Update on Home Foreclosure Mediation

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UPDATE ON HOME FORECLOSURE MEDIATION

Here is another in a series of updates on home foreclosure mediation developments nationwide from Mediate.com News Editor, Keith Seat

• The National Consumer Law Center has released its new report on mortgage foreclosure mediation focusing on programs in 19 states throughout the U.S.  The report suggests that mediation is an inexpensive solution that could save billions, as well as allowing many troubled homeowners to keep their homes.  The report recommends best practices based on foreclosure mediation data from the last three years.  The report indicates that some programs, including those in Connecticut, Nevada and New York, are more successful than other programs.  The report emphasizes the need for enforceable standards and robust outreach, both of which were lacking in the recently suspended Florida mediation program.  Mediation fees are typically less than $1,000, a tiny portion of the $145,000 per foreclosed home lost by investors.  In California alone, foreclosures have cost more than $500 billion.  National Consumer Law Center Report (February 2012); MarketWatch (February 6, 2012); UTSanDiego.com (February 16, 2012)
• A U.S. Department of Justice report on foreclosure mediation emphasizes best practices for research and evaluation and how creative collaborations among the various programs, agencies, institutions and others involved can enhance efficient use of resources.  The report, by DOJ’s Access to Justice Initiative, summarizes the results of a March 2011 workshop which included recommendations such as requiring federally-backed loans to go through mediation prior to foreclosure, creating federal guidelines for foreclosure mediation programs, and providing matching funds for state programs that meet the federal guidelines.  DOJ Report – Foreclosure Mediation: Emerging Research and Evaluation Practices (December 2011); National Mortgage Professional Magazine (January 12, 2012); Huffington Post (January 10, 2012)
• The U.S. government and 49 state attorneys general reached agreement on a $25 billion settlement with the country’s five largest loan servicers for improper handling of foreclosures.  The settlement resulted from 15 months of intense negotiation and is said to be the largest federal-state joint settlement in history.  Connecticut will receive $190 million from the settlement, of which $27 million will help pay for local foreclosure prevention programs, including the judiciary branch’s foreclosure mediation program.  Pennsylvania is to receive $266 million, which housing advocates are hoping will be spent in part to restore the Homeowners Emergency Mortgage Assistance Program, which was viewed nationally as an excellent foreclosure mediation program before it lost funding last year.  Utah will receive $171 million in the settlement, while Delaware will receive $45 million.  National Mortgage Settlement (February 2012); Ctwatchdog.com (February 9, 2012); Keystone Politics (February 10, 2012); CBS News (February 10, 2012); WGMD.com (February 10, 2012)
• The Nevada advisory panel has recommended additional changes to the Nevada Foreclosure Mediation Program by requiring banks to disclose how much they paid for homeowners’ mortgages.  Some banks reportedly bought distressed loans for as little as five cents on the dollar.  However, lenders state that loans frequently are sold in bulk, making it too difficult to determine the amount paid for individual mortgages.  Other lenders question the relevance of the information and are concerned that it will result in homeowners having unrealistic hopes of obtaining principal reductions.  Las Vegas Sun (February 24, 2012)
• Following the Nevada Supreme Court’s holding last July that a district court should have imposed sanctions against a lender that did not negotiate in good faith, District Judge Flanagan has imposed minimal sanctions by requiring the lender to cover the costs of another mediation and to give $2,500 to a legal services non-profit.  RGJ.com (January 3, 2012)
• The Nevada Supreme Court remanded two separate foreclosure cases back to District Judges Mosley and Flanagan, ruling there was insufficient documentation for foreclosure.  A Court spokesman noted that there are a significant number of similar foreclosure mediation appeals pending before the Court.  In another case, the Nevada Supreme Court is considering whether a bank can foreclose on a home despite a mediator’s finding that not all required documents were presented at the mediation.  The bank sought judicial review of the mediator’s findings and District Judge Flanagan ruled that the bank’s failure to produce documents did not amount to bad faith, which the homeowner has appealed.  CBS News (January 24, 2012); CBS News (January 5, 2012)
• Delaware legislators and the attorney general gathered to mark the launch of the state’s new mandatory foreclosure mediation program, which applies to home foreclosures from January 19 and continues for two years.  Loan Safe.org (January 20, 2012)
• New York will soon provide foreclosure mediation and counseling through a Foreclosure Relief Unit to be set up in the Department of Financial Services.  The Wall Street Journal (January 5, 2012)
• With a continuing high level of foreclosures, the City Council of Los Angeles, California is considering whether to adopt a mortgage foreclosure mediation process.  The Council is considering the type of program adopted in Springfield, Massachusetts.  Loan Safe.org (February 16, 2012)
• Protestors favoring legislation requiring foreclosure mediation and other homeowner protections in Massachusetts gathered near the State House to encourage legislative support.  The Massachusetts Commission Against Discrimination supports mandatory mediation to prevent discrimination that can occur when banks decide with whom they will mediate.  Advocates stress that Massachusetts is the only New England state that does not have a foreclosure mediation law.  The Herald News (January 11, 2012)
• Legislation requiring mediation prior to home foreclosure passed the Oregon Senate, but faces opposition from bankers in the House.  Although this legislation died in the House last year, it has bipartisan support and the governor has indicated he will sign it if it passes.  Mail Tribune (February 18, 2012)
• HOPE NOW, an alliance of mortgage market participants that provides assistance to homeowners in distress, convened a meeting in Washington, DC among judges, attorneys, and state housing agencies, including Maryland, Ohio and Rhode Island, to discuss best practices and standards for foreclosure mediation.  Foreclosure rates were down in 2011 due to problems such as “robo-signing” that temporarily halted all foreclosure processes at some big banks, but the foreclosure rates in 2012 are expected to rise.  National Mortgage Professional Magazine (February 2, 2012); HOPE NOW Website; Afro (January 13, 2012)

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