Mortgage foreclosure: the mandatory mediation the court cannot skip

It is the law inserting a mandatory mediation process between creditor and mortgage debtor before foreclosure of a principal residence can be completed (32 L.P.R.A. §§ 2881-2886). Principal residence is the one used as the home of the debtor, or of the debtor and their immediate family, and which for real property tax purposes is the one the main tax exemption would apply to. Mediation is a non-adjudicative process: a neutral mediator assists the parties in conflict to reach a mutually acceptable agreement, and it may not be held at the offices of the creditor, its attorneys, legal representatives or advisers.

The natural person who took a consumer loan, or a loan for personal or family purposes, secured by a mortgage lien on their principal residence, and against whom an action to foreclose that mortgage has been filed. The definition of debtor includes every natural person who is or could become liable for the obligation being enforced, and expressly covers those who took out reverse mortgages on their principal residence.

• That the property is your principal residence: the one you use as your main home and for which the main real property tax exemption would apply.Verified against the official source
• That a civil action has been filed to foreclose that mortgage, with the summons served.Verified against the official source
• Delivering within a reasonable time the documents the creditor requests at the hearing to evaluate alternatives — or evidence that you are working to obtain them.Verified against the official source

• The summons with a copy of the complaint: the law expressly warns of the advisability of seeking legal assistance and answering the complaint upon receiving it.
• The list of necessary and pending documents the creditor must hand you at the mediation hearing to evaluate your alternatives.
• The creditor’s written evidence certifying that its representative has authority to act on its behalf and reach agreements.

1. 1

   Step 1: Answer the complaint: mediation does not replace it

   The law itself requires the creditor to warn you, from the moment it grants the loan, of the advisability of seeking legal assistance once you receive the summons with a copy of the complaint and of answering or responsively pleading to it, and of the risk you face of losing the property if you do not. Mediation is an additional right, not a substitute for answering within the term.

2. 2

   Step 2: Count the 30 days from service

   It is the Court’s duty, within a term of thirty (30) days from service of the summons, to summon the parties to a mandatory mediation hearing presided over by a mediator selected by the parties. The hearing may be in any courtroom, or in the place the parties agree on with the mediator — but the law expressly forbids it being at the offices of the creditor, its attorneys, legal representatives or advisers.

3. 3

   Step 3: Demand they explain ALL alternatives, including the ones that do not depend on your wallet

   At the hearing you shall be informed verbally and in writing of all alternatives available in the market according to the loan and investor type to avoid losing the property, the foreclosure or the judicial sale, including those that do not depend on the debtor’s financial capacity, such as the short sale, deed in lieu of payment, voluntary surrender of title, and other remedies that keep you from losing your home or that, if you do lose it, minimize the negative consequences. The creditor’s representative must tell you which ones you qualify for and explain the reasons for those you do not.

4. 4

   Step 4: Check that whoever came from the bank can actually decide

   The creditor’s or investor’s representative who attends must be, or alternatively have access at all times to, an officer of the financial institution with authority to reach payment agreements, modifications or any other retention or disposition alternative, subject only to final underwriter approval as applicable. The representative must also hand you written evidence from the creditor certifying their representative capacity. Lack of decision-making authority is one of the procedural incidents the mediator may report to the Court.

5. 5

   Step 5: Deliver the documents they ask for, even partially

   At the hearing the creditor will give you a list of the necessary and pending documents to evaluate the alternatives. You must deliver them within a reasonable time; before the next hearing you must deliver those requested at the first one or, failing that, evidence you are working to obtain them. If you fail without just cause, you are deemed to have withdrawn from mediation and the judicial process continues. But note the nuance the law adds: either party’s failure to produce documents for the first session shall not be grounds to end the mediation.

6. 6

   Step 6: If the bank does not appear or does not act in good faith, the complaint is dismissed

   The law sets consequences in both directions. If the debtor fails to appear without adequate justification, does not deliver the documents, or does not comply with the agreement reached, they are presumed to have withdrawn and the creditor continues the foreclosure. But if the creditor fails to appear at any stage without adequate justification, or if the Court determines — after resolving the controversy at an evidentiary hearing — that it did not act in good faith regarding the offer of alternatives or the evaluation it made of you, the Court shall dismiss the complaint without prejudice.

7. 7

   Step 7: Know what happens with the agreement and the 20 days

   Once the agreement is submitted and notified to all parties, they have up to twenty (20) calendar days to reject or ratify it, and if that term ends without objection it is automatically deemed ratified. If the agreement requires recording at the Property Registry, the Court may order it by order and writ, as long as third-party rights are not affected. Mediation is confidential: the mediator may only report to the Court the procedural incidents — failure to deliver documents, lack of decision-making authority, and unjustified delay or lack of cooperation — keeping everything substantive in the negotiation confidential.

The process happens within the foreclosure civil case at the Court of First Instance: you do not request it separately, because it is the Court’s own duty to summon the parties within 30 days of service. The Office of Court Administration is responsible for approving the procedural regulation and, since the 2024 amendment, for including in its Statistical Yearbooks the breakdown of cases referred to mediation, waivers, dismissals for creditor bad faith, and types of agreement reached. Mediation expenses are paid, unless otherwise agreed, in equal parts.

• Not answering the complaint because "there will be mediation": the law warns of the risk of losing the property if you do not responsively plead.
• Not knowing the requirement is jurisdictional: without mediation no judgment may be entered and no judicial sale held.
• Failing to appear at a stage without justification: you are presumed to have withdrawn and the foreclosure continues.
• Agreeing to hold the hearing at the bank’s or its attorneys’ offices, which the law expressly forbids.
• Not demanding written evidence that the creditor’s representative has authority to reach agreements.
• Believing there are alternatives only if you have money: the short sale, deed in lieu and voluntary surrender do not depend on your financial capacity.
• Waiving mediation because the bank conditioned it: the law forbids conditioning the alternatives on that waiver.
• Letting the agreement’s 20 days pass without objecting when you did not agree: once the term ends it is automatically deemed ratified.
• Thinking the reverse mortgage is excluded: the definition expressly includes it.

These are the government pages this guide is based on.

• Poder Judicial de Puerto Rico

  Poder Judicial

  bvirtualogp.pr.gov