State and local programs to help troubled homeowners stave off foreclosure through mediation have yet to make much difference to date, according to a new report from the National Consumer Law Center.
From mid-2008 to mid-2009, more than 25 foreclosure mediation programs were launched in fourteen different states with the promise of helping thousands of homeowners avoid foreclosure. The study reviewed programs in California, Connecticut, Florida, Indiana, Kentucky, Maine, Michigan, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon and Pennsylvania.
”There is as yet no data to confirm that foreclosure mediation programs anywhere have led to a substantial number of affordable and sustainable loan modifications . . . [W]e (also) found that the existing programs routinely fail to impose significant obligations on mortgage servicers. Without the imposition of these obligations, it is unlikely that mediations will lead to fewer foreclosures,” the study found.
Mediation can be an important solution to the problems facing modifying mortgages in default. They can help confused and rebuffed homeowners find and talk to individuals authorized to make loan modifications. To maximize their reach and effectiveness, mediation programs must make homeowner participation automatic, allow mediation requests up to the time of a foreclosure sale, postpone foreclosures until servicers meet mediation program obligations and shield homeowners from liability for servicers’ attorneys’ fees and other costs. In addition, strong mediation programs require court supervision enforceable by sanctions; adequate funding for outreach, counseling and legal representation for homeowners; and notification and participation provisions for junior lien holders.
The NCLC report notes that the state and local mediation program have omitted the same crucial elements of industry accountability responsible for the weak showings from such voluntary Federal programs including Hope Now, Hope for Homeowners and the Obama Administration’s Home Affordable Modification Program (HAMP), which have ended up serving only a small percentage of eligible homeowners. NCLC points out that the industry has opposed state-level efforts to strengthen mediation programs, including such steps as requiring that servicers document of loan modification calculations.
“Under most of the existing foreclosure mediation programs, servicers have all the discretion and homeowners have little or no power. If the programs continue to demand little or no accountability from servicers, they will likely go the way of federal efforts to control foreclosures that have failed as a result of relying on voluntary compliance by the lending industry. It is unfortunate that the industry has so far prevailed in blocking Congressional action on court-ordered loan modifications, the one step that would level the playing field for consumers and ensure the necessary accountability from all parties,” said study author Geoffrey Walsh, a NCLC staff attorney.
Click on the link at the top of the story for a copy of the report.