Mandate Mediation in Foreclosure Proceedings

More states should make available automatic mortgage mediation programs.

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There is a growing recognition in states across the country of the value of requiring foreclosure mediation when homeowners and their lenders and mortgage service companies enter the foreclosure process. Mediation does not force the parties to settle or allow the mediator to impose a settlement, as in arbitration. Rather, mediation creates an opportunity for both parties to engage in meaningful communication and negotiate a solution both sides can live with. But 70 percent to 75 percent of mediation cases result in a settlement, and 60 percent result in a settlement that allows homeowners to keep their homes. Mandatory mediation promises gains for efficiency and homeownership.

Many states currently have opt-in foreclosure mediation programs, but participation in these programs rarely exceeds 20 percent of eligible homeowners. These states, including New Jersey, Nevada, Delaware, and others, should assume responsibility for automatically scheduling the first mediation session between mortgage servicers and homeowners as soon as the servicer initiates the foreclosure initiation process. Connecticut and Philadelphia are two states that have already taken this step, and participation rates in those states’ mediation programs have jumped without any decrease in the rate of successful mediation.

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