| While opinions differ on the percentage of loan | | | | With an existing loan where there is no provision for |
| workouts that wind up in default, there's no question | | | | mandatory mediation, it will only occur through a mutual |
| that a large number of them do. Foreclosure often | | | | agreement of the parties. Consider having a discussion |
| leads to disputes, which lead us to mediation. Mediation, | | | | with the borrower or borrower's counsel suggesting |
| which should not be confused with arbitration, (FN1) is | | | | mediation, and pointing out that a court may require |
| simply a formalized attempt by the parties to resolve | | | | mediation as a condition of ultimately proceeding to trial. |
| differences, with the assistance of a skilled third party | | | | The cost of mediation is customarily split between the |
| negotiator. Mediation can be brought about by a | | | | parties. Where the borrower is unable or unwilling to |
| contractual agreement (that originated prior to the | | | | advance their share of the mediation cost, consider |
| dispute) or by mutual agreement when a dispute | | | | advancing their share of the cost and adding it to the |
| arises. | | | | loan balance, or simply paying their share of the cost, in |
| First, why mediation? There are some key benefits | | | | the interest of avoiding higher litigation costs later on. |
| aside from the obvious avoidance ofcostly and time | | | | As with clearly defined "protocol" arrangements, |
| consuming litigation. Mediation is privileged by statute in | | | | mediation may benefit you by avoiding or reducing the |
| California. Therefore, the parties can speak freely in | | | | high cost of litigation, and in actually resolving certain |
| mediation, without risk that their statements can be | | | | problems or differences between you and the |
| held against them in potential later litigation. | | | | borrower. A huge additional benefit in today's |
| You may not be able to go to trial in some courts | | | | pro-borrower, pro-modification, anti-lender environment, |
| before there has been a mediation or other alternative | | | | exists in your showing that you went to further efforts |
| dispute resolution (ADR) procedure. More often than | | | | to attempt to help the borrower retain their property. |
| not, the ADR process doesn't occur until the eve of | | | | FN1: Mediation is an formalized attempt to resolve |
| trial. A better strategy is to take the initiative and have | | | | disputes, in the presence of a trained negotiator |
| mediation or other ADR procedure at the beginning of | | | | mediator. There are no resolutions or decisions |
| the conflict, rather than on the eve of a trial. | | | | imposed by third parties, as in arbitration proceedings. |
| To maximize your ability to avail yourself of mediation, | | | | With arbitration, the parties are bound to accept the |
| consider placing a clause in your loan agreements that | | | | findings of the arbitrator. |
| requires the parties to mediate in the event of a | | | | FN2: The California Association of Realtor's (CAR) |
| dispute. Some pre-printed forms in related industries | | | | pre-printed purchase contract form contains a |
| contain mediation clauses (FN2). | | | | mediation clause. |