Notification of default and mediation regarding residential real property subject to foreclosure and granting rule-making authority

Under the bill, if the borrower has failed to make two consecutive mortgage loan payments, the mortgagee must send the borrower a notice when commencing a foreclosure action. The notice must inform the borrower of the default and what must be done to cure the default, state that the mortgagee intends to start a foreclosure action, and provide the names and addresses of credit counseling services available to homeowners.

Under the bill, when a mortgagee starts a foreclosure action, the mortgagee must inform the borrower of the right to request mediation by submitting a request to the director of state courts (director). If mediation is requested, the foreclosure action is stayed until mediation is completed. When the borrower requests mediation, the bill requires the director to refer the borrower to a financial analyst for advice regarding the mortgage foreclosure and to provide the mortgagee and borrower with names of persons who are available to provide mediation services. The bill requires the director to create a list of persons who have knowledge of financial matters to serve as mediators, create a separate list of persons to serve as financial analysts, and provide those persons with training related to their duties under the bill.

The bill requires the director to notify the parties of the time and place of the mediation session. The mediator may not compel a settlement between the parties, but must attempt to achieve a resolution of the issues involved in the mediation. The bill requires the parties to engage in the mediation in good faith, which includes attending the mediation sessions, providing full information to the mediator and other party, and considering debt restructuring alternatives as a method of resolving the default. The cost of the mediator may be added to the mortgage loan payments required by the borrower.

Under the bill, if the mediator determines that the borrower or mortgagee has not mediated in good faith, the mediator provides that information to the court. If the mortgagee has not mediated in good faith, the court may supervise the mediation directly, prohibit the mortgagee from continuing an action to foreclose on the residential property for 180 days, or order the mortgagee to pay the borrower's court costs, including attorney fees. If the borrower has not mediated in good faith, the mortgagee may proceed immediately to foreclose on the residential property.