Originally posted February 2, 2025
The New Mexico Foreclosure Settlement Program could be a trap. What you need to know about it.
For homeowners facing foreclosure in New Mexico, the Foreclosure Settlement Program (FSP) might seem like a lifeline. The FSP is administered by the First, Second, and Thirteenth Judicial District Courts. The program is designed to facilitate communication between lenders* and borrowers, with the goal of resolving foreclosure cases outside of litigation. But is the program truly designed to help homeowners, or does it place them at a disadvantage?
What Homeowners Should Know About FSP
At its core, the Foreclosure Settlement Program aims to:
- Reduce confusion about the foreclosure process.
- Minimize unnecessary court filings and hearings.
- Encourage meaningful communication between lenders and homeowners.
- Settle cases outside of litigation through mediation.
Sounds promising, right? But as a homeowner facing foreclosure, it’s important to understand what participation actually means. Most importantly, does it truly serve your best interests?
The Good: Potential Benefits for Homeowners
For some homeowners, the FSP can offer a structured approach to negotiating with their lender. Some of the reported benefits include:
- A temporary pause on foreclosure proceedings: Once a homeowner enters the program, foreclosure litigation is put on hold while negotiations take place.
- Opportunities to modify the loan: In some cases, homeowners have been able to secure a loan modification that allows them to stay in their homes.
- Avoiding eviction: Even if staying in the home isn’t an option, some homeowners negotiate a more favorable exit strategy, allowing them to leave on their own terms.
According to court statistics, 96% of cases in the Second Judicial District Court that fully completed the program were resolved through telephonic conferences. That means most cases don’t even reach in-person mediation.
The Bad: Homeowners May Be at a Disadvantage
While the program promotes settlement, it may not always work in the homeowner’s favor. Here are a few concerns:
- No guarantee of keeping your home: Just because a homeowner enters the program doesn’t mean they will secure a modification or resolution that lets them stay.
- Unequal representation: Lenders come to mediation with experienced attorneys and legal teams. Homeowners, on the other hand, are not automatically provided with legal counsel. Many homeowners enter negotiations unaware of their full legal rights.
- “Good Faith” Participation Rules: Homeowners are expected to engage in “good faith” negotiations, and failure to meet the program’s expectations can result in being removed from the process—potentially putting them back on the fast track to foreclosure.
The Ugly: Are Homeowners Pressured to Settle?
One of the biggest concerns with the FSP is that it may subtly pressure homeowners into accepting settlements that favor the lender. For example:
- Mediation is confidential: Under NMRA Rule 11-408, anything said during mediation is not admissible in court. If a homeowner later realizes they were misled or coerced into a bad settlement, they may not be able to use the mediation discussions to challenge the agreement.
- Sanctions for Homeowners, but Not for Banks: If a homeowner is perceived as not negotiating in “good faith,” they can be removed from the program. However, lenders who fail to engage meaningfully face minimal consequences beyond a potential court order.
- Typical Mediation Requirements are Suspended: The FSP facilitator does not require a representative of the plaintiff to participate. While the homeowner must attest to having authority to settle, the same is not true for the opposing attorney. What we have discovered is that the named “plaintiffs” are not actually engaged in foreclosures, which are wholly prosecuted by attorneys for an alleged “servicer”. It is not required for the servicer to provide proof of authority to act on behalf of the alleged note holder and we have discovered the cutting of corners where no such authority exists.
What Can Homeowners Do to Protect Themselves?
If you are a homeowner facing foreclosure and considering participation in the FSP, here’s how you can protect yourself:
- Seek Legal Assistance: Before agreeing to anything, consult with an attorney who specializes in foreclosure defense.
- Know Your Rights: Just because you’re in mediation doesn’t mean you have to accept an unfavorable deal. If you believe your lender is acting in bad faith, document everything and be prepared to assert your rights.
- Request Transparency: Ask for a clear explanation of why your loan modification was approved or denied. Lenders are required to provide certain documents explaining their decisions.
- Demand Proof of Authority: Ask for a power of attorney or other agreement that allows the attorney to settle on behalf of the plaintiff (educate yourself of mediation requirements)
- Understand the Consequences: Know what it means to enter the program and what options may be off the table if you participate.
Final Thoughts
While the Foreclosure Settlement Program has helped some homeowners stay in their homes, it is far from a perfect system. If you are facing foreclosure, approach the program with caution and awareness! Understanding your rights and seeking legal guidance can mean the difference between keeping your home and being pressured into an unfair settlement.
The FSP was created through the settlement funds obtained from the 2008 housing crisis. Yet, none of those who were responsible for the destruction of many families faced even one day in jail. And they were paid off, is it hard to believe this program might be a trap?
*Lender – for purposes of this article we are using the word “lender”, because that is the entity believed to have a right to the loan and a right to foreclose. However, this discussion opens up another can of worms, which will be discussed in this blog separately. We have learned that most, if not all, of the plaintiffs in foreclosure cases in New Mexico, are engaged in a shell game. Nobody truly knows who is entitled to payments. We are uncovering serious misrepresentations, and in some cases outright fraud. Something for homeowners to consider when engaging in settlement, is to consult with legal counsel. At a minimum, ensure the party on the other end of the phone is actually authorized to settle, as per court rules. If this issue is forced, preferably through an attorney, it is likely the homeowner will determine that there is no real party in interest. You might contract away your rights and give them to someone lacking any right.
Would you like to share your experience with the FSP? Leave a comment below or contact us to share your story.
DISCLAIMER: We are NOT attorneys and this should not be construed as legal advice. If you require direct assistance, seek competent legal counsel (if you can find anyone willing to challenge the system. These unicorns are few and far between). Do not contact us directly for specific advice on anything posted in our blog. We will not respond.
