In response to the ongoing foreclosure crisis in this country, many states have implemented mediation programs to assist borrowers in finding ways to avoid foreclosure. If you are a homeowner facing foreclosure in Maine, you may be eligible to participate in the state’s Foreclosure Diversion Program, which provides court-sponsored mediation . Read on to learn more about how Maine’s Foreclosure Diversion 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 is a process that is used to help homeowners avoid foreclosure by coming up with an alternate solution that benefits both the borrowers and the lender. Mediation consists of a meeting between:
- the borrowers
- their lender, and
- an impartial third-party (the mediator).
At the meeting, the parties discuss the borrower's financial situation and try to negotiate a way for the homeowner 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
- forbearance agreement
- short sale, or
- deed in lieu of foreclosure.
(To get information about each of these options, see our Alternatives to Foreclosure area.)
Maine has established a Foreclosure Diversion Program to assist distressed homeowners. This program offers Maine homeowners the option to participate in court-sponsored mediation as part of the foreclosure process (Me. Rev. Stat. Ann. tit. 14 § 6321-A).
In Maine, lenders may foreclose only by judicial foreclosure, which means the lender must file a lawsuit in state court. (In a nonjudicial foreclosure, the lender does not have to go through the state court system.) The lender initiates the foreclosure by filing a complaint and having it served on the borrower, along with a summons to appear in court.
(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?)
Eligibility for Maine Foreclosure Mediation
The eligibility requirements to participate in Maine's foreclosure diversion program depend on when the foreclosure was filed.
Foreclosures filed after December 31, 2009. Foreclosures filed after December 31, 2009, are automatically eligible for mediation when the homeowner files an appearance, answer, or a request for mediation within 20 days of being served with the foreclosure summons and complaint so long as the property is:
- the primary residence of the homeowner, and
- has four or fewer units.
Foreclosures filed on or prior to December 31, 2009. Foreclosure actions filed on or before December 31, 2009, that have not yet resulted in a final judgment may qualify for foreclosure mediation if:
- the homeowner files a motion requesting mediation with the court
- the court finds that there are resources available to perform mediation
- mediation will not unduly delay the proceedings or result in prejudice to the lender, and
- the property is primary residence of the homeowner and has four or fewer units.
Notification of Mediation
The lender must provide information regarding the mediation program along with the foreclosure complaint when it is served on the homeowner at the beginning of the foreclosure.
Through this program, the homeowner may have the chance to attend an information session. The information session will cover:
- what is expected of the homeowner during the mediation process
- the availability of community resources, and
- advice specific to the homeowner's particular situation (in some cases).
Not all courts will require that you attend an information session, but if you receive notice that one has been scheduled, you should go to the session.
The lender must provide certain forms to the homeowner along with the foreclosure complaint. The homeowner then has 21 days after the information session (or 42 days after the service of the summons and complaint if no information session is held) to complete and return the forms.
Additionally, if you attend an information session, you will be informed about any additional information that must be provided at the mediation, such as:
- proof of income (either pay stubs from your employer or a Profit and Loss statement if you are self-employed)
- list of expenses, and
- copies of any completed application(s) for mortgage or financial assistance.
Participation in the Foreclosure Diversion Program Postpones the Foreclosure
If a mediation is scheduled, the court cannot issue a final judgment in the foreclosure case until a mediator’s report has been completed (Me. Rev. Stat. Ann. tit. 14 § 6321-A).
Cost to Participate in the Foreclosure Diversion Program
The homeowner does not have to pay a fee to participate in the Foreclosure Diversion Program. The program is paid for by a surcharge that is added to the filing fee that lenders pay when they file a foreclosure action.
Should You Participate in the Foreclosure Mediation Program?
Maine law requires that each party must make a good faith effort to mediate all issues at the mediation (Me. Rev. Stat. Ann. tit. 14 § 6321-A). However, this does not mean that the lender must give you a way to avoid foreclosure.
Still, even though participating in Maine’s Foreclosure Diversion program does not guarantee that a foreclosure will be avoided, it doesn't hurt to attend the meeting. The lender may be more likely to agree to a nonforeclosure solution at a mediation than if you approach it outside of the program. Or you might qualify for a loss mitigation option that you hadn’t previously considered.
For more information on Maine’s foreclosure mediation program, go to www.courts.state.me.us/maine_courts/fdp.