The National Consumer Law Center (NCLC) has conducted a study of several state foreclosure mediation programs designed to control the growing number of houses in foreclosure. The study showed that the programs, which require conferences or mediations before homes could be placed on foreclosure sales, have an enormous potential to help troubled homeowners.
But the study noted that the foreclosure mediation programs are in great jeopardy because of the lack of accountability. The industry accountability shortfall is the same problem that has been dogging the voluntary mortgage modification programs of the federal government.
The study covers foreclosure mediation initiatives in 14 states, including Connecticut, Florida, Maine, California, Nevada, Michigan, Kentucky, New Jersey, Oregon, New Mexico, Pennsylvania, New York, Indiana and Ohio.
The NCLC study warned about the expectations that these foreclosure mediation initiative may be creating, especially to homeowners who are desperate to save their houses in foreclosure.
The NCLC pointed out the lack of data to confirm or show that foreclosure mediation programs have resulted to a significant number of sustainable and affordable home loan modifications. The group also said that the existing mediation programs have failed to impose significant responsibilities on mortgage lenders. It added that the absence of any obligation will not make mediation successful in terms of reducing the number of foreclosures.
The NCLC discovered that many foreclosure mediation programs lack mandatory rules, do not require lenders to provide information to substantiate the right to foreclose and fail to place sanctions for not complying with existing rules. The group added that the programs do not require analyses of mortgage modification alternatives.
Furthermore, the programs have imposed unreasonable procedural hindrances that limit a significant number of distressed homeowners from participating. To top it all, the NCLC said that in almost all foreclosure mediation programs, homeowners are left on the mercy of lenders.
The report concluded that foreclosure mediation initiatives play an important role in making sure that lenders comply with their federal obligations. For the foreclosure mediation programs to succeed in reducing the number of houses in foreclosure, the NCLC recommended requiring servicers to provide homeowners with documents showing their net present value and affordable loan modification calculations.
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