Idea of the Day: Foreclosure Mediation Programs Are Necessary
Bank of America Corp. and Ally Financial Inc., two of our nation’s largest home mortgage lenders, announced last week that that they would resume active foreclosures in 23 so-called judicial foreclosure states, or those states where foreclosures move through the courts. The two banks had previously announced they were suspending foreclosures across the country on October 1 after claims came to light that they and other prominent lenders used “robo-signers” to sign thousands of affidavits at multiple lending institutions certifying that they had reviewed loan documents that they had never in fact seen.
The banks’ announcements capped two weeks of increasing uncertainty in the housing market. While some state’s attorneys general continue to push for a foreclosure moratorium, there is growing consensus that pressing “pause” on the crisis is no solution.
Instead, jurisdictions and the federal government should implement foreclosure mediation programs so that responsible homeowners and their lenders or mortgage servicers have at least one chance prior to foreclosure to review the documentation and ensure the foreclosure is both legal and appropriate. Getting the parties face to face with each other and the documents in the presence of a neutral, third-party expert on foreclosure mediation can immediately help restore certainty to the foreclosure process before foreclosures run their course.
There is consensus that ending the housing crisis and stabilizing housing markets requires us to address the glut of foreclosures as quickly as possible. That has been the goal of federal Making Home Affordable programs, including HAMP, similar state initiatives, increased housing counseling, and increasingly foreclosure mediation. The faster we sustainably modify mortgages where possible or dispose of a property via short sale or foreclosure sale, the faster lenders and investors can regain control of their balance sheets, states and local governments can stabilize tax revenues, and homeowners can achieve a stable home life.
For more on this topic please see:
- Clearing the Foreclosure Crisis by Alon Cohen
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