In response to the ongoing foreclosure crisis in this country, many states have implemented mediation programs to assist homeowners in finding ways to avoid foreclosure. In Kentucky, the courts of Jefferson County initiated a foreclosure mediation program for homeowners starting March 30, 2009. Read on to learn more about how Jefferson County’s Residential Foreclosure Conciliation Program works and how you can benefit from the process.
(To learn about other options for dealing with foreclosure, visit Nolo's Foreclosure section.)
What is Foreclosure Mediation?
Foreclosure mediation (called a “conciliation conference” in Kentucky) is a process that is used to help homeowners avoid foreclosure by coming up with an alternate solution that benefits both the homeowners and the lender. Mediation consists of a meeting between:
- the homeowners
- their lender, and
- an impartial third-party (the mediator).
At the meeting, the parties discuss the homeowners’ financial situation and try to negotiate a way for the homeowners to keep the home or give up the property without going through a foreclosure. By working together, the parties are often able to reach an agreement.
Potential outcomes of mediation include:
- loan modification
- repayment agreement
- forbearance agreement
- short sale, or
- deed in lieu of foreclosure.
(To get information about each of these options, see our Alternatives to Foreclosure area.)
Kentucky Foreclosure Process
In Kentucky, foreclosures are judicial, which means the lender must file a lawsuit in state court. The lender initiates the foreclosure by filing a complaint and having it served on the borrower, along with a summons to appear in court. Learn more about the Kentucky foreclosure process.
(To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)
Kentucky Foreclosure Mediation
Kentucky does not have a statewide foreclosure mediation program. However, Jefferson County, which includes the city of Louisville, has implemented a Residential Foreclosure Conciliation Program.
Jefferson County’s Residential Foreclosure Conciliation Program
The Residential Foreclosure Conciliation Program provides early court intervention to homeowners whose properties are in foreclosure by referring eligible cases to a conciliation conference. The program provides homeowners with the opportunity to:
- fill out a financial packet with a housing counselor so they can apply for an alternative to foreclosure
- present the financial packet to the lender
- speak with a pro bono attorney, and
- attend a conciliation conference with the lender to explore the possibility of settlement before a court-ordered sale of the property.
This program is considered to be an opt-in program, which means if homeowners want to participate in a conciliation conference, they must request it.
The program is available for residential, owner-occupied properties.
Notification of the Program
For every foreclosure filed, the court issues a notice that advises the homeowners of the program. The notice is included with the complaint for foreclosure that is served to the homeowner.
The notice will advise the homeowner of:
- eligibility requirements for the program
- the date of the conciliation conference, and
- the steps the homeowner must take to preserve the conciliation conference date.
Participating in the program does not halt or delay the foreclosure. However, if the homeowner returns the financial forms and a certificate of compliance to the court, then a conciliation conference must be held (which the lender is required to attend) before a foreclosure sale can be completed.
At the Conciliation Conference
The conciliation conference gives the homeowner the opportunity to:
- discuss alternatives to foreclosure with the lender, and
- be represented by an attorney at no cost.
As part of this program, homeowners can request a pro bono (free) attorney to represent them at the conciliation conference. The pro bono attorney will meet with the homeowners on the day of the conference to review paperwork and provide representation at the conference.
Steps in the Foreclosure Conciliation Program
Here's how the conciliation program typically works:
- The lender files its complaint for foreclosure and the court clerk attaches the Foreclosure Conciliation Program notice.
- The homeowner is served the notice along with the complaint for foreclosure.
- If the homeowner opts in to the program, the homeowner will attend a clinic at a legal aid society (which will be referenced in the notice) where housing counselors will assist the homeowner in completing a financial packet to submit to the lender.
- The homeowner must submit the financial packet to the court and the lender at least two weeks before conciliation conference.
- The lender and homeowner meet at the master commissioner’s office for the conciliation conference approximately 60 days after the complaint for foreclosure is filed. (The master commissioner is an officer who conducts foreclosure sales and other duties delegated by the judge.)
- A workout agreement is not mandatory, but if the lender does not attend the conciliation conference, a foreclosure sale will not be held.
Should You Participate in the Foreclosure Conciliation Program?
Participating in Jefferson County’s Residential Foreclosure Conciliation Program does not guarantee that you will avoid foreclosure, but it might increase your chances of doing so. The lender may be more likely to agree to a nonforeclosure solution during mediation than if you try to negotiate a similar alternative on your own. Or you might qualify for a loss mitigation option that you hadn’t previously considered.
For more information on foreclosure alternatives available to Kentucky homeowners, go to www.protectmykyhome.org.