The Jefferson County, Kentucky Circuit Court based in Louisville instituted a “Foreclosure Conciliation Project” to bring lenders and homeowners together to explore alternatives to foreclosure. According to state and federal sources, Jefferson County is Kentucky’s largest county with over 700,000 residents -- nearly 17% of the state’s population. The Court’s order establishing this program recognizes that “the mortgage foreclosure crisis and current economic downturn are resulting in a large increase in the number of foreclosure cases that have been and are likely to be filed.”
The Jefferson County program is modeled after a successful foreclosure diversion pilot program instituted in Philadelphia and is effective for foreclosure cases filed after March 30, 2009 on owner-occupied properties. In Jefferson County, the Master Commissioner (a judicially-appointed officer who conducts foreclosure sales and other duties delegated by the Judges) will conduct the conciliation conference. According to the Master Commissioner’s March 30, 2009 memorandum outlining the program, it will initially start in four of the Court’s 13 divisions. After an initial test period designed to identify and eliminate procedural kinks, the Court expects to make the process available in all foreclosure cases within the county.
Under this program, the defendant has the affirmative obligation to “opt-in”. The Court will issue a notice and case management order at the time the case is filed, advising the defendant of the conciliation conference date and the eligibility requirements for the diversion program, as well as requiring him to complete a financial packet. The defendant must then present the packet directly to the lender’s attorney and file a certificate of compliance with the Court at least two weeks prior to the conciliation conference in order to preserve the date of the conciliation conference.
Conciliation conferences will be held on Thursdays before the Master Commissioner or one of his deputies. If the homeowner complied with the requirements, the lender is required to participate with a representative that has decision-making authority. The conference is intended to foster discussion of feasible alternatives to foreclosure. Pro bono attorneys will be available to review possible resolutions and aid in the process. In cases where the defendants lack the financial resources to negotiate new loan terms with the lender, attorneys will negotiate on their behalf to reach an agreement that allows the homeowner, “a graceful exit and time to find appropriate alternative housing”, according to the Commissioner’s memo.
According to the Commissioner, the program is not intended to delay the entry of a judgment in a foreclosure case. The program will not delay the progress of a case toward a sale date unless the plaintiff lender refuses to comply, in which case a sale date will not be held.
The Commissioner also requested feedback from the participating parties in order to identify and eliminate potential procedural kinks. If you have any particular documentation requirements for consideration of loss mitigation proposals, please forward that information to us and we will share this with the Court as this program develops. Feel free to e-mail me directly at pratliff@weltman.com.
This program will benefit mortgage lenders and servicers by encouraging borrowers to come to the table to discuss options. If successful resolutions are reached, it can reduce costs and foreclosure timelines for lenders and servicers, and potentially reduce the number of REO properties in this community. However, lenders and servicers will have to make a representative available to participate in these conferences, and although the conciliation conference date will be set at the time the case is filed, the defendant can wait until 14 days prior to the scheduled date before filing his certificate of compliance and mailing his financial information to the plaintiff’s attorney, which is the event that makes the conciliation conference mandatory. In any event, we will advise you of the scheduled date for the conference once we receive the Court’s case management order.
If you have any questions on this information, please contact Mr. Philip Q. Ratliff, Esq. Phil is an associate in the Real Estate Default Group of the Cincinnati office focused on foreclosure services for Weltman, Weinberg & Reis Co., L.P.A. He can be reached at (513) 723-2215 or via e-mail at pratliff@weltman.com.
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