DEAR BENNY: I am having problems with my mortgage. I fell on some hard times lately and fell behind on my mortgage payments. My mortgage lender has been dragging this out for over a year. I have been set up on two separate trial payments and made them both with no problem. Now my loan has gone into foreclosure. The lender keeps telling me that I am under review. Can you tell me what options I have to try to keep my home? –Hodges
DEAR HODGES: During the recent winter season — with snow and lenders having legal problems when they did not have the original promissory note — the foreclosure rate throughout the country fell. However, with spring on the horizon, lenders are back to foreclosing.
Unfortunately, your situation is all too familiar. Lenders arrange payment plans, whereby the loan is modified, and even if the homeowner is diligent in making the requirement payments, suddenly the lender issues the foreclosure notice.
Communicating with lenders is often next to impossible. You have to call a phone number, and if you are lucky, you will finally get to talk to a real, live person. But that person often has no real authority, and if they see that you are now in foreclosure, you are told to talk with the attorney handling that procedure.
And if you can finally get to talk with the lawyer, he/she tells you that you have to discuss your situation directly with your lender.
It’s time to stop this merry-go-round called "chase the lender." Here are a few suggestions:
First, if your lender is a national bank, contact the Office of Comptroller of the Currency and file a complaint. This is a federal agency that regulates national banks, and banks must respond to the OCC on any complaints within 10 days.
Next, contact the congressman and senators in your state. Presumably, you are a registered voter, and one of the responsibilities of a legislator is to resolve constituents’ issues.
Next, see if your state has any foreclosure-relief programs.
Finally, if all else fails, see if you can arrange a short sale, so that at least you won’t have a foreclosure on your record.
DEAR BENNY: I’ve been a real estate broker, investor and landlord for 25-plus years. Now my main business is here in the world of mediation, where I specialize in areas of home and family. I mediate civil matters, where in Maine we have a rule requiring alternative dispute resolution (ADR) in most civil cases, and also mediate under Maine’s strong Foreclosure Diversion Program.
The results here in Maine have been very positive and I expect that about half of the cases I’ve mediated will result in dismissal of foreclosure action and homeowners staying in their homes. As to the other half, most of these homeowners now have a much clearer idea of their options going forward, whether it be the need for more income, selling the home before they lose it to the lender, or specifics on deed-in-lieu of foreclosure or short sale.
Even here in Maine, there is nothing preventing a homeowner and servicer from discussing mortgage relief directly, and this is happening all across the country. It is amazing, however, how that conversation is more meaningful and productive when we mediate in a court setting with a servicer representative with authority at the table (if only telephonically).
We also have a buyer-seller mediation program from a mediation clause in the purchase and sales agreement (since 1991) promulgated by the Maine Association of Realtors.
An interesting discussion is becoming more prominent between the legal and mediation communities about the specific role of mediators in legal disputes. Central to this is the question of whether the mediator should be more facilitative (focused on allowing the parties to find their own solutions based on what works best for their needs and relationship) or evaluative and problem-solving (focused on advising parties of the likely court outcome and using the mediator’s judgment to suggest party action.) This is a huge question that will determine the evolution of mediation practice.
The bottom line for me is that the client will never be best served by substituting my judgment for the client’s, and that conflict often has elements aside from legal that must be addressed to fully satisfy the client. Recent research continues to support this perspective.
As long as we continue to stay in the rut of "old-school" mediation, we’ll never fully capture its benefits. Mediators and attorneys can think of their relationship as collaborative rather than competitive. — William
DEAR WILLIAM: Many thanks for your interesting and thought-provoking e-mail. Mediation on foreclosure issues is cropping up all around the country; many states (and my own Washington, D.C.) have enacted legislation to mediate with their borrowers before they can pursue litigation.
Unfortunately, too many homeowners have been unable to get in contact with their lender to discuss their financial problems and issues. Mediation, at the very least, gets the parties talking to each other.
DEAR BENNY: In the course of refinancing our mortgage on a vacation home I learned that our condo association does not have a master flood policy on the various buildings that form our community — even though the bylaws state that the board shall obtain and maintain flood insurance.
I asked the board president how the board justifies ignoring a clean mandate spelled out in the bylaws.
After several months of evasive answers, a board member who is an attorney wrote me as follows, "Under Delaware law a board is permitted to deliberate and make decisions under the business judgment rule. You have presented an issue and this volunteer nonprofit board is taking the steps necessary to make an informed reasoned decision. I think you should be mindful of the doctrine of the law of unintended consequences" — i.e., increased dues.
I am not an attorney but the implication of the statement seems to be that a Delaware board can ignore bylaws as long as it is deliberating about those bylaws. The board has had 10 years since its inception to obtain flood insurance as required by the bylaws. How much deliberation does it need? The reference to unintended consequences seems irrelevant to me, as the bylaws are pretty clear and do not allow for unintended consequences.
My interest in this is financial. If the entire association is under one flood policy and the cost of that flood policy is equally divided among owners, my cost will be substantially less than paying for an individual policy as I now do, as required by my mortgage holder.
Is there anything I can do short of going to court? That’s an expenditure I’m not willing to undertake! The status quo poses a hazard to all owners: Those owners who do not have a mortgage are not required to carry flood insurance.
Let’s say there are two such owners in a six-unit building and there is a serious flood. It’s very doubtful that those owners could come up with their share of the repair costs out-of-pocket leaving the other owners to either pony up or abandon the building. –Albert
DEAR ALBERT: There are two legal concepts governing boards of directors. In some states, the business judgment applies. This started in Delaware (where your association is located) in order to protect those who serve on corporate boards. Oversimplified, those courts that have accepted this concept take the position that unless a board member (or the entire board) is doing something illegal, or unethical, the courts will not interfere — even if the board is making a mistake.
In other states (and in Washington, D.C., where I practice law) the courts have rejected the business judgment rule and instead have adopted a "reasonableness test." In other words, was the action of the board reasonable under all of the circumstances?
So in those states that have adopted the business judgment rule, it is possible that a board can ignore a clear directive spelled out in the bylaws. It’s not a good idea, but some courts throughout this country have allowed this.
However, if, for example, the association budget contains a line item for the flood insurance, and there is money available to pay that line item, I think that a good argument can still be made that the board should abide by its bylaws.
Clearly, this is a slippery slope; if the board can get away with not paying the flood insurance (even though it is mandated in your bylaws), what else can they get away with?
In a state where the reasonableness test applies, the court will have to review all of the facts in order to decide whether the board had the right to ignore the bylaws. So if there is enough money in the budget — and if you are in a flood zone — I suspect the court will find the board’s decision unreasonable.
Bottom line: Condominium owners must vigilantly monitor their board’s decisions. If you don’t agree with their decisions, mount a campaign with as many fellow owners as you can, and call for a special meeting of the association. Your bylaws spell out the procedure for this process.