A panel of foreclosure mediation experts organized by the Department of Justice concluded the federal government is needed to better fund and standardize promising initiatives across the country.
Since 2007, more than 8.9 million homes have been lost to foreclosure, according to RealtyTrac data. More than 30 foreclosure mediation programs have been created in at least 25 states to put borrowers in touch with servicers for a better shot at a modification or some other alternative to foreclosure. Several programs continue after a few years.
But research on whether these mediation programs actually work is scarce. In March, the Justice Department organized a workshop with dozens of foreclosure mediation administrators and researchers.
“Although the impact of well-crafted programs appears promising, only a few jurisdictions have engaged in an in-depth study of program outcomes, and to date there has been no comprehensive study comparing outcomes for homeowners in mediation to similarly situated homeowners who have not had the benefit of mediation,” according to a report on the workshop released Tuesday.
Around the country, there are hits and misses.
A Philadelphia foreclosure mediation program reached between 80% and 85% of foreclosure cases, according to Ira Goldstein, director of policy and information services for The Reinvestment Fund, which finances neighborhood revitalization. For those homeowners automatically entered into the program, he found, 35% reached an agreement with the servicer, and 85% of the cases are resolved in two meetings or less.
According to the federal report, this number varies by state. In Connecticut, a mediation often lasts as many six meetings before reaching a resolution.
But programs designed by 20 circuit courts in Florida are widely regarded as ineffective at best and failures at worst. The programs were designed around guidelines distributed by Florida Supreme Court in 2009. Roughly 64% of participating borrowers left mediation without a deal with their lender. State courts attempted to force servicers to send representatives with full authority to consider offers, but the programs were scrapped in December.
The Justice Department workshop concluded that more specific evaluations are needed for these disparate programs. The attendees drafted a standard set of data points and definitions needed to effectively measure one against the next. But in the end, the group concluded that the federal government “should take an active role” in standardizing guidelines for mediation programs and to properly fund them.
Sens. Olympia Snow, R-Maine, and Jeff Merkley, D-Ore., introduced a bill in May that would standardize the servicing process and install new rules for mediations. A sister bill from Rep. Elijah Cummings, D-Md., would make these rules federal law, but both pieces of legislation have stalled in Congress.
“The success of mediation programs comes down to accountability,” according to the report. “Mediators find it extremely difficult to move things forward when a servicer is non-compliant. The escalation process is not working because there is no real threat of federal intervention.”
Write to Jon Prior.
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