The number of pending home foreclosures in Oregon scheduled for mediation is growing, six months after the Legislature mandated that lenders meet with distressed mortgage holders before repossessing their homes.

The Legislature last year extended the mediation requirement to foreclosure cases filed in state courts, as well as those filed with county clerks, or nonjudicial cases. Experts in banking, real estate and the law offered contrasting opinions on whether that mandate, which took effect in August, has hastened the smooth disposition of foreclosures.

“The legislative change to the foreclosure process has created a backlog,” said John Helmick, CEO of Gorilla Capital, a firm that buys, rehabilitates and sells foreclosed-upon homes. “Whenever there’s a change, it takes people a while to adjust to the change.”

However, the state agencies responsible for implementing the mediation requirement say the process is not backlogged.

The average life of a foreclosure case is 42 days; those cases in which both sides “are fully engaged” in the mediation process may take longer, according to the Oregon Department of Justice.

“There has never been a backlog of case requests,” wrote Janet Borth, assistant attorney general, in an email. “Among cases that proceed to a resolution conference, there are a significant number of adjourned or rescheduled resolution conferences.”

Thousands, and growing

Between August, when the law took effect, and March 16, the Oregon Foreclosure Avoidance Program recorded 6,559 requests to mediate a pending foreclosure, according to the Oregon Department of Justice. Of those, 4,028 were closed, either because the lender withdrew the request, the homeowner failed to respond or the process was complete. Lenders, who file most mediation requests, must obtain a certificate stating they attempted to mediate with the mortgage holder before foreclosing on a property.

Another 2,410 cases remain open in some stage beyond the first filing, awaiting a homeowner response, for instance. Finally, 825 cases are in the first stages.

Kevin Christiansen, government affairs director for the Oregon Bankers Association, said the state in February provided him information that indicated about a third of homeowners participated in mediation.

“The bottom line is the concern we have is the program, as a whole, is going to slow down the process” and stall the economic recovery, he said. “The other thing that gets lost is our banks have had lots of conversations with folks before the foreclosure process has happened.”

Overall, foreclosure filings are increasing again after six months of relative inactivity. In Central Oregon they have yet to reach the numbers put up in early 2013 and in years prior. In February alone, lenders filed 19 new foreclosure cases in Deschutes County Circuit Court. In July, they filed 164, according to information supplied by Jeff Hall, county trial court administrator. In August, filings fell to 65 — and to three in September as lenders complied with the new law.

At the closing end of the judicial process, the county Sheriff’s Office listed 337 properties for sale on the courthouse steps last year, and 72 properties so far this year, said civil technician Lisa Griggs.

“I think we’re on track to meet or exceed the 337,” she said.

Measured success

The mediation requirement, designed to bring lenders and borrowers face-to-face to find alternatives to foreclosure, may be paying off in Deschutes County, according to Lynne McConnell, an associate director with NeighborImpact. The nonprofit organization is designated to represent Deschutes County homeowners during mediation.

NeighborImpact claims a 93 percent success rate, success being defined as something other than foreclosure: outright sale, loan modification, short sale or forbearance, McConnell wrote in an email.

“Things are going a lot quicker than last year,” McConnell said recently. “It’s not a perfect system, but we’re getting resolutions that seem to work for all sides.”

NeighborImpact has closed 50 cases this fiscal year, according to McConnell. The organization has scheduled 20 mediation sessions, or “resolution conferences,” for April, as many as took place statewide in the 2012-13 fiscal year, she said.

“Of clients who have stuck with us through the whole process, only four have been foreclosed upon this fiscal year,” she wrote in an email March 21. But even McConnell says the process is taking longer than expected.

“It’s easy to jump to conclusions that it’s not working,” she said. “But that’s not the whole story.”

Bankers say the mandate created a backlog of foreclosure cases, which lengthens the time those homes, sometimes abandoned, are unavailable for sale. Abandoned homes drive up bank costs and create neighborhood eyesores, Christiansen said.

“Our banks are interested in getting them sold,” he said. “I don’t think you want them on the books longer than necessary.”

What lenders prefer

Banks until mid-2012 preferred to file foreclosure actions outside the court system, through notice and sale, a process that starts with a public notice and ends with an auction on the courthouse steps. Bankers favored the nonjudicial process because it avoids the expense and delays of foreclosure through the court system, Christiansen said.

In 2012, the Legislature imposed a mediation requirement on nonjudicial foreclosures. That, and an adverse state appellate court ruling, sent lenders to state courts, where no mediation was required, to file foreclosures. Last year, the Legislature passed Senate Bill 558 to bring uniformity to the law.

“One of the things it did was it made the mediation requirement applicable to nonjudicial and judicial foreclosures,” Christiansen said.

In Deschutes County, at least, lenders this year still seem to prefer the courts to nonjudicial foreclosures.

In January and February, they filed a total 30 judicial foreclosures. As of March 19, the county clerk’s office has received 19 nonjudicial filings, according to online records.

Christiansen said the overall foreclosure process was bogged down while bankers adapted to the expanded mediation requirement. “I think our banks are trying to make it work,” he said. “They’re participating in the program.”

— Reporter: 541-617-7815, jditzler@bendbulletin.com