A foreclosure mediation program enacted by the Oregon State Legislature took effect Wednesday, providing distressed borrowers in the state with another avenue to remain in their homes.
The new law gives homeowners a face-to-face meeting with firms holding their mortgages to discuss loan modifications and other work-out options.
The state is not the first to enact a mandatory mediation program for certain borrowers, but it's one of the few to gain helpful insight by watching other states launch similar mediation programs.
"I think Oregon did a good job by seeing what is and isn't working for some of the other states' mediation programs," said Linda Cale, housing director for Consumer Credit Counseling Service of Southern Oregon.
Her agency works with Oregon citizens who are facing debt troubles. Cale is optimistic about the new program, viewing it as another potential debt reduction tool for borrowers. At the same time, she is realistic about mediation's varying outcomes.
"When I've talked to other agencies that do default counseling (for homeowners), the results are sometimes a little better than half (of the workouts) becoming successful," she said. "It all depends on the type of modification, the borrower and their individual financial situation."
In circumstances where a borrower simply has no funds and no assets, mediation efforts may prove futile.
Homeowners who enter the "at-risk" of foreclosure stage now have an automatic right to mediation before a lender can legally foreclose in Oregon. If borrowers do not respond to the lender's mediation notice within the specified timeline, they lose eligibility, according to the program's website.
Those who choose to meet with their lenders are required to pay a $200 mediation fee.
Michael Woods, a managing attorney for Potestivo & Associates, says the Oregon program sounds similar to a statewide mediation program launched in Michigan three years ago.
As a lender's attorney, he says the Michigan program has been a success in providing a "good avenue for borrowers who feel they really need a structured process and an opportunity to sit down with the lender and their attorney to sort out any issues they may have."
"The borrowers we have seen that have opted into the mediation have definitely received some good results," Woods said.
The Michigan program was enacted in mid-2009. Woods said the program is heavily focused on loan modifications, but it does allow for other loss-mitigation solutions.
"The benefit we see is there are not as many loans going through a foreclosure sale here in Michigan," Woods said. "It also slows down the process giving the lender an opportunity to focus on the borrower and their financial situation to see if they can work it out."