With foreclosures on pace to top one million this year, and federal programs designed to help troubled borrowers falling woefully short of their goals, a few states have stepped up and implemented their own programs aimed at stemming the foreclosure tide. Twenty states across the country are now offering what are known as mortgage mediation programs, which facilitate negotiations between lenders and borrowers before a foreclosure is finalized. In three states and two cities, these mediation sessions are required.
Such programs have been incredibly successful in keeping troubled borrowers in their homes, as the sessions require lenders to actively negotiate, instead of giving borrowers the run-around to which so many have been subjected. As Christopher Brecciano, a Connecticut attorney who represents borrowers in foreclosure, explained, mediation “requires the borrower to sit eye to eye with the bank’s attorney and means there is someone to hold accountable rather than just some service person on the telephone.” In Connecticut, which has an automatic mediation program, 62 percent of those entering mediation received a permanent loan modification. In Nevada, where the program is voluntary, the number is 74 percent.
But the mortgage lending industry is having a hard time getting on board with these successful efforts. In fact, the Mortgage Bankers Association, which represents many large mortgage lenders, opposes all such efforts to push banks into negotiating with borrowers:
John Mechem, a spokesman for the Mortgage Bankers Association, which represents the largest mortgage lenders, said the group is opposed to both mandatory and voluntary mediation programs. He argued that the programs are expensive and are often used by borrowers as a tactic to stall foreclosure. Mr. Mechem said the industry on its own has done almost 1.5 million mortgage modifications this year outside of mediation programs. If such programs must be implemented, he said, the MBA favors a voluntary system over mandatory meetings.
Of course, opposing smart efforts to help homeowners is nothing new for the MBA. Back in 2009, the MBA — with the help of Congressional Republicans — successfully lobbied against the adoption of mortgage cram-down legislation, which would have allowed judges to modify mortgages in bankruptcy court.
That legislation’s defeat, and the MBA’s subsequent celebrations, led Sen. Dick Durbin (D-IL) to say that when it comes to the Senate, the banks, “frankly, own the place.” And now that a moderately successful alternative has been found, which is allowing borrowers to stay in their homes and prevent all the negative effects of a foreclosure for both the borrower and the wider community, the MBA is standing in opposition once again.