To say that the state court run Residential Mortgage Foreclosure Mediation program has been a failure is an understatement. This program was created by the Florida Supreme Court in an attempt to help Florida citizens modify their home loans so that they’d not be foreclosed upon for being unable to pay. With only a 3.6 success rate, the Supreme Court of Florida is now considering termination of the program.
On the heels of this debate comes an attractive Federal Court alternative: forcing modification in a Chapter 13 bankruptcy and using the threat of giving the home to the bank as a means of lowering principle and interest payments. This method started last year in Orlando, it appears to be working, and it makes total sense.
For a long time banks have been foreclosing on the homes of good people who can’t make their payments only to be unable to sell the property for anywhere near the debt owed. The banks can write-off this difference as a tax loss, but they can only claim so much tax loss each year. Jacksonville judges are now allowing debtors to file motions to force the lenders into mediation where we can show them what they’ll get if the debtor gives the house up in the bankruptcy vs. what they’ll get if they willingly drop principle and interest on the loan.
This is all fine and dandy in theory, but what about real life?
One law firm stated a 90% success rate for mortgage modifications with 20% of those receiving a reduction of the principle amount owed. One case in particular reduced their principle by $160,000 on a $618,000 loan.
If you are unable to make your mortgage payments and would like to attempt forcing your bank into a mediation, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a consultation.