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Mortgage Foreclosure: a Nationwide Financial Crisis Coming to a Courtroom Near You Presented by: The Hon. Michael G. Gotsch Panel members: The Hon. Cynthia Ayers, The Hon. Nancy Boyer, and The Hon. Francie Hill Slide 2 Tsunami Warning: Mortgage Foreclosure Crisis In Indiana 50% increase in mortgage foreclosure cases over a five-year period 50% increase in mortgage foreclosure cases over a five-year period Slide 3 Tsunami Warning: Mortgage Foreclosure Crisis In Indiana 43,804 foreclosure actions filed in 2007 43,804 foreclosure actions filed in 2007 45,394 foreclosure actions filed in 2008, a roughly 4% increase 45,394 foreclosure actions filed in 2008, a roughly 4% increase Slide 4 Tsunami Warning: Mortgage Foreclosure Crisis In Indiana Mortgage foreclosures now comprise 15% of all civil filings Mortgage foreclosures now comprise 15% of all civil filings Slide 5 Tsunami Warning: Mortgage Foreclosure Crisis In Indiana Bankruptcy filings in Indiana have increased by 41% in one year Bankruptcy filings in Indiana have increased by 41% in one year Slide 6 Tsunami Warning: Mortgage Foreclosure Crisis In Indiana Banks walking away from foreclosed property Banks walking away from foreclosed property Slide 7 Tsunami Warning: Mortgage Foreclosure Crisis In Indiana O.V.V. Open, Vacant & Vandalized Properties O.V.V. Open, Vacant & Vandalized Properties = Blighted = Blighted Neighborhoods Neighborhoods Slide 8 Catching the Wave and Staying Afloat: Courts Respond to the Crisis Case management techniques Case management techniques Slide 9 Catching the Wave: Courts Respond to the Crisis Additional Notice Requirements Additional Notice Requirements Slide 10 Staying Afloat: St. Joseph County Experience Emergency Local Rules require additional notice to defendants Emergency Local Rules require additional notice to defendants Foreclosure Actions Foreclosure Actions Summary Judgment Summary Judgment Slide 11 Catching the Wave: Courts Respond to the Crisis Alternative Dispute Resolution Alternative Dispute Resolution Slide 12 Staying Afloat: Other State Initiatives to Deal With the Mortgage Foreclosure Crisis Philadelphia County (Philadelphia, Pennsylvania) Philadelphia County (Philadelphia, Pennsylvania) Residential Mortgage Foreclosure Diversion Program Cuyahoga County (Cleveland, Ohio) Cuyahoga County (Cleveland, Ohio) Foreclosure Mediation Program Slide 13 Staying Afloat: Marion County Experience Marion County (Indianapolis, Indiana) Marion County (Indianapolis, Indiana) Mortgage Settlement Conferences homeowners & lenders Mortgage Settlement Conferences homeowners & lenders Hon. Cynthia Ayers, Marion Superior Court Hon. Cynthia Ayers, Marion Superior Court Slide 14 Catching the Wave: Other State Resources Respond to the Crisis Pro Bono Legal Services Pro Bono Legal Services Loan Modification Loan Modification Negotiation Negotiation Short Sales Short Sales Slide 15 Staying Afloat: Indiana Housing and Community Development Indiana Foreclosure Prevention Network Indiana Foreclosure Prevention Network Get Help, Get Help, Get Hope Get Hope Slide 16 Plugging the Dike: Recent State Legislative Initiatives General Assembly Passes S.B. 492 (H.B. 1637 ) IC 32-30-10.5 General Assembly Passes S.B. 492 (H.B. 1637 ) IC 32-30-10.5 Effective July 1, 2009. Effective July 1, 2009. Places various limitations on residential mortgage foreclosure actions and final judgments. Places various limitations on residential mortgage foreclosure actions and final judgments. Only applies to secured property that is a debtors primary residence. Only applies to secured property that is a debtors primary residence. Slide 17 Ind. Code 32-30-10.5-8 Pre-suit requirements Creditor must provide debtor notice of intent to initiate foreclosure 30-days prior to filing the complaint. Creditor must provide debtor notice of intent to initiate foreclosure 30-days prior to filing the complaint. Encourages debtor to contact the IFPN to speak with a prevention counselor. Encourages debtor to contact the IFPN to speak with a prevention counselor. Slide 18 Ind. Code 32-30-10.5-8,-11 Jurisdictional Requirements Ind. Code 32-30-10.5-8,-11 Jurisdictional Requirements For foreclosure cases pending as of July 1, 2009, the court must send debtors a notice of right to participate in settlement conference before issuing a final judgment. For foreclosure cases pending as of July 1, 2009, the court must send debtors a notice of right to participate in settlement conference before issuing a final judgment. Beginning July 1, 2009, creditors must serve debtors a notice of right to participate in a settlement conference, with the complaint, and attach a copy to the complaint, when initiating a foreclosure action. Beginning July 1, 2009, creditors must serve debtors a notice of right to participate in a settlement conference, with the complaint, and attach a copy to the complaint, when initiating a foreclosure action. Slide 19 Exceptions to Notice and Right to a Settlement Conference Property is not the debtors primary residence; Property is not the debtors primary residence; The loan has been the subject of a prior foreclosure prevention agreement, and the debtor has defaulted with respect to the terms; The loan has been the subject of a prior foreclosure prevention agreement, and the debtor has defaulted with respect to the terms; Bankruptcy proceedings are pending; or, Bankruptcy proceedings are pending; or, A settlement conference would be of limited value based on the result of a prior loss mitigation effort between the plaintiff lender and defendant debtor. A settlement conference would be of limited value based on the result of a prior loss mitigation effort between the plaintiff lender and defendant debtor. Slide 20 Settlement Conference Yes, or No? If the debtor says NO, or does not respond within sixty days of receipt of the pre-suit notice, or thirty days of receipt of the complaint notice, the court may issue a foreclosure judgment. If the debtor says NO, or does not respond within sixty days of receipt of the pre-suit notice, or thirty days of receipt of the complaint notice, the court may issue a foreclosure judgment. If the debtor says YES, the court must provide a notice of settlement conference and schedule it within 25-60 days of the request unless the parties mutually agree to another specified date. If the debtor says YES, the court must provide a notice of settlement conference and schedule it within 25-60 days of the request unless the parties mutually agree to another specified date. Slide 21 Settlement Conference Order Requirements Date/Time/Location of conference, unless parties submit to the court a stipulation to modify the date/time/place; Date/Time/Location of conference, unless parties submit to the court a stipulation to modify the date/time/place; Encourage debtor to contact the IFPN to speak with a foreclosure counselor, and include IFPN contact info; Encourage debtor to contact the IFPN to speak with a foreclosure counselor, and include IFPN contact info; Documentation requirements for debtor/creditor ; and, Documentation requirements for debtor/creditor ; and, Parties have right to be represented by an attorney or assisted by foreclosure counselor. Parties have right to be represented by an attorney or assisted by foreclosure counselor. Slide 22 Settlement Conference Documentation Requirements Creditor must bring: Creditor must bring: Copy of the original note and mortgage; Copy of the original note and mortgage; Payment record substantiating the default; Payment record substantiating the default; Itemization of all amounts claimed by the creditor as being owed on the mortgage. Itemization of all amounts claimed by the creditor as being owed on the mortgage. A transaction history showing all account activity A transaction history showing all account activity Debtor must bring documentation of: Debtor must bring documentation of: Present and future income; Expenses, assets, and liabilities; Employment history; and, Any other documents or information the court deems necessary. Slide 23 Settlement Conference Details The court may issue orders requiring certain people attend the settlement conference. The court may issue orders requiring certain people attend the settlement conference. The creditor must have someone attend the settlement conference who has authority to negotiate a prevention agreement. The creditor must have someone attend the settlement conference who has authority to negotiate a prevention agreement. The court may order, for cause shown, that the parties reconvene a settlement conference anytime prior to judgment being entered. The court may order, for cause shown, that the parties reconvene a settlement conference anytime prior to judgment being entered. The judge has discretion whether to attend a settlement conference, designate a senior judge to preside, or order the parties to use a mediator. The judge has discretion whether to attend a settlement conference, designate a senior judge to preside, or order the parties to use a mediator. Slide 24 After the Conference If the parties agree to enter into a prevention agreement, it must be reduced to writing, signed by both parties, and filed with the court no later than seven days after the signing creditor can elect to dismiss or stay foreclosure proceeding. If the parties agree to enter into a prevention agreement, it must be reduced to writing, signed by both parties, and filed with the court no later than seven days after the signing creditor can elect to dismiss or stay foreclosure proceeding. If the parties do not agree on a prevention agreement, no later than seven days after the conference, the creditor must notify the court, and proceedings continue. If the parties do not agree on a prevention agreement, no later than seven days after the conference, the creditor must notify the court, and proceedings continue. Slide 25 Plugging the Dike: What about Tenants? Indiana law does not provide foreclosure protections for tenants. Indiana law does not provide foreclosure protections for tenants. Federal law does provide tenants some foreclosure protections. Federal law does provide tenants some foreclosure protections. Slide 26 Questions, Comments, Review