Some states offer homeowners who are facing a foreclosure the opportunity to participate in a foreclosure mediation program. In general terms, "mediation" is a form of alternative dispute resolution. Foreclosure mediation, specifically, is a process in which a homeowner, the loan servicer (on the lender's behalf), and a neutral mediator get together to try to work out a loss mitigation option, like a loan modification, and avoid foreclosure.
Participating in mediation doesn't guarantee you'll be able to prevent a foreclosure, but you might be able to figure out a way to keep your home or exit the property, like by completing a short sale or deed in lieu of foreclosure, under terms you can live with.
Under Delaware law, most homeowners going through foreclosure qualify for mediation.
Foreclosures in Delaware are judicial, which means the lender has to file a lawsuit in state court to foreclose. The lender starts the suit by filing what's called a "complaint" with the court and serving a copy on you (the borrower), along with a summons to appear in court.
Delaware's foreclosure mediation law (Del. Code Ann. Tit. 10 § 5062C) creates a process for homeowners in foreclosure to connect with a housing counselor and participate in a mediation session before the court may enter a judgment of foreclosure.
Here's how the foreclosure mediation process works in Delaware.
You're automatically assigned to foreclosure mediation if the mortgaged property is a one- to four-unit home, and you reside in the home as your primary residence.
The lender serves a mediation notice along with the complaint and summons. This notice gives information about the state's Automatic Residential Mortgage Foreclosure Mediation Program.
To participate in the mediation process, within 30 days from the date the notice was served, you must:
Borrowers who don't certify their intent to participate in mediation may still attend the scheduled mediation conference and meet with the lender's representative. But the mediation is less likely to be successful, and the lender may seek a foreclosure judgment immediately after the mediation.
The court will then issue a mediation scheduling notice to you and the lender. The mediation scheduling notice will inform you of:
At least 14 days before the mediation conference, you have to provide a financial proposal worksheet to the lender, mediator, and any other entities the court requires. The HUD-approved housing counselor will help you prepare this proposal.
You also have to bring specific documents to the mediation conference. The lender will let you know at least seven days before the mediation date (or another date the mediator agrees is appropriate) what papers you need to bring to the conference. Each party must also be available at least three days before the mediation date to discuss the list of documents.
The mediator will oversee the mediation conference and provide guidance as appropriate. But if multiple mediation conferences are happening in the same location simultaneously, the mediator may determine that a mediator's presence isn't required for the entire mediation session.
Potential outcomes of mediation include:
The lender can't get a judgment of foreclosure until after the mediation date.
Mediation is free for the borrower. The lender has to pay a fee to cover the costs of the program.
Delaware's foreclosure mediation program is scheduled to expire, unless extended, on January 1, 2025.
While participating in a foreclosure mediation program doesn't force the lender to give you a foreclosure alternative, it doesn't hurt to go through the process. In most cases, going to mediation is a good idea; the lender could be more likely to agree to a nonforeclosure solution when you go through official mediation procedures, or you might qualify for a loss mitigation option that you hadn't previously considered.
Even if mediation doesn't help you avoid a foreclosure, it will likely buy you some extra time to remain in the home without making any payments.
Foreclosure mediators are typically trained in mediation, as well as federal and state foreclosure laws, and also usually know about different community-based resources and mortgage assistance programs that could be available to help homeowners facing foreclosure. But they don't represent either party in the mediation process, and they can't give legal advice.
So, while you don't have to hire a lawyer to represent you in your foreclosure mediation, it's often a good idea. A lawyer can give you legal advice specific to your situation and advocate on your behalf, helping you negotiate a way to avoid foreclosure. A lawyer will also ensure that your legal rights are protected in the process. And, if you're thinking about filing a response to the foreclosure, or any other motion with the court, consider talking to an attorney beforehand to discuss the consequences of doing so and your various options.
For more information on Delaware's foreclosure mediation program, go to the State of Delaware's Residential Mortgage Foreclosure Mediation Program website. You may also call the Delaware Homeowner Relief Hotline at 800-220-5424 or contact a HUD-approved housing counseling agency.