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Permalink Reply by Nicole Bohe on July 24, 2011 at 5:45pm

I'm unclear who the parties would be at the mediations? Would it be the homeowner and the banker who issued their mortgage? Would it be the bank's lawyer? (The article talks about one of the bank's "servicers" attending the mediation via speakerphone)

Do banks like this idea of mediating loan modifications? Will the modifications actually help - if they can't pay the original payment, will they be able to pay anything? Do you think these could be reasons why these programs are not working?

And is there a bigger effect happening here on ADR in general? Both parties are having negative mediation experiences, what will this do in the future of an ADR practice?

I attended the University of Maryland and lived in Prince George's County for those years when the housing "bubble" was just about to burst. That area was going through a lot of changes then and another slew of changes now. It will be interesting to see how it all comes out in ~5 years....

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Permalink Reply by John C. Turley on July 26, 2011 at 10:05pm

 

In Michigan, mediation is taking place within the mortgage holder short sales process in lieu of foreclosure. It is not an exact model for adoption or emulation for negotiation or mediation since the short sell expert is not necessarily a trained mediator. Every case appears to be unique, although there is a defined process with predictable steps and outcomes in place. Homeowners in danger of foreclosure due to missed mortgage payments as a result of lost jobs or reduced incomes are working with realtors to review their options. Instead of an outright forfeiture of their property within a designated period of time according to law, there are ways for the homeowner to negotiate with the banks to take a lower payoff on the balance rather than the bank assuming ownership of the property. The defendant may also avoid bankruptcy.

What does not happen is a sit down between the mortgagee and the mortgagor with an ADR specialist acting as the neutral to mediate the terms and the final payoff. The negotiations do not take place online entirely. It is more of an exchange of data and documents between the financial institution and the party in default via the short sale expert who acts as the negotiator and in effect the mediator. Terms are concluded; however, it is not as if respective positions are heard and facilitated by the middle person. It is more like "you owe us $____, and we agree to accept $____. I can pay you $______ contingent upon the sale of my home with $____ in cash, etc. The short sale expert negotiates with both parties to reach a financial agreement with terms.

Here is how the mediation takes place in Michigan. The bank is notified that the borrower wishes to proceed to a short sale of their property. A real estate agent finds a buyer who will buy the property in default for an agreed upon amount. The bank wins because they will receive a negotiated payoff instead of another home that they do not need nor want. The new buyer moves into the foreclosed home and may write their new mortgage with the bank that originally foreclosed. The seller of the property or more precisely the short seller may walk away from the foreclosed property or negotiate a new mortgage for a new home with their original bank. The banks are generally satisfied because they receive some monies rather than none with the opportunity to write 1 or 2 or sometimes 3 new mortgages.

The key to this transaction is to work with the bank's loss mitigation department. Here is where the negotiations take place. The short sales expert is akin to an ADR specialist because this person knows how to get the deal done to satisfy the mortgage holder, the lender, and the realtors. The latter receives sales commissions on the properties in question. It is a WIN/WIN for all parties including the negotiator or short sale expert if the process is done correctly. The sale breaks down when the process is not observed. Only 5% of the experts know what they are doing in this field since the practice is tainted by corruption, greed, unethical practices, stupidity, and ineptitude.

As a trained mediator, negotiator, and ADR specialist, we are completing these types of sales in Michigan. I also hold a real estate license although one is not necessary to do the above. It is not so much a legally mandated issue as it is one of timing and working with the banks to stop the foreclosure process and to accept for example $300,000 instead of $555,000 or whatever amount is due.

When I wrote my paper for online mediation and negotiation in Professor Rainey's course, I focused on the 30 day window between the foreclosure notification by the bank to the mortgage holder and the resumption of the default process. I thought that this 30 day cooling off period was the window of opportunity for mediation. Actually, the window stays open longer since the entire short sale process may take as long as 6 mos. The fastest short sales are completed in 60=90 days from start to finish. The key is to start the process with the banks ASAP. The banks are always the strongest party; however, the skill is to negotiate from strength since the banks dislike foreclosures.

To answer the question, the mediations are proceeding in Michigan under a different format and process than the conventional image of disputing parties with the ADR specialist as the facilitator. The process is complex and demanding; however, it works well when in the hands of the experts such as my wife.

JCT

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Permalink Reply by John C. Turley on July 28, 2011 at 8:50am

CLARIFICATION:

Please allow me to clarify my point about the bank writing 1-3 new mortgages.  The short seller of the property does not receive a new mortgage from the foreclosing bank.  The seller may indeed buy another home with a new mortgage.  More precisely the new mortgage will usually be with another financial institution. 

With further discussion and review, the short sale aspect of the real estate business is indeed a case study in negotiation and ADR expertise.  The caveat is that a process just as in mediation must be observed.  The practice is evolving and will be with us for some time since the real estate business will be anything but business as usual, or the way things used to be.  Instead of using the equity in the property for various financial goals, the 21st Century(no pun intended) real estate sale will be a negotiated sale between the buyer/seller/mortgage holder/realtor(s) and the short sale expert to liquidate a traditional long term asset.  A realtor and the short sale expert may be one in the same person.  This is a rare combination because of the required skills and demands to do both jobs well.  This is why I contend that 5% of the experts are competent in this emerging field of negotiation and ADR expertise.

JCT

"The banks are generally satisfied because they receive some monies rather than none with the opportunity to write 1 or 2 or sometimes 3 new mortgages."

JCT

John C. Turley said:

 

In Michigan, mediation is taking place within the mortgage holder short sales process in lieu of foreclosure. It is not an exact model for adoption or emulation for negotiation or mediation since the short sell expert is not necessarily a trained mediator. Every case appears to be unique, although there is a defined process with predictable steps and outcomes in place. Homeowners in danger of foreclosure due to missed mortgage payments as a result of lost jobs or reduced incomes are working with realtors to review their options. Instead of an outright forfeiture of their property within a designated period of time according to law, there are ways for the homeowner to negotiate with the banks to take a lower payoff on the balance rather than the bank assuming ownership of the property. The defendant may also avoid bankruptcy.

What does not happen is a sit down between the mortgagee and the mortgagor with an ADR specialist acting as the neutral to mediate the terms and the final payoff. The negotiations do not take place online entirely. It is more of an exchange of data and documents between the financial institution and the party in default via the short sale expert who acts as the negotiator and in effect the mediator. Terms are concluded; however, it is not as if respective positions are heard and facilitated by the middle person. It is more like "you owe us $____, and we agree to accept $____. I can pay you $______ contingent upon the sale of my home with $____ in cash, etc. The short sale expert negotiates with both parties to reach a financial agreement with terms.

Here is how the mediation takes place in Michigan. The bank is notified that the borrower wishes to proceed to a short sale of their property. A real estate agent finds a buyer who will buy the property in default for an agreed upon amount. The bank wins because they will receive a negotiated payoff instead of another home that they do not need nor want. The new buyer moves into the foreclosed home and may write their new mortgage with the bank that originally foreclosed. The seller of the property or more precisely the short seller may walk away from the foreclosed property or negotiate a new mortgage for a new home with their original bank. The banks are generally satisfied because they receive some monies rather than none with the opportunity to write 1 or 2 or sometimes 3 new mortgages.

The key to this transaction is to work with the bank's loss mitigation department. Here is where the negotiations take place. The short sales expert is akin to an ADR specialist because this person knows how to get the deal done to satisfy the mortgage holder, the lender, and the realtors. The latter receives sales commissions on the properties in question. It is a WIN/WIN for all parties including the negotiator or short sale expert if the process is done correctly. The sale breaks down when the process is not observed. Only 5% of the experts know what they are doing in this field since the practice is tainted by corruption, greed, unethical practices, stupidity, and ineptitude.

As a trained mediator, negotiator, and ADR specialist, we are completing these types of sales in Michigan. I also hold a real estate license although one is not necessary to do the above. It is not so much a legally mandated issue as it is one of timing and working with the banks to stop the foreclosure process and to accept for example $300,000 instead of $555,000 or whatever amount is due.

When I wrote my paper for online mediation and negotiation in Professor Rainey's course, I focused on the 30 day window between the foreclosure notification by the bank to the mortgage holder and the resumption of the default process. I thought that this 30 day cooling off period was the window of opportunity for mediation. Actually, the window stays open longer since the entire short sale process may take as long as 6 mos. The fastest short sales are completed in 60=90 days from start to finish. The key is to start the process with the banks ASAP. The banks are always the strongest party; however, the skill is to negotiate from strength since the banks dislike foreclosures.

To answer the question, the mediations are proceeding in Michigan under a different format and process than the conventional image of disputing parties with the ADR specialist as the facilitator. The process is complex and demanding; however, it works well when in the hands of the experts such as my wife.

JCT

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Permalink Reply by Nicole Bohe on July 28, 2011 at 1:20pm

Thanks for that additional information John. I think that filled in the questions I had while reading the article. When you said it was more of an exchange of documents rather than a full-on, sit-down process, the images started to come in clearer in my mind as to how this process works.

It definitely seems like an intense process for the homeowners, which perhaps is also hindering participation.

Thanks again for sharing your experience/perspective!

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Permalink Reply by John C. Turley on July 28, 2011 at 3:22pm

Nicole:

You are welcome.  I learned all that I know from my wife who is a subject matter expert in the field of short sales.

Many homeowners do not know that reputable short sale services exist.  A number of the ones advertised are crooks who demand $2,500+ up front and do little or nothing for the homeowner.  We ran across one today where $3K was paid upfront with no results.

We are trying to persuade Michigan government officials to formalize the process and require certification or training.  Lawyers are entering the short sales field;however, it is not necessary to use one if the correct processes and procedures are followed.  Everyone wants extra billable hours.

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