The nation's housing market has shown some positive signs lately. Even one of the gloomiest indicators — the rate of foreclosures — has seen a little improvement, slowing down in many markets.
That still leaves the nation with a massive problem: Millions of properties in foreclosure — a backlog that has overwhelmed the courts in many states.
In Florida, judges believe the answer may be special mediation courts that bring lenders and homeowners together.
A few years ago, St. Lucie County, on Florida's Atlantic coast, was the fastest growing county in America. Today, it holds a different distinction — it's home to one of the nation's highest foreclosure rates.
The county has just a quarter-million people. But state Circuit Judge Burton Conner says that last year, it averaged 750 new foreclosures a month.
"If we were to hold that pattern for another year, you would have close to 20,000 homes in foreclosure," he says.
In larger Florida counties, the numbers are even bigger. Last year in Miami-Dade County foreclosures totaled 100,000.
Appointment With A Judge
Like many states, Florida requires foreclosures to go before a judge. In some counties, dockets are so clogged that it takes six months or more before cases can be scheduled — and the backlog is growing.
That's led judges in two judicial circuits that include St. Lucie County and Pensacola to set up a new system for handling foreclosures. Before seeing a judge, borrowers and lenders are now required to meet with a mediator who will try to help both parties reach a settlement.
The special mediation courts are being run by a Florida nonprofit, the Collins Center for Public Policy.
"Ours is not the answer, it is an answer for a group of people — homeowners who occupy their homes, lenders who have the authority to settle," says Rod Petrey, president of the Collins Center. "That's not everybody, but it's a significant number."
Homeowners must first go through credit counseling to determine how large a monthly payment they can afford. Lenders must make available a representative who can make changes to the mortgage. If they don't show up, judges can dismiss the case.
Mandatory foreclosure mediation has also been adopted in New Jersey, and it's being considered in Nevada, Minnesota, Connecticut and other states.
It's an idea that has been used for more than a year in Ohio. It was pioneered in Cuyahoga County, where the rising number of foreclosures was a problem even before the housing bust.
Tom Mlakar of the Legal Aid Society of Cleveland says lenders there have embraced the program — and for good reason.
"I would suggest it's the number of abandoned homes, vacant properties in our communities," he says.
Mlakar says lenders have an incentive to keep houses occupied, especially in neighborhoods where vacant homes may be stripped of siding and plumbing, and ultimately abandoned. In Cuyahoga County, Mlakar says, nearly three-quarters of the foreclosures that go to mediation result in a settlement.
Philadelphia, another area where special foreclosure mediation courts have been used, has been touted as a national model.
"I think in many ways it is a model, but it shouldn't be oversold," says Irwin Trauss, with Philadelphia Legal Assistance, who has some 200 clients who are in foreclosure.
Like Cleveland, Trauss says, Philadelphia has special circumstances that make lenders willing to come to the table and consider ways to keep borrowers in their homes.
Philadelphia has a long history of foreclosure prevention programs and a chief judge who has become an activist on the issue. Trauss says creating foreclosure mediation courts, by itself, isn't enough.
"In those cases, where you have a lender that's willing to explore resolutions that make economic sense, it provides a forum for that to happen. But it's only as good as the external pressures that exist on the lenders to actually reach resolutions," he says.
In New Jersey and in Florida's St. Lucie County, where mandatory mediation is just beginning, banks are wary. In both places, the number of new foreclosures filed has suddenly dipped dramatically.
In the area around St. Lucie County, although the program has been up and running for a few weeks, the first hearings have been slow to get started.
"I think there's still somewhat of a reluctance about being court-ordered into mediation," says Judge Conner, who helps run the program there. "And that will be part of the experiment: Can we persuade lenders it's actually to their benefit — and we believe it is — ... to engage in mediation?"
The chief judge has scheduled a meeting with lenders to discuss their participation in the program. In any case, they may have little choice. Several other Florida counties, including Miami-Dade, are also now considering setting up their own special foreclosure mediation courts.