Foreclosures continue to rise in Florida and other U.S. states hit hard by the real estate crisis. Several Florida counties are trying to fight back against the problem by bringing banks and homeowners together to find a way to save troubled mortgages from foreclosure.
Real estate experts say now may be a great time to buy a home in south Florida, if only because so many cheap foreclosed homes are available.
The flood has created chaos for local judges, who must rule on every foreclosure case. But another option is to avoid the courtroom and order both the bank and the home owner into a mediation room.
Rod Petrey, head of the Collins Center which organizes out-of-court mediation programs, says that option has been ignored in Florida until now.
"One thing we are missing is for the two parties to talk to each other," Petrey said. "When a lender calls a borrower, a lot of the language has been: 'Pay up, deadbeat.' Is that the best way to have a conversation with the borrower?"
Some borrowers also complain that banks or lending firms do not return their calls or that it is too hard to get in touch with the right person in charge of their mortgage.
Petrey says some of those communication problems can be avoided with court-ordered mediations, which the Collins Center is helping to organize in several areas. The non-profit group recently held a training session for about 200 trained mediators in the Miami area.
One of the trainees, Joan Bickerstaff, said a mediation session may provide a number of alternatives not available in a foreclosure trial.
"The court system is overwhelmed and probably does not provide the best solution. The discretion that the court has in a foreclosure proceeding is fairly limited," she said.
Courts have no authority to order a bank to change the terms of a loan or compel a homeowner to continue making payments on a home. But at a mediation the two sides can agree to adjust the loan, reduce the monthly payments or decide to sell the house at a lower price and terminate the mortgage.
Experts say the process will not work for every homeowner in trouble, especially people who have lost their jobs or those who borrowed way too much in the first place.
Rod Petrey says the key to mediation is a credit counseling session, to determine what a home owner can afford.
"A lot of lenders say we have not seen information from that borrower in years, we do not even know if they have a job or not. Plus for the borrower, it really forces them to add up what they got and what they do not have," Petrey said.
The Collins Center has organized 15 mediations in Miami. Former judge Tom Bateman, who advises the center, says the sessions are confidential, but the results have been encouraging.
"Nine had reached what we call a successful resolution, ... and they agreed to adjourn and continue negotiating after the mediation session," Bateman said.
Similar mediation programs have been operating for months in states like Ohio and New Jersey, where they are credited with limiting new foreclosures.
But Miami realtor Enrique Lopez doubts whether it will work in Florida, where home prices have plunged in the past two years. He says there is no incentive for home owners to negotiate a deal to remain in a house worth far less than the mortgage on it a situation known as being "upside down".
"If you are an attorney or realtor, why would you advise your client to remain in a property that as an investment makes no sense to do any more? How many years before a property that is $50-60,000 upside down will recover its value?" Lopez asked.
Lopez says home owners may be better off accepting a foreclosure in that type of situation. He says many people can find a similar house for a lot less money, now that real estate prices have fallen so far.