From the Boston Globe:
Even when faltering homeowners and their banks would both benefit by modifying mortgage terms or arranging a so-called “graceful exit’’ from an unsustainable loan, such negotiations haven’t become standard practice — and the arduous foreclosure process lurches forward, often through bureaucratic momentum alone.
One promising solution is for governments to make mediation automatic, by requiring that borrowers be given a chance to sit down with lenders and neutral third parties to attempt to work out a payment solution that is viable for all involved.
Mayor Menino is asking the Legislature to make the process automatic in looming foreclosure cases in Boston. Lawmakers should agree, and go a step further by making mediation automatic throughout the state for homeowners facing foreclosure. Similar laws have proved beneficial in Connecticut, Florida, and New York. Massachusetts should follow suit.
The foreclosure crisis has thrown millions of families into limbo, muddied the balance sheets of mortgage lenders, and threatened the recovery of the broader economy. Foreclosing on a home and maintaining it until it can be auctioned is costly for lenders; they’re often better off when they offer more affordable terms to a delinquent homeowner, or agree to terminate a mortgage amicably, perhaps through a short sale. But the necessary negotiations can be hard to bring about when the company that services the mortgage doesn’t actually own it — or when a mortgage holder has thousands of foreclosure cases on its hands.
That’s why mediation should be automatic. One study found that cities and states with mandatory mediation reported settlement rates approaching 75 percent. In these cases, lenders get an acceptable payment schedule rather than an empty house in a profoundly troubled housing market.
A program of automatic mediation also builds transparency and communication into the foreclosure process, which more often involves reams of paperwork, endless bureaucracy, and a dearth of human interaction.
I don’t think this is going to happen on a broad basis because our financial “industry” has become basically a criminal organization. They not only break the law, but they have what all criminal organizations have-no remorse. None. Nada.
We didn’t stumble innocently into this epic, criminal housing Ponzi scheme. People set down, planned, discussed the ins and outs, the up and down sides, and then went about the process of defrauding vast numbers of folks. The guilty run from the street level all the way up to the highest ranks of our society.
This chapter in our history is going to end the way all gangster activity does-badly-for all of us.
Just foreclose!
The foreclosure system works very well.
It is the short sale BS that is corrupt and inefficient.
Every month deadbeats get away with not paying their mortgage just makes the debt owed greater and greater. These people have proven they can’t repay their debts how will changing the interest rate or adding a balloon payment change anything.
The devil with this sort of thing is of course in the details. It is fine and well for reporters to advocate mediation, but how it is implemented is the bigger question.
Mediation involves a third party whose job it is to assist the parties to a dispute to reach a negotiated result. Mediators don’t work for free usually and someone has to pay them.
In considering this you can probably break the types of foreclosures that occur into three types.
Uncontested foreclosures in judicial foreclosure states (95%).
Contested foreclosures in judicial foreclosure states (the other 5%).
Non-judicial foreclosures such as we have in California.
Mediation in uncontested judicial foreclosures does not seem practical since the borrowers are not part of the dispute anymore.
Mediation in contested judicial foreclosures probably happens in most cases anyway since most courts push mediation on the parties to try to get the case out of the system to free up the docket.
Requiring mediation in non-judicial foreclosure states such as California would be a significant change to the process, and could result in borrowers gaming the system more than they already do. California already requires that the servicer/lender make contact with the borrower prior to initiating non-judicial foreclosure. To also mandate mediation would slow the process down further, and there would be a question of how the mediation system would allocate costs of mediation between the parties and how capable the system would be in resolving borrower recidivism issues, etc. If passed in California, the servicers would probably view this as another moratorium against foreclosure until it was figured out.