No Homestead-Lender Mediation Act (vetoed bill)

Minnesota home values are predicted to plummet by more than $7 billion by 2010, while 30,000 additional home foreclosures are predicted this year.

A bill sponsored by Rep. Debra Hilstrom (DFL-Brooklyn Center) and Sen. Linda Scheid (DFL-Brooklyn Park) that intended to promote mediation as a tool to prevent some of those foreclosures was vetoed by Gov. Tim Pawlenty.

HF354, the Homestead-Lender Mediation Act of 2009, was modeled after the 1986 Farmer-Lender Mediation Act, which Hilstrom said helped 14,000 farmers avoid foreclosure.

The mediation option would have been available to homeowners who had already received mortgage counseling as currently required, requested the mediation and demonstrated in good faith that they could meet the financial obligations of a refinanced mortgage, an adjusted repayment schedule or other arrangements agreed to by debtor and creditor.

“While I am supportive of a mediation option for certain foreclosure cases, this bill does not incorporate my key recommendations,” Pawlenty wrote in his veto message.

Having a mediator rather than a mortgage counselor determine who is eligible for mediation is “nonsensical,” the governor wrote. If the mediator is making that decision, “the mediation process would have already begun.” Instead, “the counselor should determine eligibility for mediation based on objective criteria prior to the matter being referred to a mediator.”

The attorney general’s office would have appointed and paid for qualified mediators, but Pawlenty wrote that the office “is not the proper entity to select neutral dispute resolution personnel or procedures.” He preferred the Office of Administrative Hearings with the use of qualified volunteers.

To fund the program, every foreclosure fee would have increased by $125 per foreclosure, even those not involving mediation. Pawlenty wanted the program to fund itself through fees applied within the mediation transaction.

The governor wanted all meetings to be available electronically, instead of having the initial meeting by telephone or video conferencing with the subsequent option to meet in person at the mediator’s discretion, as the bill proposed.

HF354*/SF340/CH154