By Alan White
More than 25 states and localities are using mediation programs of various kinds to address the foreclosure crisis. These programs assume that many foreclosures could be prevented if only the servicer and homeowner could break through all their communication problems and talk until they reach an agreement. Homeowners won't return calls, the mortgage industry complains, and if only we could talk, we could work it out.
A new study of 800 settlement conferences held in New York City in June and July 2009 found that homeowners came committed to serious negotiation, and in nearly half of the cases with documents and/or having made a loan modification proposal. Servicer attorneys, on the other hand, came to conferences without settlement authority, without documents and without knowing the servicer's settlement position or even the status of a modification request.
The National Consumer Law Center's report on state mediation programs points out the limitations of voluntary conciliation programs that do not require mortgage servicers to participate in good faith. Very few mediation programs deny foreclosure relief until the servicer has completed a modification analysis and explained their decisionmaking. The mounting evidence is that servicers do not provide timely and accurate responses when homeowners seek foreclosure alternatives. It will be interesting to see Treasury Department reports on servicer compliance with HAMP Directive #7, which calls for homeowners to have their modification request acknowledged in 10 days and decided upon in 30 days.
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