Courier News

Foreclosure-mediation Program Widens

Courier News / — Tuesday, November 4, 2008


MIDDLESEX COUNTY — The New Jersey judiciary is stepping in to calm the waters for Garden State homeowners who have defaulted on their mortgages.

The courts in Middlesex County recently launched a pilot program to bring lenders and distressed homeowners to the negotiating table. The program will now be duplicated in courthouses around the state — by the middle of this month in Union County and in Somerset County by mid-December.

"We're ready to go," said David Trombadore, president of the Somerset County Bar Association. Volunteers are being lined up to participate in the program and a one-day training session is scheduled for Dec. 1, he said.

Superior Court Judge Harriet Derman will oversee the program in Somerset County.

Local officials are awaiting final instructions from the state Administrative Office of the Courts, Trombadore said.

"The program is really designed to get in front of what is obviously going to be a deluge of cases," said Travis Francis, assignment judge of Superior Court, New Brunswick.

Francis and Judge Frank Ciuffani, who both spearheaded the new program, have reached out to the Middlesex County Bar Association for volunteers. About 70 attorneys have so far stepped up to volunteer as mediators on behalf of homeowners and more are expected, Ciuffani said.

Few banks want to increase the number of houses in their housing inventory much less carry the costs of taxes and upkeep that taking over a home entails, said Kevin Wolfe of the Office of Foreclosure for the state.

Refinancing or changing the terms of the original home loan often result from mediation. Those modified terms could conceivably mean that a bank would actually reduce the principal on a loan, Wolfe said.

That can sometimes mean that tens of thousands of dollars will be forgiven.

Sometimes loans are rearranged so unpaid amounts get tacked on to the end of the life of the loan.

But there is also the possibility that someone is so deeply mired in debt or has so little income that no mediation can help.

A short sale — a sale where more is owed to the bank than the sale of the house will yield — is another option.

"It really depends on the ability of the homeowner to pay," Ciuffani said.

Mediation in foreclosure cases is not a novel concept. The program, however, now makes it mandatory for people who contest foreclosures.

What is novel is that the program also targets those people who do not fight foreclosure actions. Uncontested foreclosures account for 95 percent of all those actions in New Jersey, Ciuffani said.

He said that latter group is not often heard from. If heard from at all it's when the sheriff places their home on the auction block. A small percentage of those people who have not contested the foreclosure action ask the court to stall that sale.

The main focus of the program is to help those people before they come to the end of the line. Even when a default judgment has been entered against someone who stopped making mortgage payments, that homeowner can still sign up for mediation.

But it also aids the banks seeking to get a loan "performing" again.

"It works to everybody's benefit," Francis said.

As with all actions, the courts remain neutral.

The number of foreclosures has been growing, causing concern that a flood of new actions could soon hit the court system.

During the past year, there were 46,130 foreclosure filings in New Jersey, a 46 percent increase from the year before.

In September, there were 3,997 filings, compared to 1,400 in September 2006.

Francis stressed that homeowners must step forward on their own. There is no automatic admission into the program, except for those fighting foreclosure actions in court.

But stepping forward has become a lot easier.

Wolfe said that distressed homeowners have taken the advice of many financial news reports have tried placing calls themselves to their banks to try to rework a deal.

"People have been getting bounced from phone to phone," he said.

The foreclosure remediation program puts the heft of the court system at the disposal of failing homeowners looking to renegotiate with lenders.

Homeowners must first go through one of three nonprofit agencies in Middlesex County to get counseling on their financial situation, Wolfe said.

The organizations are the Faith Fellowship Community Development Corp. in Sayreville, the Puerto Rican Action Board in New Brunswick or New Jersey Citizen Action in Highland Park.

Volunteers from the bar association have been volunteering as mediators in foreclosure cases for a few years, but those case were limited in scope. They involved those homeowners who contested a foreclosure action.

The new mediation program will not provide a happy ending in every case, but will in some, Ciuffani said.

"It's worth the effort," he said. For more information on the program, call 609-292-8470 during business hours.

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