Foreclosure Mediation: An Inexpensive Tool to Keep Homeowners in their Home
With nearly 3 million homes lost to foreclosure and an expected additional 10 million homes in the near future, what is a troubled homeowner to do?
In February 2012, the National Consumer Law Center published its fourth report on foreclosure mediation .
They found that:
- Foreclosure mediation programs and conferences provide substantial community benefits at little or no cost. Mediation fees average from none to less than $1,000. Yet, investors lost an average $145,000 per home foreclosure in 2008, and foreclosures just in California have resulted in nearly $500 billion in aggregate costs.
- Effective mediation programs do not prolong foreclosures.
- Foreclosure mediation programs should connect borrowers with housing counselors. Borrowers who receive housing counseling are much more likely to avoid foreclosure, and obtain affordable as well as sustainable loan modifications.
- Not all foreclosure mediation programs are equal. All states should adopt foreclosure mediation programs with enforceable standards and robust outreach as permanent features of state foreclosure laws as quickly as possible.
- Mediation programs must ensure that the FHFA’s new servicing guidelines do not lead to unnecessary foreclosures.
- Strong foreclosure mediation programs can work hand-in-hand with other tools to rebuild the nation’s broken mortgage market and should be used to maximize HAMP modifications. The modified loans’ default rate over 1 year dropped from 56.2% in 2008 to 25.7% in 2010. HAMP loan modifications were the most sustainable of all with a 17.3% (2011) redefault rate after 1 year.
- Policymakers can use mediation programs to help preserve minority homeownership; gains made over the last decade are vanishing.
Borrowers in mediation must receive accurate information about an increasingly unaffordable rental market. Renters, especially those who are low-income, are more than twice as likely as homeowners to spend more than 50% of income for housing. Mediation programs should refer all homeowners to housing counselors to evaluate the costs of renting before giving up on saving a home.