Indiana's Democratic Gubernatorial Candidate Long Thompson Proposes Questionable Foreclosure Plan
October 02, 2008
This is not a political blog, and I generally do not write about residential or consumer issues. From time to time, however, there is political news targeted mainly to the consumer that I feel may be of interest to secured lenders who deal with business debts. Today's Indianapolis Star article "Long Thompson Offers Plan To Reduce Foreclosures" is one of those news stories.
Ms. Long Thompson's proposal includes items that could adversely affect a business lender's efforts to foreclose on commercial properties in a timely and cost-effective manner. It first bears mentioning that, as noted in last week's post, Indiana is a judicial foreclosure state. Relatively speaking, Indiana foreclosures already involve court-based delays and litigation-related costs that cut against lenders and in favor of borrowers.
Nevertheless, Ms. Long Thompson wants to require borrowers and lenders to mediate before the Court can enter a judgment and order a sheriff's sale. In Indiana, mediation is a non-binding settlement conference that brings the parties and lawyers face-to-face and involves an independent intermediary. Mediators (and Courts) can't force parties to settle, however. Moreover, in my experience, filing a suit to foreclose usually is the lender's last resort. Contrary to popular opinion, in the vast majority of cases, lenders don't want to foreclose. They prefer to work something out (settle). My point is that efforts will have been made to settle the case before the foreclosure proceedings have even begun, and indeed such efforts can continue after suit is filed. To mandate that lenders, against their will, incur additional delays and expense to formally mediate would, in all due respect to Ms. Long Thompson, seemingly be a waste of time and money.
The proposal also seeks to extend the grace period, from three months to four months, between when a plaintiff/lender/mortgagee files the lawsuit and when the plaintiff can request a sheriff's sale (post-judgment). This isn't a big deal, especially in commercial cases where it's often difficult to get a judgment within that time frame anyway. Having said that, there's plenty of time to resolve the problem, if it can be, before a borrower loses the property. See my prior post on Basic Foreclosure Process/Timing In Indiana. For a multitude of other reasons I won't detail here, it's highly unlikely that the additional thirty days sought by the gubernatorial candidate would bring about any reduction in home foreclosures.
Much, much more could be written about these issues, but these are my two cents for now. I understand that home foreclosures are a problem in Indiana, and I respect the fact that Ms. Long Thompson is thinking about the issue. At the end of the day, however, these Democratic plans simply create costs for lenders that exceed the corresponding benefits, if any, to borrowers.