Remember back in the grim days of the mortgage foreclosure crisis? Back when consumers in trouble on their mortgages told horror stories about their inability to reach a live human being at their bank? Back when borrowers would have to fax forms to Wichita on one day and Cleveland the next?
Well, if a proposed piece of legislation working its way through the Indiana House of Representatives is passed as it stands, Hoosier borrowers might find themselves right back there.
Tucked inside Senate Bill 415, on Page 55 of a 104-page bill, is a paragraph repealing language from state code that created, back in 2009, the practice of mortgage settlement conferences for troubled borrowers facing foreclosure.
The change in language isn’t in a bill primarily about mortgages. Most of the bill deals with vacant and abandoned properties. It unanimously passed the Senate in mid-February and is currently in the House’s Local Government Committee.
Attempts to reach various legislators this past week were unsuccessful. Messages left last week with both the Indiana Mortgage Bankers Association and the national Mortgage Bankers Association were not returned by Friday evening.
Created in 2010 by the Indiana Supreme Court, the task force helped develop best practices for trial courts and litigants in mortgage foreclosure cases. The group piloted and expanded now to 26 counties what is officially known as the "Mortgage Foreclosure Trial Court Assistance Program."
Members of the state’s Mortgage Foreclosure Task Force are frustrated and worried about the potential change.
They are frustrated because they were never consulted, never asked to testify about a bill that purports in its fiscal statement to make some of their lives easier.
"I was shocked to find out that this bill could have passed out of committee without anyone knowing about it," said Allen Superior Court Judge Nancy Boyer, who handles some of Allen County’s mortgage foreclosures and serves on the state’s mortgage foreclosure task force.
And they are worried about the impact of the loss of what is recognized as a successful program designed to keep people in their homes, if appropriate, and always keep human beings at the center of the commercial transaction. From April 2010 to October 2013, the program conducted 15,869 telephone conferences and 12,574 in-person settlement conferences.
Statistics show about 51 percent of the settlement conferences resulted in a work-out between the bank and the borrower. The other times, the banks took possession of the homes, according to the Indiana State Court Administration website.
The task force is worried about people like 43-year-old Peter Rommel, who is fighting to stay in his home through the mortgage settlement conference process.
Entitled to ask for settlement
When lenders file a foreclosure, Allen Superior and Circuit courts send the borrower a letter, telling them they are entitled under Indiana law to ask for a settlement conference to talk about their mortgage.
That conference puts both the borrower and a representative from the lending institution, regardless of where it might be located, in the same room with a judge or a mediator, to hash out the process.
While engaging in a settlement conference does not guarantee that buyers get to keep their home – in fact about half the time they do not – it does guarantee that they get to have one specific point-of-contact that is the foreclosure process.
Rommel, a postal worker, is facing his second foreclosure action. The first one, a few years ago, came after he lost a long-held job and was forced to take a job that paid less. His wife, a stay-at-home mom, had trouble getting back into the workforce, and he fell behind on the mortgage for the house they’d lived in since the late 1990s.
"I’ve been working, but I wasn’t bringing in enough income," he said.
It was hard dealing with his lender as well, he said.
"I’ll send in everything that they need and then they’ll mail me a letter saying oh, you need to get these forms in," he said. "It was keeping me up at night, did I get them the forms in time, I can’t get ahold of anybody, did I get them the forms they need â ¦ that’s a lot of stress."
The settlement conference process this time put him in connection with a specific person to deal with, and it helped him learn about other programs for which he qualified to help him stay in his home.
Specifically, he has been approved for Indiana’s Hardest Hit Fund, geared to help borrowers like himself who have suffered employment loss or other financial catastrophe.
He is still in negotiations with his lender but is optimistic that he and his family of four will be able to stay in their home. His wife is now working two jobs, and Rommel said he is able to get in touch with the bank directly.
"I’m a big fan of these programs," he said.
Local attorney Robert Aplin works as a facilitator in Allen County’s settlement conference program. In the past, he has represented lenders in court. His work as a neutral third-party facilitator helps him sleep better at night, he said.
"I know how both parties feel," he said. "I get the position of the banks. This is a commercial transaction."
Aplin said the program provides a direct benefit to troubled borrowers, giving them a real shot at keeping their homes.
But when that’s not possible, it can often save borrowers from a second, lesser-known and lingering consequence of foreclosure: monetary judgments apart from the loss of the house. That often adds insult to injury, slapping a large monetary judgment on a family now scrambling to find a new place to live.
He finds insinuations that these conferences slow down the mortgage foreclosure process a bit insulting.
There are as many problems in communication between the lender and the borrower as there are from the borrower to the lender, Aplin said.
"It’s just that the banks want to point at the homeowner and say ‘it’s always their fault,’ and that’s just not true," Aplin said. "I would be upset if the program went away. This is one of the areas of my practice I feel best about.
"There are a lot of ways for the people of Fort Wayne, Allen County to get hurt, even though they don’t have to be."
In 2010, there were 1,067 foreclosures in Allen County. By 2012, that number had climbed to 1,556, according to Judge Boyer.
In 2014, the number dropped to 968. But in 2015, the numbers appear to be on the rise again, in spite of the recent federal protections for consumers cited by the banks, Boyer said.
Allen County has seen a 60 percent success rate for borrowers participating in the settlement conference process, Boyer said.
"That means that the bank starts receiving its money. Different programs that are available may completely catch up borrowers mortgages," she said. "It’s good for the community."
Judith Fox, mortgage foreclosure task force member and University of Notre Dame clinical law professor, is adamant the settlement conference process remain accessible to borrowers.
And she worries that the bigger mortgage lenders have duped state legislatures into thinking there’s a problem with the process.
There isn’t, Fox contends.
"Our numbers are good," she said. "We get good workouts."
Fox said the mortgage lenders are claiming the settlement process slows down foreclosures. That is also not something borne out by the numbers.
"You can’t blame that on the settlement process," she said. "It just makes me angry."
Her research of Indiana’s foreclosure process has shown the timelines for lenders who participate in the settlement process and those who do not are almost identical.
And the repeal of the settlement conference language has little to do with abandoned and vacant properties, though that is the bill in which it is included.
Most of the bill makes provisions for vacant or abandoned properties, like which county official is responsible for auctioning them off, that there must be delinquent taxes or special assessments on the properties before they are sold, and that city, county or town officials take the property if a minimum bid is not received.
And then there’s that one section about the settlement conferences.
"It is not, not, not, not, the fault of the judicial system that properties are abandoned," she said.
Statutes already exist to protect communities from the blight of foreclosed homes. Sometimes, the banks themselves make the decision to walk away from the properties, even after the foreclosures are complete or are in process, Fox said.
Troubled borrowers cannot participate in a mortgage settlement conference if they don’t reside in the home. Therefore, those properties are far from abandoned, Boyer said.
Some of the arguments for the proposed changes have alleged the program isn’t needed because federal programs make similar requirements of lenders, another argument Boyer isn’t buying.
"The reason the state of Indiana enacted the statutes was because the borrowers were falling in the cracks," she said.
Those federal laws have been in place for just over a year, and have done nothing to stem the tied of foreclosures in Allen County, which are on the rise again, Boyer said.
"If (the banks) are so positive that this is duplicative, and it causes delays," Boyer said. "Then they should not be hesitant to have all the testimony come before the commission."