached at (305) 347-6657.

You are not Alone in filing Bankruptcy

Open to the Public- Boca Event

Time: June 25, 2010 from 9am to 4pm

Location: Boca Raton, FL. Palm Beach County

Street: 501 E. Camino Real

City/Town: Boca Raton, FL 33432

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Event Type: networking forum, seminars, hero appreciation, fradulent document graveyard

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Assessing the Changing World of Civil Procedure Post-'Twombly,' 'Iqbal'

Jeff Jeffrey
The National Law Journal
June 21, 2010

The impact of two landmark Supreme Court rulings that changed the standards civil lawsuits must meet to proceed is still unclear, a panel of lawyers said Friday during a discussion at the American Constitution Society's annual conference.

The panel, titled "Access to Federal Courts after Iqbal and Twombly," was billed as a freewheeling "bull session" by moderator Arthur Miller, a law professor at NYU Law School.

Miller opened with a brief explanation of Bell Atlantic Corp. v. Twombly, an antitrust case that established the requirement that civil complaints be demonstrably "plausible," and 2009's Ashcroft v. Iqbal, which expanded that requirement to all federal civil complaints.

Plaintiffs lawyer Elizabeth Cabraser, a partner at San Francisco's Lieff Cabraser Heimann & Bernstein, said the plausibility requirement has forced her to reject some cases that she might have taken on prior to the two decisions because "often the truth is implausible on its face." She said that the cases that are never brought can be the cases that would be most important.

Suzette Malveaux, a law professor at Catholic University's Columbus College of Law, described what Miller called a "catch-22" created by Twombly and Iqbal. "Often in discrimination cases, the plaintiff doesn't have access to the information that would push a case from possible to plausible. But because you have to have plausibility before a complaint can move forward, getting access to that information becomes impossible," Malveaux said.

But John Freedman, a litigation partner at Arnold & Porter, said his clients are filing motions to dismiss more often because of the new standards, but added that statistics compiled by the Administrative Office of the U.S. Courts show that the number of cases that are actually dismissed hasn't changed much since the two rulings.

After agreeing with Freedman, Andrew Pincus, an appellate partner at Mayer Brown, said that the issue at the heart of both Twombly and Iqbal is the cost defendants have to pay to provide the type of discovery required in civil disputes. "For even a small or middle sized case, the cost of discovery can be between $2 million and $3 million."

Besides, Pincus said, "If you look at what's been going on in the lower courts, this is less a sea change as it is a recognition of what was already going out there in the trenches."

That may be, said Judge W. Louis Sands of the U.S. District Court for the Middle District of Georgia, but those cases do make it more challenging for pro se plaintiffs to get their complaints past the initial stages of pleadings before being dismissed. Additionally, Sands said, until a body of case law can be developed, there's little to guide the trial court on which cases should be dismissed."

Judge Diane Sykes of the 7th U.S. Circuit Court of Appeals said she could understand the "alarm" of plaintiffs attorneys who may feel their clients face a higher threshold before they can file a complaint. But she went on to say that "eventually a body of case law will be developed to tell courts how heavy handed this standard needs to be." In the meantime she said, "I expect most judges to be cautious in applying these standards."

Malveaux posited a way to fix the allegedly shifting standard for filing a civil complaint. She said that judges could weigh in on a case sooner and allow for limited discovery on a few key points that might "push the case over the line from possible to plausible." Freedman noted that he has seen that approach already being used in some of the cases he has handled for clients.

Pincus said that the approach described by Malveaux and Freedman could be a good way to get to a "rough cut" version of the case and limit lawsuits to the "real questions." "What we have is a legal system that seeks to answer every question and introduce every piece of evidence," Pincus said. "But if we could be satisfied with 'most' instead of 'all' it would be a major improvement."

GSEs Extend Forbearance to Borrowers with Chinese Drywall Problems

Government-backed mortgage giants Fannie Mae and Freddie Mac announced Friday that they will grant forbearances to borrowers experiencing problems as a result of the defective wallboard.

Analysis: Debt Relief Firms Putting Debtors in a Deeper Financial Hole - Why you should see a Bankruptcy Attorney Instead

The long recession has delivered an abundance of customers to the debt settlement industry as debt-saturated Americans continue suffering lost jobs and income, sliding toward bankruptcy, the New York Times reported on Saturday. The settlement companies typically harvest fees reaching 15 to 20 percent of the credit card balances carried by their customers, and they tend to collect upfront, regardless of whether a customer?s debt is actually reduced. State attorneys general from New York to California and consumer watchdogs like the Better Business Bureau say that the industry?s proceeds come at the direct expense of financially troubled Americans who are being fleeced of their last dollars with dubious promises. Consumers rarely emerge from debt settlement programs with their credit card balances eliminated, these critics say, and many wind up worse off, with severely damaged credit, ceaseless threats from collection agents and lawsuits from creditors. As the industry has grown, so have allegations of unfair practices. Since 2004, at least 21 states have brought at least 128 enforcement actions against debt relief companies, according to the National Association of Attorneys General. Consumer complaints received by states more than doubled between 2007 and 2009, according to comments filed with the Federal Trade Commission.

Banking Lobbyists Make a Run at Reform Measures

As Congress rushes this week to complete the most far-reaching financial reform plan in decades, the banking industry lobbyists are pushing for provisions to undercut a central pillar of the legislation, known as the Volcker Rule, which would forbid banks from using their own money to make risky wagers on the market and would force them to sell off hedge funds and private equity units, the New York Times reported today. To secure the support needed for their bill, Senate negotiators are leaning toward creating a series of exemptions to the Volcker Rule that would allow banks to continue to operate these businesses as investment funds that hold only client money. The three main changes under consideration would be a carve-out to exclude asset management and insurance companies outright, an exemption that would allow banks to continue to invest in hedge funds and private equity firms, and a long delay that would give banks up to seven years to enact the changes.

Sales setaside in Illinois

The Illinois legislature passed an amendment to its foreclosure statute allowing a borrower to undo a foreclosure sale if the borrower proves s/he applied for a HAMP loan modification, and that the property was nevertheless sold in material violation of the HAMP program guidelines.  Illinois Governor Pat Quinn is expected to sign the legislation into law shortly, and the amendments should become effective on January 1, 2011.

Separately, two Illinois counties also are implementing mandatory foreclosure mediation programs.

Foreclosure Mediation Program - Cook County, IL (Chicago area)

The Cook County Mortgage Foreclosure Mediation Program provides free assistance to Cook County homeowners in foreclosure.  Although the program officially started in April of 2010, implementation is beginning now.

In order to qualify, the borrowers must: (1) be residents of Cook County, Illinois; (2) have received a foreclosure summons from the Cook County Court; and (3) live in the building in foreclosure – which may be a single-family home, single-family condominium or apartment building with four or fewer units.

The qualified borrowers are directed to call the toll-free help line to schedule a free meeting with a housing counselor. After meeting with a housing counselor, homeowners will have the opportunity to meet with an on-site attorney to discuss the housing counselor’s recommendations and prepare for a court date that will determine whether the foreclosure case can be mediated with the lender.

Program assistance is provided by the Chicago Bar Foundation, Illinois Housing Development Authority, The Chicago Community Trust, The Center for Conflict Resolution, the Chicago Legal Clinic and Chicago Volunteer Legal Services.

Foreclosure Mediation Program - Will County, IL (Joliet area, southwest of Chicago)

Similarly, the Will County mortgage foreclosure mediation program provides free assistance to Will County homeowners in foreclosure.  The program was announced on June 7, 2010, and is being set up for implementation now.

Under rules approved by the Illinois Supreme Court and promulgated by the Twelfth Judicial Circuit (Will County), all residential foreclosure actions are automatically scheduled for a mandatory pre-mediation conference within 60 days.

Along with the summons, defendant borrowers will be given a form explaining the mandatory mediation program. The form will state that the case will be evaluated by an outside mediator for possible loan modification or other resolution. It will also state that if modification is not deemed feasible or if the borrower does not want to save the home, then mediation may still be used to assist the parties in discussing a consent foreclosure in which the lender will waive any deficiency against the borrowers. The form also will advise the borrower to bring certain financial information, and will contain a list of local counseling agencies available to assist borrowers in foreclosure. All financial information will be held in confidence by the mediator and not disclosed to any other party without the consent of the borrower.

An independent mediator will determine at the pre-mediation hearing whether the borrower meets initial criteria of having greater monthly income than expenses in order to qualify for a loan workout or modification. If the borrower does not meet the criteria or does not wish to keep the house, the mediator may seek to determine whether the borrower can deed the property to the lender or consent to a judgment waiving any deficiency judgment against the borrower. If the borrower meets initial criteria for a loan modification or wishes to surrender the property in a consent foreclosure or other arrangement, the mediator will scheduled a mediation conference within 30 days.

At the mediation conference, a representative of the lender must appear in person with full settlement authority and participate in good faith in the mediation process. Failure to attend or to participate in good faith will result in sanctions by the court, including possible dismissal of the action. If the borrower fails to appear without excuse, the mediation will be terminated and the matter will be referred back to the trial court. Any agreement will be reduced to writing and signed by the parties and their counsel.

The Circuit Court may retain jurisdiction of the case for a trial period. If the borrower fails to successfully modify the loan, or if no agreement is reached, the foreclosure will resume in the Circuit Court.

The Will County Chief Judge has compiled a list of qualified mediators, who are either retired judges or attorneys with a minimum of five years experience in the mortgage foreclosure field. Any mediator will be prohibited from practice in residential mortgage foreclosure proceedings in the Twelfth Circuit in any capacity, including bidders at the Sheriff’s sales. Mediators will be paid $150 for each file. To finance the program, the Supreme Court has authorized an increase in the filing fees paid by a plaintiff for all foreclosures in the Twelfth Judicial Circuit (Will County) from $276 to $426.