Foreclosure Avoidance Mediation Program May Be Expanding to Judicial Foreclosures
Lane Powell Shareholder Peter Hawkes authored an article in the Spring 2013 issue of Oregon Bankers Association’s Banking Matters magazine titled “Foreclosure Avoidance Mediation Program May Be Expanding to Judicial Foreclosures.” The article is about the new proposed litigation that would expand Oregon’s Foreclosure Avoidance Mediation Program. Last year, Oregon legislature created the program as an answer to the large number of nonjudicial foreclosures and the perception that borrowers were not being given an adequate opportunity to work out their delinquencies before losing their properties to foreclosure. The program requires lenders to first seek mediation with their respective borrowers before nonjudicially foreclosing on the borrowers’ properties. In the article, Hawkes discusses the problems with the mediation program, and notes that lenders have largely been able to avoid it by proceeding with judicial foreclosures instead. However, the legislature is now considering extending the mediation requirement to judicial foreclosures as well, which could render it unavoidable for lenders.
The mediation program is in many ways problematic. It creates significant delay and cost in mitigating losses on delinquent loans that, in many cases, borrowers cannot realistically repay and lenders have already unsuccessfully sought to modify. And, because the mediator is hand-picked by the Attorney General’s office, there is a risk that he or she may be biased toward borrowers, and have a different view than the lender of what is a “reasonable” modification. The mediator may then claim the lender is not acting in good faith and refuse to issue a certificate of compliance to the lender if the lender is not willing to accept what the mediator deems to be “reasonable.”