The Mediation Laws are not Preventing Foreclosures

October 9th, 2009

The mediation laws mandated in California and other states to prevent foreclosures are not being of much help. It stipulates that the lenders have to talk things over with the borrowers and try and find out other options before they proceed with foreclosure. They have to prove to the court that these steps have been taken. But despite this foreclosures continue apace. These are the findings of a recently conducted survey.

The programmes of 14 states were analyzed by The National Consumer Law Center and the centre came to the conclusion that none of the measures have been able to contain foreclosures. This is because nothing is made compulsory for the banks and they are not penalized or held accountable if the measures fail. On their part it remains voluntary. The report read, “There is as yet no data to confirm that foreclosure-mediation programs anywhere have led to a substantial number of affordable and sustainable loan modifications. The existing programs routinely fail to impose significant obligations on mortgage servicers (without which) it is unlikely that mediations will lead to fewer foreclosures.”

Staff attorney Geoff Walsh of the centre who penned the report said that very targets of the programme are at risk. He said, “While these programs could provide significant help to homeowners, they suffer from the same lack of industry accountability that has plagued the voluntary federal programs that have sought to encourage large-scale modifications over the past two years.”
The mediation laws in California related to foreclosures stipulates that the servicers cannot file default notice until 30 days have passed since they have contacted the borrower via phone, via certified mail or personally to “to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure.”
The law came into force from 2008 September and resulted in the immediate slowing down of the foreclosure process. But once the system was entrenched, the numbers of foreclosures began to increase to touch the previous niches – as per the data collected from public records.

Apart from California many other states have enacted similar conditions. But the figures are grim – right across the nation hundreds of borrowers have started to default. In August this year 7.58% of those holding mortgages were a minimum 30 days lagging behind in their payments.

Walsh said some alterations had been made in the original programmes and these will make the measure more effective.