Changes and Additions to Vermont’s Foreclosure Mediation Program
by: Emily Ross, Esq.
With House Bill 431, the Vermont Legislature recently made changes to the Vermont mediation program established in 2010 to comply with the mediation requirement of HAMP. HAMP, or the Home Affordable Modification Program is a federal program set up as a result of the mortgage crisis that allows homeowners having trouble paying their mortgage to enter into modifications with lenders to lower their monthly payment. In 2010 the Vermont legislature established a program to “assure the availability of mediations and application of the federal Home Affordable Modification Program.” 12 V.S.A. Ch 163, Subchapter 9. This legislation established a system under which Vermont residents facing foreclosure can take advantage of the mediation guaranteed them by HAMP.
Last month, the Vermont legislature passed amendments to this legislation making it applicable to all government loss mitigation programs. These government loss mitigations programs include HAMP, as well as “any loss mitigation program for loans owned or guaranteed by government-sponsored entities.” These government-sponsored entities include Fannie Mae, Freddie Mac, FHA and the VA.
The mediation program established by the legislature only applies to owner occupied dwelling houses with four units or less that is a principal dwelling for the owner. It applies to all foreclosures in the state of Vermont unless: 1) the loan involved is not subject to any government loss mitigation requirements; 2) prior to commencing the foreclosure the lender met with the borrower in Vermont to discuss any applicable loss mitigation options; and 3) the plaintiff in the foreclosure action, the lender, certifies in a document filed with the foreclosure complaint that 1 and 2 above were satisfied.
In an action for foreclosure subject to the mediation provisions discussed here, the mortgagor, also known as the borrower, may request mediation prior to four months after judgment is entered and before the end of the redemption period specified in the decree. After a request has been made, the court must refer the case to mediation pursuant to the policies and procedures specified in this subchapter. The new changes place standard time limits on how long the mediator has to complete the mediation. Unless the mortgagee and mortgagor agree otherwise, or the court orders for good cause, mediation must be completed within 120 days of the appointment of the mediator and prior to the expiration of the redemption period.
The new legislation gives the Vermont Bar Association the authority to establish a “fair and neutral-selection process” for parties to find an acceptable mediator. If the parties are not able to find a mediator through this process then the court must appoint a mediator for the case. In addition to the requirements already in effect, the new changes add the requirement that mediators, who must be attorneys, periodically take continuing education classes on foreclosure prevention or loss mitigation. This differs from the previous requirement that a mediator take one class prior to being approved as a mediator.
The new legislation also modifies and expands on the requirements for the mediation itself. For instance, the new language states that during the mediation, the parties must address the available tools for the prevention of foreclosure and discuss the amount due on the note, if this amount is disputed. It goes on to state that the mortgagee, or lender, must use and consider all foreclosure prevention tools such as forbearance and loan modification. If a modification was not offered by the lender, the statute requires them to justify to the mediator and borrower why it was not offered. The borrower is also required to make a good faith effort to provide to the mediator, within a time determined by the court or mediator, information on their household income as well as any other information required by the applicable government loss mitigation program.
Reporting requirements were also modified with the 2013 changes. Previously, the mediator was responsible for delivering a mediation report to the court and both parties within seven days of the conclusion of the mediation. Now, the mediator is also required to deliver a copy of this report to the Office of the Attorney General. This report will remain confidential but information in it will be used by the Attorney General to develop reports on the effectiveness of the mediation program.
The new legislation also expands the penalties for not complying with the obligations of this section. Previously, a non-compliant mortgagee could only be prohibited from selling or taking possession of a property in question. Now, other remedies are available such as the payment of attorney’s fees, monetary sanctions, dismissal of the foreclosure without prejudice and tolling of interest, fees and costs.
The new additions and changes to this section go into effect on December 1, 2013 and apply to any foreclosure proceeding instituted after that date.
About the Author:
Emily is Senior Counsel and Regulatory Compliance Specialist at Bankers Advisory, Inc. She is a graduate of Auburn University and earned her Juris Doctor at Case Western Reserve School of Law. She is admitted to the Bar in Massachusetts and Vermont. Emily can be reached at michelle@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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