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County program seeks to reduce foreclosures

Banks urged to talk with homeowners

January 12, 2011 | 08:41 AM
Elkhorn — Walworth County Judge John Race said he was disturbed by the stream of homeowners facing foreclosure who came through his courtroom.

"These are good people fallen on hard times," Race said.

"It isn't often I am disturbed by what I do in court," Race said in a recent face-to-face interview. But he said he was watching people coming into his court in tears, frustrated in their efforts to renegotiate their mortgages, and frightened by the summons and complaint for foreclosure filed against their homes.

Race said he was also disturbed that the banks holding the homeowners' mortgages were often unwilling to negotiate.

Frequently, homeowners would seek to renegotiate their mortgages only to discover their paperwork and documentation were lost within the bank bureaucracies.

Meanwhile, foreclosure procedures grind along relentlessly.

However, starting this month, as many as 10 foreclosure cases in Walworth County will go to negotiation before a volunteer mediator through the new Walworth County Foreclosure Mediation Program.

"I don't have to enforce the harsher aspects of that law," Race said of foreclosure. "I can require that they negotiate."

Race said he believes lenders should listen to the plight of their borrowers.

Starting Nov. 1, 2010, all Walworth County homeowners facing foreclosure received request-for-mediation documents along with their summonses.

The program is similar to one now in operation in Rock County.

The goal is to get the banks to agree to reduce payments, extend mortgage deadlines and reduce interest rates, with the dual goal of allowing homeowners to stay in their homes and to have mortgages repaid in full.

Terri Maier, who does marketing part-time for attorneys Sweet, Maier & Coletti, Race consulted with attorneys Natallie Fleury and Debra Tuttle who had set up a model foreclosure mediation program through the Marquette University Law School, and with his fellow Walworth County judges, Robert Kennedy, James Carlson and David Reddy. Attorneys John Maier and David MacDougal were also consulted.

The mediation program makes sure the lender is listening to what the homeowner has to say, Stickney said.

"We have high hopes for this, that it will help people reach agreements with lenders," Stickney said. "Nobody's asking the lender to give them the house."

Getting the banks to the negotiation table is not overly complicated, said Jody Stickney, a foreclosure counselor with the nonprofit Community Action of Walworth and Rock counties.

"The judge says (to the bank), 'I'm not going to sign this order of foreclosure until you come to the table,'" Stickney said.

Volunteer lawyers act as mediators. About a dozen Walworth County lawyers have signed on to be mediators in the mortgage program, Stickney said.

Mediator training was done through Marquette University Law School, Stickney said.

However, mediation and negotiation are not a sure thing for the homeowner, she said. Stickney screens applicants to make sure they can benefit from renegotiation.

Late last month, Stickney said she had 10 applicants in the program being screened. The homeowners provide Stickney with information about family finances and how they got into trouble with their mortgages.

Stickney said the mediation program works with the federal Making Home Affordable Act, initiated by the Obama Administration and enacted by Congress in 2009.

Stickney said the banks really don't lose any money through negotiation. Interest rates could be cut to as low as 2 percent, she said.

The problem with the act is that it is complicated for homeowners to negotiate alone and some lenders make it as difficult as possible for mortgage holders to use it, she said.

The best homeowner candidate for mediation is someone who has adequate income and documentation of income, said Christine Jensen, of Rock County Consumer Credit, who screens applicants for the Rock County program. Jensen is a certified consumer credit and housing counselor with the nonprofit Family Services of Southern Wisconsin and Northern Illinois.

Jensen said she's seen 187 clients in 2010.

That is usually someone who was unemployed and missed some payments, but who is now employed, or someone who had hours cut back at work, but who is now back to full-time employment, Jensen said.

Candidates for mediation also include those who suffered a financial catastrophe, such as a divorce or serious medical emergency, and who are now recovering financially, she said.

Larry Barton, a Janesville attorney, is a mediator in the Rock County program. He also helped Walworth County set up its program.

Barton said that, during negotiations, the bank is usually represented in person by an attorney. But a bank official is usually also available by phone.

The important thing, is that the homeowner is able to talk to someone who can make a decision on his or her mortgage, Barton said.

Jensen said that in her experience, about half of the lenders are working out new agreements with borrowers to help them keep their homes.

Through mediation, interest rates can be reduced and banks will sometimes extend loans back out to 30 or 40 years, she said.

"We are seeing payments go down," Jensen said of the Rock County program

It's all about communication. At least for the homeowner, said Stickney.

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