Foreclosure rates have remained at record highs for Indiana the past few years, and a court program to help homeowners hasn't been as successful as hoped. That's now changing.
Court employees find it troubling that only a small number of eligible homeowners have participated in settlement conferences to save their homes. But one court's pilot program to improve how it communicates with borrowers may help. By being more aggressive in letting borrowers know their options to at least try to save their homes has already had success in getting more people to request settlement conferences.
Statewide, only 2 percent of homeowners facing foreclosures have requested settlement conferences under the state statute that went into effect in July 2009.
But after implementing a few changes to how most courts around the state were handling settlement conferences, a pilot program in Allen County that started in February has already seen a significant increase in the number of requested settlement conferences. Other counties are hoping for similar success rates, according to an announcement April 20 from the Indiana Supreme Court and Indiana Foreclosure Prevention Network.
In the courtroom where Allen Superior Judge Nancy Eshcoff Boyer started the pilot project, Lt. Gov. Becky Skillman discussed these new efforts. The project has court staff directly contact defendants in foreclosures to let them know what a settlement conference is, including what is expected of borrowers.
That court is also doing more to get lenders and servicers to participate in settlement conferences in good faith, including the assignment of one point person on the loan servicer's end who will shepherd the borrower's case so the borrower can have realistic options if he or she is eligible for a loan modification, Judge Boyer said.
The Indiana Housing and Community Development Authority worked with the Supreme Court to determine which counties have the greatest need and are most willing to try the program, said Kathryn Dolan, spokesperson for the Supreme Court.
Other counties that have signed on include Marion and St. Joseph, which started similar programs in their courts in April, and Monroe County is on track to start a program this summer. Programs will be targeted to the needs of the individual counties and geographic regions.
For instance, each court can decide who will contact the borrowers.
In Marion County, a law student is paid a nominal fee to be the logistical coordinator to oversee settlement conferences for foreclosure cases that have been filed in the courtrooms of Superior Judges Cynthia J. Ayers and David J. Dreyer, and Circuit Judge Louis F. Rosenberg.
Judge Ayers said the logistical coordinator sifts through the cases filed in those three courts to determine who is eligible to participate in settlement conferences, which are available only to those who may lose their primary residence and have not yet had a settlement conference.
The logistical coordinator then contacts those parties by letter that a phone conference has been arranged and that they need to have certain financial documents assembled for that phone conference.
The Allen County pilot program is similar, only someone on the court's staff makes the contact because they have chosen not to hire a logistical coordinator.
In both counties, someone will sift through foreclosure cases to find those who are eligible for settlement conferences. They will then notify the borrowers by phone of a preconference, which is the borrower's chance to request a settlement conference and where the homeowner can learn what is needed for a settlement conference in terms of financial documents and other information.
In the past, a homeowner would receive notice of this option, but it would be among a stack of other papers from the lender, often at the bottom of the stack or mixed in with other paperwork.
Even having the courts contact the borrowers directly will make a difference, said Stephanie Reeve, manager of the Indiana Foreclosure Prevention Network.
"According to the new law that went into effect last July, at least 30 days out the lender needs to send a presuit notice. In that notice, they need to include a notice of the borrower's right to request a settlement conference. I noticed IFPN's volume of calls skyrocketed around that time, but only from people when they received presuit notices. The stack of documents they receive when they are foreclosed on is scary and it's written in legalese so they usually don't get that far down. We're also working on making notices more user friendly for the borrowers."
She said she was optimistic about the pilot programs.
"I think settlement conferences and what IFPN has been doing offer the best opportunity for homeowners to come to a resolution. I'm just hoping they'll take advantage of it," she said.
She and others interviewed for this story said they were encouraged by numbers from Allen County.
Of 66 phone conferences set from the start of the program in February until April 20, 29 did not take place, but of those 29 borrowers, five cases had already been worked out in some way, according to statistics reported to the Indiana Supreme Court from Allen Superior Court.
Of those who did call about the program, two borrowers were not eligible, one borrower was eligible but did not request a settlement conference, and the other 34 requested settlement conferences.
Judge Boyer said whether one considers the success rate to be 34 requests out of 66, or 51 percent requesting settlement conferences, or the number of those who actually called and requested settlement conferences, 34 out of 37, or 92 percent, "it's a whole heck of a lot better than 2 percent."
As a result of the telephone conferences, 17 settlement conferences have been set.
"Out of 17, there was as no agreement in two cases, five cases where an agreement was reached and the foreclosure suit was dismissed, and 10 negotiations are continuing," she added.
The five cases that resulted in success included four stay-in-home workouts from adjustments of the terms of the mortgage, and one short sale.
While the cases are considered successful, Judge Boyer said the system itself is difficult to navigate. She said she had heard of cases from facilitators where someone who thought they had a workout later learned that it wasn't communicated to the right person and the foreclosure proceeded even after an agreement was reached at a settlement conference.
While Allen County has had attorney facilitators working as neutrals on settlement conferences since last year, those who've done settlement conferences in Marion County courts have not had neutrals and rarely have attorneys for the borrowers. They will now have facilitators for all settlement conferences, Judge Ayers said.
Facilitators will be paid from a $50 filing fee the Supreme Court recently implemented for all foreclosure filings. After handling at least one block of four settlement conferences for no fee, facilitators can be paid $150 for each block of four settlement conferences they handle.
While Judge Boyer said her court would prefer to have attorneys help as facilitators instead of representing borrowers, Marion County is encouraging attorneys to be facilitators or take on clients and is offering a rate of $25 per settlement conference plus some expenses like parking after they take on a couple cases for no fee.
The system itself may not change overnight, Judge Boyer said, but seeing the program in her court has helped her understand what is working and what isn't.
Because it is a pilot program, she said she has the capability to adjust the way settlement conferences are handled, including how the lenders and borrowers communicate after reaching an agreement. For instance, she said she was considering adding a status conference to her calendar following the settlement conference.
"I will ask facilitators when they have the next round of settlement conferences to ask the servicer and plaintiff's attorney how much time it'll take to process the results. If they say 30 days, then I'll set a status hearing 30 days out to see where things stand at that point," she said.
And while the whole process can be overwhelming, she said, "I'm still hopeful."