Foreclosure Mediation
Topics on this page:
- What is mediation?
- What happens in mediation?
- What are your mediation goals?
- Do I need an attorney at mediation?
- What happens after mediation?
- Mediation: A Four-Part Video Series
What is mediation?
Mediation is a conversation between a homeowner and lender. At mediation, all parties get together to discuss the mortgage situation and options that will allow the homeowner to keep their home or move out. Lenders usually participate by phone.
Mediation is confidential. This means that anything said in mediation cannot be shared in any other place outside of mediation.
When Can I Request Mediation?
The only opportunity for a homeowner to request mediation that the lender must attend is when the lender serves the homeowner a Final Loss Mitigation Affidavit. Once the lender completes the loss mitigation review, and if there are no available alternatives to foreclosure, a Final Loss Mitigation Affidavit will then be filed and mailed to homeowner.
The Final Loss Mitigation Affidavit may be included in the Order to Docket (OTD). The OTD is the first filing of the foreclosure action in court. It may also be called a “Complaint to Foreclose” or “Notice of Foreclosure Action” If the Order to Docket contains a Preliminary Loss Mitigation Affidavit instead of a Final Loss Mitigation Affidavit, the lender must send the Final Loss Mitigation Affidavit to you at least thirty (30) days before the date of a foreclosure sale. The Request for Foreclosure Mediation form should be included with the Final Loss Mitigation Affidavit. You have 25 days after receiving the Final Loss Mitigation Affidavit to request mediation.
How Do I Request Mediation?
You should submit the Request for Mediation form with the circuit court in the county where your foreclosure case was filed as soon as possible. You should also send your lender's attorney a copy of the request form.
A $50 fee to request mediation must be paid before mediation can be scheduled. If you cannot pay the fee, you can ask the court to waive the fee by filing a Request for Waiver of Foreclosure Mediation Fee with your Request for Mediation. This form is available on the court’s website.
NOTE: This is the only time you will be offered the opportunity to request foreclosure mediation. You will not have another chance if you do not submit your Request for Foreclosure Mediation form and non-refundable $50 fee during the 25-day time frame.
Who Attends Mediation?
All people that are named on the mortgage must attend the mediation. You may bring along a spouse, family member, or friend to support you during mediation. There will likely be an attorney representing the lender. You may bring a lawyer too.
There will also be an Administrative Law Judge (ALJ). The ALJ is not acting as a judge, but instead will be there as a mediator. A mediator is a neutral, third-party who helps the parties try to reach a voluntary agreement. The mediator will not make any decisions about your situation and will not tell the lender it has to take any specific steps in your case.
Who Oversees Mediation?
Mediations are conducted by the Office of Administrative Hearings (OAH). After you file your mediation request, the court forwards your request to OAH for scheduling. OAH will schedule the mediation within 60 days of receiving your request from the court. Once scheduled, OAH will send you a notice with the date, time and location of your mediation. The notice will also include a list of required documents that you and your lender must exchange. These documents must be exchanged at least 20 days before the mediation.
Prior to mediation you must send the following documents to the lender:
- Borrower(s) Information Worksheet
- Request for Foreclosure Mediation
- Federal income tax returns from the two most recent tax years (including schedules and attachments)
- Any previous loan modifications
- Most recent statement of any other loan on your property
- Most recent bill or proof of payment for property taxes and insurance, if you pay directly.
If you have a conflict and need to postpone the mediation, you must contact OAH to request a postponement. All requests for postponement must be submitted at least 5 days before the scheduled mediation.
Foreclosure Mediation from the Maryland Courts
What happens in mediation?
At the start of the mediation, the ALJ who is acting as the mediator will explain the purpose and rules of mediation. The mediator will ask everyone to sign a statement confirming that they understand the mediation rules, including rules relating to confidentiality. Any discussions or offers presented during mediation cannot be used as evidence in later legal proceedings.
The mediator will present a list of potential options that may help you resolve your situation. The lender will review each of these options with you.
You or your lawyer may talk about your situation. You may present pay stubs, income statements, or other documents that show that you can afford the monthly mortgage going forward. All possible options are discussed openly and everyone is free to participate in the discussion.
The end result of a mediation involves many factors. A mediation may end with the lender agreeing to consider a new loan modification application, an acknowledgement that all documents have been received, or a plan to meet certain requirements within a certain amount of time. A mediation may also result in no agreement. The mediator can continue the mediation one time for good cause. The mediator cannot continue the mediation more than once unless all parties agree to the continuance.
Mediation usually lasts 1 to 1½ hours.
If the parties reach an agreement, the mediator puts the agreement in writing and everyone signs it. If you have second thoughts after the mediator puts the agreement in writing, you can decide not to sign the agreement. Your lender can also decide not to sign.
I am hoping to modify my loan. What Should I Take to Mediation?
If you want a loan modification, bring these documents to the mediation, even if you’ve submitted them before:
- Newly prepared and completed lender application
- 3 months of current bank statements
- At least 1 month of current pay check stubs
- Currently dated Hardship Letter
- A hardship letter is a letter that a homeowner writes to the lender explaining the hardship that they are experiencing that caused them to miss payments. The letter should provide key background information on the issues because it can serve as a starting point for the lender to consider loan modification. The letter may explain ways the homeowner plans to fix the issues and what they want from the mediation, such as loan modification or a repayment plan.
- If you have income other than employment, such as Social Security or retirement, bring the following:
- Social Security income documentation, approved for 1 year or more
- Social Service income documentation (food stamps, etc.), approved for 1 year or more
- Disability income documentation, approved for 1 year or more
- Retirement income documentation, approved for 1 year or more
Bring 3 copies of all documents. You will need 1 for the ALJ, 1 for the attorney representing the lender, and 1 for your records. If you are trying to get a loan modification, the documents you bring should show that your income is enough to pay all of your monthly debts, including mortgage payments and any arrearage.
What are your mediation goals?
If your goal is to obtain a loan modification:
You need to present an accurate and favorable financial picture. That may include finding ways to increase your income by finding a second job or taking on a renter and decreasing your debt by thinking what non-essentials can be removed from your costs. You may also need to consider bankruptcy if you have large consumer debt (for example, credit cards) or a second mortgage.
The Debtor Assistance Project ("DAP") provides legal advice to individuals without an attorney. The DAP can answer questions about bankruptcy, including how bankruptcy may be used to help prevent foreclosure. You should seek advice from a bankruptcy attorney if you are considering this as an option. Also, you should consider working with a housing counselor, if you aren’t already. A housing counselor can help you determine if you have a sustainable solution, meaning that you have enough income to pay all your household debts plus your monthly mortgage payment. You can find a free housing counselor by calling the HOPE Hotline at 888-995-4673.
Your lender may count some income sources but not others. Income that the lender will recognize includes wages, Food Stamps, Social Security, Social Security Disability income, retirement pensions, Social Security Supplemental Income, Maryland Electrical Assistance Program and any other income that is not temporary. The lender will not recognize unemployment compensation, temporary disability, or income that is not reported to the Internal Revenue Service (IRS).
Your lender may, but does not have to, accept a new loan modification application and agree to pause the foreclosure sale while they review it. If your lender denies the new loan modification application, then they will proceed with the foreclosure sale. If your lender agrees to review a new application, establish clear timelines for when you must submit any new documentation, and how long it will take to review the application. The lender will be basing their decision on the documentation you provide, lending regulations and the guidelines from the mortgage investor.
If your goal is to move out:
Prepare your best argument for your position. For example, some lenders are willing to offer ‘Cash for Keys.’ This means that the lender will pay you to move out. The lender may be willing to negotiate a payment in exchange for your agreement to move out by a particular date and leave the property in a clean, good condition. This could be up to a few thousand dollars.
Do I need an attorney at mediation?
You do not need an attorney to represent you at mediation. If you are prepared and bring whatever documentation you will need to support your goals, you can proceed on your own. However, an attorney can serve as an additional advocate for you and may be able to identify potential legal issues or other options available to you. You can contact the HOPE Hotline at 888-995-4673 to find out if you are eligible for free legal representation.
What happens after mediation?
If you and your lender agreed that you would provide updated documentation, submit all the documentation to the lender’s attorney right away. Keep a copy of what you submit and note when you submitted it for your records.
If you and your lender agreed to any other follow-up, make sure to do the things you committed to doing.
If you and your lender did not come to an agreement, think about your next steps. What will happen if your house is sold at a foreclosure sale? Have a back-up plan including how you will leave the home and where you will go. Mediation does not guarantee that you can keep your home. Have this conversation prior to mediation, as the timeline for foreclosure after mediation is short. If you do not reach an agreement at mediation, a foreclosure sale can happen 15 days after mediation.
Mediation: A Four-Part Series
Part 1: What is Mediation? from the Maryland Courts
Part 2: How Do I Find a Mediator? from the Maryland Courts
Part 3: How to Participate in Mediation from the Maryland Courts
Part 4: Common Questions After Mediation from the Maryland Courts