When Vice President Joseph Biden’s Middle Class Task Force meets on November 19 in Washington, at the top of its agenda should be steps to resolve the home foreclosure crisis across our nation. Foreclosures remain at extremely high levels across the country. In Las Vegas, among the nation’s hardest hit cities, 1 in 70 homes is in foreclosure. And foreclosure is not the end of the story. It could take close to a decade just to sell off the homes already foreclosed upon.
To stabilize the housing market as quickly as possible, it is imperative that we keep as many homeowners in their homes as possible while speeding up the foreclosure and transition to new housing for those homeowners who cannot afford their homes even with modification. Foreclosure mediation achieves both of these positive outcomes simultaneously. Friday’s Middle Class Task Force meeting at the Eisenhower Executive Office Building is an opportunity for Vice President Biden to demonstrate the Obama administration’s continuing resolve in this crisis.
Foreclosure mediation is the last line of defense in foreclosure prevention when all the parties can meet and settle upon a loan modification that is both sustainable for the homeowner and nets the mortgage servicing company handling the mortgage for lenders and investors greater value than it can expect from selling the home at auction. And foreclosure mediation also is the first line of attack, speeding up the foreclosure process for those homeowners who simply cannot make their mortgage payments even if modifications were made. This saves mortgage servicers the cost and complication of lengthy foreclosures.
Foreclosure mediations are operating successfully in more than 20 state jurisdictions around the country. Those that are fully operational, such as those in Connecticut, Philadelphia, and Nevada, see settlements in well over half of their mediations, with a majority of homeowners keeping their homes. The same trend appears in every jurisdiction that implements a program, so we need more programs.
Moreover, the key to a successful foreclosure mediation program is homeowner participation. Inundated with often questionable offers for assistance from every direction, homeowners in foreclosure many times do not learn that mediation is available or question the validity of the offer. Thus, it is important that jurisdictions automatically schedule mediations for homeowners and mortgage servicers or lenders.
Automatic scheduling just sets a time for the parties to talk. Whether the parties settle remains their choice. But it’s important to note that automatic foreclosure mediation programs see a 75 percent participation rate while existing programs that require homeowners actively request mediation have participation rates around 20 percent.
The Vice President’s Middle Class Task Force should therefore encourage foreclosure mediation, and in particular automatically scheduled mediation, across the country to provide homeowners with a fair process to help keep their homes while maximizing value to mortgage lenders, servicers, and investors. The Center for American Progress has spent the past two and a half years tracking and documenting foreclosure mediation programs nationwide. Our findings, including our conclusions regarding automatic scheduling of mediation as well as a host of best practices recommendations for jurisdictions looking to create or improve their programs, can be found in our papers:
- It’s Time We Talked: Mandatory Mediation in the Foreclosure Process (June 2009)
- Now We’re Talking: A Look at Current State-Based Foreclosure Mediation Programs and How to Bring Them to Scale (June 2010)
- Walk the Talk: Best Practices on the Road to Automatic Foreclosure Mediation (November 2010)
- Talking It Up: Recommendations for Encouraging Foreclosure Mediation at the National Level (forthcoming)
Alon Cohen is a consultant and author at the Center for American Progress on housing issues. He is also SVP and general counsel of FightMetric LLC, a Washington, D.C., startup focusing on sports statistics.