Monday, June 22, 2009
The Center for American Progress, a nonpartisan research and educational institute, put out a report today that suggests states should offer mediation programs for distressed homeowners to avoid foreclosures.
The report says that nine million homeowners will face foreclosure in the next four years and states should step in and help keep people in their homes.
Mediation works like this: the homeowner and the lender meet with a neutral mediator who helps both parties come up with a solution for a mortgage that is in default.
From the report:
Requiring delinquent borrowers and servicers to come face to face at least once in the foreclosure process for mediation can significantly reduce foreclosures by creating an opportunity to both parties to negotiate an outcome superior to foreclosure. Jurisdictions that have implemented mandatory mediation report that more than seven in 10 cases are resolved short of foreclosure.
Not all resolutions, of course, lead to borrowers staying in their homes. But mediation also allows homeowners to arrange “graceful exits” in lieu of evictions. The upshot: mediation is beneficial for homeowners and mortgage servicers, as well as for the courts that are straining to keep up with the number of foreclosure filings in heavily impacted jurisdictions.
California is a state where the foreclosure process happens between the borrower and the lender only — no courts involved. In other states, foreclosure requires a court preceeding during which judges can intervene.
According to the report, the city of Philadelphia and the state of Connecticut both have had success with mandatory mediation programs.
One interesting fact the report points out is that the next wave of foreclosures will hit prime-mortgage borrowers. It seems as though it's fairly useless to keep blaming "irresponsible borrowers" for the real estate crisis that has spiraled into a major recession.
More homeowners are vulnerable now that unemployment continues to rise. It's time to look for effective and viable solutions to this enormous problem.
posted by Avoid foreclosure, We buy houses, Stop foreclosure
@ 9:12 PM
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