If the bank is foreclosing on your home, you may qualify for “mediation.”
Mediation means that the bank has to work with you to see if you can save your home. The mediator is an attorney. The mediator does not work for the bank. The mediator should help you and the bank work out issues about financial documents and loan modification. The mediator should set up a meeting to help you and the bank reach an agreement.
Look for a Request for Mediation form with the foreclosure papers. If you want mediation, fill out the form. Bring it to the court or mail it.
If you fill out the mediation form, the court will send you a mediation letter. There are important instructions in this letter. Read it carefully. A neutral mediator will be assigned to your case. Before you go to mediation you will need to send information to the bank. The bank has to see if you qualify for a loan modification or other programs that could save your home. The mediator should help you and the bank work out any problems that come up.
Mediation is free for the homeowner. The bank has to pay for mediation.
Choosing a Mediator
The court’s mediation letter will have the names of three qualified mediators. You and the bank have seven days to agree on a mediator from this list provided in the letter. There is more information about the mediators online.
- Go to the Vermont Bar Association website at www.vtbar.org.
- Find “For the Public.”
- Click on “Foreclosure Mediation Program Info.”
- Click on the link there that gives you a list with information about each mediator.
If you and the bank don’t agree on a mediator, the court will choose a mediator.
Documents You Need for Mediation
The bank must review you for loan modification programs if you give the bank the financial documents they need. The bank’s lawyer will give you forms to fill out and a list of documents you will need to give the bank. Even if you have applied for a loan modification before, you still have to give the bank financial documents that are up to date.
You will probably need the following documents:
- Everyone will need:
- Your two most recent bank statements for all of your accounts
- Your two most recent federal tax returns
- A recent utility bill that shows your name and the property address
- A copy of your most recent property tax bill
- A copy of your most recent homeowners insurance declarations page, if you have a current policy
- If you are working:
- You will need your two most recent pay stubs showing how much you have earned this year.
- If you are self-employed:
- You will need a profit and loss statement for either the most recent quarter or year-to-date.
- If you get public benefits like Reach Up, Food Stamps, SSDI, or SSI:
- You will need your most recent benefit award letter or statement.
- If you get child support, alimony or separation maintenance and you want this income to be counted:
- You will need a copy of your divorce decree, separation agreement, child support order or other legal document that shows how much income you get and how often you get it.
- If you get rental income:
- You will need IRS Schedule E from your most recent tax return OR
- A copy of your current lease agreement(s)
You can include the income of household members if they help pay household expenses, even if they are not borrowers on the mortgage. You will have to give proof of income for any household income that is counted.
What is a Loan Modification?
A loan modification is where the bank changes the terms of your mortgage to get you current on your loan while keeping your payments affordable. Banks can lower your interest rate, make your loan term longer, and/or tack some of what you owe on the end of your loan to get you current and make the payments affordable.
In mediation, the bank should review you for any loan modification programs for which you may qualify.
- If your loan is owned or guaranteed by Fannie Mae or Freddie Mac, the bank has to review you for special programs that may lower your monthly payment.
- You can find out if your loan is a Fannie Mae loan by using their Loan Lookup Tool.
- You can find out if your loan is a Freddie Mac loan by using their Loan Lookup Tool.
Most loan modifications start with a three-month trial period. If you make the trial payments on time for three months, you will get a final loan modification that permanently lowers your payments.
What if the Bank Isn’t Working with You in Mediation?
Sometimes banks or mortgage servicers don't work with the mediation process. They may ask for the same documents many times. They might take a really long time to review you for a loan modification. If you have given the bank all of the documents it needs, but the bank hasn’t agreed to a mediation date or reviewed you for a loan modification, it may be breaking the law.
If you think that the bank is not doing what it’s supposed to do in mediation, contact the mediator for your case. The mediator may be able to set up a phone conference or talk to the bank’s lawyer to try to get the issue settled.
If the mediator isn’t willing or able to help you, you can file a written motion with the court. You can ask the court to order the bank to cooperate in the mediation process and review you for a loan modification within a reasonable amount of time. In your motion, explain what has happened in the mediation process and tell the court why you think the bank has been unfair.
At the end of the mediation, the mediator will file a report with the court. The report will include:
- information about what happened in mediation
- whether you and the bank settled the case with a loan modification
- whether the mediator thinks the bank acted in good faith
The judge could decide that the bank didn’t act in good faith if the bank:
- took many months to review your complete financial packet for a loan modification,
- denied a loan modification you qualified for, or
- didn’t have someone come to your mediation session.
If the judge finds that the bank did not act in good faith during your mediation, the judge can order sanctions. Sanctions are penalties. The judge could order the bank to pay a fine or stop charging interest until the bank reviews your case for loan modification. The judge can order other penalties.
You might disagree with the mediator’s report that the bank acted in good faith. If you think the bank did not act in good faith in mediation you can ask for sanctions by filing a motion. In your motion you will need to explain what happened in mediation. Tell the court why you think the bank did not act in good faith. Be detailed. Give examples of what happened in mediation. If the judge agrees with you, the judge can order sanctions against the bank.