Governor signs measure to establish clearer rules on foreclosure processes
By The Star Staff
Gov. Wanda Vázquez Garced on Wednesday signed into law Senate Bill 1325, which would amend the Law for Compulsory Mediation and Home Preservation in Mortgage Foreclosure Proceedings.
The law seeks to improve the mediation process to make it more effective at a time when, faced with the coronavirus pandemic emergency, many people are fighting to keep their homes.
The measure arose after a summit with representatives of debtors and mortgage creditors, as well as mediators, who presented their opinions on improving the mediation process.
The law clarifies terms for producing documents, allowing the mediator to inform the court if one of the parties obstructs the process; allows voluntary resignation in the event a homeowner decides to surrender the property to creditors;and requires that the person representing the creditor will have the authority to negotiate terms.
“We want to prevent people from losing their roof, their main home, and that is why the law was created, to be able to provide mediation alternatives so that this does not happen,” the governor said regarding the amendment, which had the support of Community Legal Services, the Puerto Rico Bar Association, Puerto Rico Legal Services, and the Foreclosure Prevention Clinic of the University of Puerto Rico School of Law, among others. “As time passes and given the circumstances in which we have lived, it is necessary to amend and temper [the law] so that it meets the needs of all parties, and that is what is intended with this measure.”
Compulsory mediation is a procedure designed to help the mortgage debtor and provide legal tools for avoiding foreclosure of a property, and reaching agreements with the creditor.
“That said, we understand that there are certain particular cases where that same debtor wants to dispose of the property and can decide under certain circumstances that he or she does not want to enter the mediation process. There are cases, for example, where the debtor has agreed to a voluntary surrender, but cannot consummate it due to subsequent liens on the mortgage,” the measure reads. “However, on the other hand, we cannot lose perspective that, according to information from the Courts Administration Office’s Bureau of Alternative Methods, the bulk of mortgage debtors do not have legal representation when they go into these processes. A person who is going to waive their right to enter this type of mediation must understand the short-, medium- and long-term effects. It would then be necessary to guarantee that the person who resigned does so freely and voluntarily, that is to say that the resignation was informed, not conditioned or coerced. After listening to all the proposals, this measure allows it in the cases of home disposition, where the mortgage debtor is not interested in the retention of the home.”
Meanwhile, although the mediation process is confidential, the measure specifically allows the mediator to inform the court if one of the parties obstructs the process.
The author of the measure, Sen. Carmelo Ríos, expressed his gratitude to the governor “for giving way to this measure, which is consistent with our mission to help thousands of families who are struggling to preserve their properties.”
“This legislation will promote a responsive and transparent compulsory mediation, without undermining the ordinary processes of banking institutions,” he said. “It is my commitment to continue promoting measures that help mitigate the mortgage crisis on the island.”
The director of the aforementioned Mortgage Foreclosure Prevention Clinic, Ricardo Ramos González, said that with the measure “the obligation of creditors to act in good faith is ratified, emphasizing the jurisdictional nature of the mediation process, regardless of whether the claim has been answered, that is to say that a court before declaring a debtor in default must summon mediation.”
“It also adds that the creditor has to send people with decision-making capacity to the negotiations, and it helps those debtors who are members of a post-community partnership or a succession,” Ramos González said.