Florida homeowners faced with losing their homes are now entitled to undergo mediation before a foreclosure is finalized, the state's Supreme Court has ordered.

In an administrative decision issued yesterday, the Florida Supreme Court endorsed the recommendations of the state Task Force on Residential Mortgage Foreclosure Cases, which recommended the adoption of a statewide mediation program to intervene between borrowers and lenders prior to foreclosure.

The order requires that borrowers have the opportunity to meet with their lender and, with the aid of a certified mortgage counselor, try to work out an alternative solution to foreclosure. The lender would be able to proceed with foreclosure if no agreement is reached.

A mediated agreement would not necessarily enable a homeowner to maintain ownership of the property. While a loan modification that would enable the borrower to keep the home is one possible outcome, other negotiated agreements might include short sales or simply surrendering the property to the lender through a deed-in-lieu in return for other considerations.

The order applies to all residential mortgages on homestead property that originated under Truth in Lending regulations. It does not apply to second or vacations homes, or to commercial or investment properties.

Participation is not mandatory for borrowers, who may chose to opt-out. Participation by lenders is required. Mortgage mediators must be from HUD-certified nonprofit credit counseling agencies.

Under the order, a mediation must be scheduled between 60 and 120 days after a foreclosure is filed, unless the borrower opts out of the process.

The Task Force was formed in response to Florida's ongoing foreclosure crisis and issued its report in August. The state currently has the most foreclosure starts in the nation and the largest inventory of foreclosed properties, as well as the third-highest mortgage delinquency rate. At the time of the order, approximately 456,000 foreclosure cases were pending statewide.

    Published on December 30, 2009