Thursday, July 15, 2010

foreclosure homes

Foreclosure Mediation Programs Succeed Across The Country — Will Pawlenty Give Minnesota’s A Chance?

Today, across the country, mortgage mediation programs aimed at helping struggling homeowners stay in their homes are getting underway. Programs are launching in Maryland, as well as Florida’s 6th and 10th judicial circuits — encompassing Pasco, Pinellas, Hardee, Highlands, and Polk counties — while Cook County, Illinois is beginning a huge round of outreach for its burgeoning program.

In all, “the number of jurisdictions with foreclosure mediation programs is nearly double the number a year ago, with jurisdictions in 21 states now offering foreclosure mediation or negotiation programs.” Not on this list, however, is Minnesota, where Gov. Tim Pawlenty (R) saw fit to veto a program last year.

The Minnesota state senate recently passed the bill again, sending it to the state House, so Pawlenty could very well get a second shot soon. And there’s simply no reason for him to oppose the program, as mediation — during which a bank meets face-to-face with a borrower, often in the presence of a judge and housing advocates, to try and forge a mortgage modification or other arrangement that prevents a foreclosure — is one of the most successful methods of helping struggling borrowers stay in their homes.

Connecticut’s mediation program, for instance, has kept 60 percent of its borrowers out of foreclosure. Philadelphia’s success rate is also 60 percent, while Nevada claims an 85 percent success rate:

About 80 percent of homeowners at risk of losing their homes don’t engage in any efforts to negotiate with their lender. And those who do so on their own often run into a bureaucratic mess, including hours on hold, lost records, and customer service representatives who know nothing about the borrower’s situation. Mediation helps to ensure that situations like that don’t happen.

“These new protections empower our fellow Marylanders, putting them on a more equal footing with mortgage companies that too often can’t be bothered to pick up the phone before beginning a foreclosure proceeding against a Maryland family,” said Governor Martin O’Malley (D). And lest Pawlenty think this is a purely partisan issue, it has also won the praise of Gov. Jodi Rell (R-CT). “Clearly, mediation is an effective tool homeowners can use to ward off foreclosure,” she said. “This program is a beacon of hope for hard-pressed homeowners and a real alternative for lenders.”

In mediation, there’s no requirement for a lender to accommodate a borrower, but it’s often the case that preventing a foreclosure is in the best financial interest of both the borrower and the lender. As CAP’s Andrew Jakabovics and Alon Cohen wrote, “the simple act of participating in mediation consistently yields solutions short of foreclosure that are acceptable to both sides.” Hopefully, should the Minnesota legislature do the right thing and create a program, Pawlenty will allow it to stand.

America was built on a cycle of real estate bubbles. Every region has its history of boom-to-bust towns, or towns that never actually came into existence, though rubes back east paid good money for lots in what was sure to be the Next Big Thing, only to see their money vanish along with the town when the bubble burst.

Twenty years from now, we'll be hearing the old chestnuts, "Real estate only goes up!" and "Buy now before you're priced out forever!" while real estate mania pushes the prices beyond reality once again.

We never learn.


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