Borrower Fighting Foreclosure: Part 2 - Mediation Request

[Daniel E.]

Borrower has now requested mediation. What should I expect with this?

We have long been proponents of renegotiating the mortgage. But the delinquent property taxes are too high.

Borrower's take-home pay is ~ $1,500 - $2,000 / month. Her Chapter 7 lists monthly expenses (prior to mortgage) of $1,300.

As a reminder, property taxes are $12,000 past due. Best plan they will offer is $2,500 down and the remainder over 24 months ($400/mo). 

So, the way I see it, the lowest possible payment of JUST taxes and insurance is $550 - $600 / month. There is just no room for the mortgage payment. I need at least $450 of P&I on a performer for us to make the deal work. 

Anyways........how do these typically end up?

@Chris Seveney

[Wayne Snell]

Hi @Daniel E. I felt the need to chime in on this one. Hopefully it gives you some ideas, but I do want to state that this is for entertainment purposes only and not to be construed as legal advice . :-) 

I have two comments to consider. Maybe this will also get others to chime in or even debate what I say here...

1) FWIW, as part of mediation YOU get to make some demands as well. One demand could be that you will agree to their payment proposal as long as they enter into a taxes repayment plan with the county SEPARATELY from your mortgage. Many (but not all) counties will do this and since she is BK Chapter 7 they probably will be more willing to do so so they get their money. Then your company is not on the hook to pay them and it usually stops any tax FC from occurring (thus protecting you) as long as they are in that payment plan. OR...you could agree to capitalize the $12,000 taxes into the back of the loan, which might make you look like a good guy to the judge. Downside here is that you would have to advance them to the county to protect against a possible tax lien/FC. I have done this when taxes are a few $1,000 (but never as much as $12k BTW), just saying that you could. 

2) Just because you are going to mediation doesn't mean you have to accept the plan. Not sure where you are talking about, but many mediations are NOT binding (again ask your lawyer for your specific case and jurisdiction) . Just make sure you have a good attorney that can argue why the mediated plan is NOT acceptable and that it adopting it will just kick the can down the road - meaning you will be back in front of the judge again soon when the borrower fails, wasting court time and resources. We can usually prove that the borrower doesn't meet the criteria of the NOW CURRENT lending laws (Debt-to-Income ratios, credit score, etc.) For example, the $1500-2000 per month take home pay means she should not have a mortgage payment of anything more than $500-666 per month. And with whatever credit score (assume 500-550 but probably lower) she would not even qualify for the loan at all today. With the taxes being $400 of that monthly payment, the $100-266 that could be applied to the P&I and outstanding balance (whether you forgive arrears or not) would put the loan out past 40 years at 5% if not further. The attorney should argue if it is feasible that can pay for the next 40 years? These things need to be pointed out to a judge to get them to see why it isn't in the BORROWERS best interest to do this deal - not that it's a bad deal for you. Hope this helps.