There are a number of excellent ideas for mitigating the current foreclosure crisis that need greater attention. We will be featuring a discussion of the most promising policies next week. One concept which needs greater attention and support is the insertion of automatic mediation into the foreclosure process.
Alon Cohen, who has been advising the Center for American Progress on mediation alternatives, argues that there are many ways to expand the use of mediation and insert it into the process automatically.
As Alon describes it, foreclosure mediation is:
a last, best chance for the homeowner and mortgage lender or mortgage servicer to sit down in the presence of a neutral third party who understands the foreclosure and loan modification processes and determines whether there is any deal that nets both sides greater value than would foreclosure.
He explains the mechanics here, and the federal policy levers here.
But the key is that recent results have been encouraging, with more than half of all participants in mature foreclosure mediation programs reaching a settlement. The next step is to make sure that this option is pursued automatically as a matter of course when foreclosure proceedings get underway. There are opportunities for Congress to step into the void and encourage more states to employ this approach which already has a proven track record of support. The federal government might offer a modest grant program for states that deploy or enhance their mediation programs. This would create some incentives and a means to share best practice activities, as a various default options that include mediation hearings. The value of this approach will increase substantially if Congress decides to shut down the HAMP modification program that has fallen woefully short of its own goal.
Foreclosures often create a lose-lose scenario. Mediation is a way to stem the tide and help families stay in their homes. Not only that but it can help communities recover from the housing crisis and allow lenders to limit their losses. That’s the proverbial win-win. Congress should get back to work and make sure it is an option for everyone facing the loss of their home.