Mortgage Mediation In Chapter 13 Bankruptcy Sabotaged By Lender Docu...

Have you been jerked around by mortgage banks in court ordered mortgage mediation in Chapter 13 bankruptcy cases? Another local attorney spoke with me this week about how big banks are playing debtors and their attorneys in court ordered mortgage modification mediation.

The attorney’s client filed Chapter 13 in Orlando where the courts have for some time ordered mortgage lenders to participate in mediation regarding modification of Chapter 13 debtor’s home mortgages. His client has a first mortgage with a very big bank whose home office is in a very big state west of the Mississippi.

The court issued a standard mediation order requiring the bank to let the debtor know all the documents needed for mediation at least 14 days prior to the mediation. The lender requested documents, and the debtor provided documents requested.

As soon as the mediation started the lender announced that they could not evaluate the modification, provide hypothetical results, or in any way discuss the modification because– you guessed it— they needed still more documents. One of the main documents was an updated pay stub which the debtor said he had at home and could have provide if only the bank gave him just one days notice instead of the 14 day notice specified in the court order. The attorney told me that the mediation was adjourned in 10 minutes.

As a result, the debtor took off a half of day of work for nothing, and the debtor attorney wasted two hours of his time, for nothing. Sue for costs and sanctions? Not so easy to do.

Here’s the problem. Mediation is confidential. No matter how much the lender screws you over in the mediation you cannot introduce the conversation as evidence in court. In this case, for example, the attorney could not tell the court that as soon as the mediation began the lender made another document request.

Here’s a suggestion to help prevent attending pointless mortgage mediation. Before consenting to commencement of the mediation ask the lender if it needs additional documents to conduct the mediation. Clearly state that you do not consider the mediation to have begun unless you are first assured that all documents have been requested and provided. If the lender then requests more documents on mediation day you may be able to report that to the court as a non-confidential discussion prior to mediation.

So, what if the lender says he has documents, you begin the mediation, and then the lender screws you over by immediately requesting more documents in the confidential mediation. I would argue fraud, and fraud can be exception to evidentiary privilege.

I don’t think courts want the mortgage lenders to ignore court orders setting deadlines for document requests prior to mortgage mediation. I think courts will interpret the evidentiary rules as much as they can to permit debtors reporting of non-compliant mortgage lenders.