Suddenly all the government agencies are giving their two cents on foreclosure.
Foreclosure mediation, the process whereby homeowners negotiate with lenders so they need not lose their homes, is worthy of a boost in research and possibly federal funding, according to a new report from a Justice Department panel.
As millions of homes in the foreclosure pipeline weigh on home prices and the housing recovery, government officials have considered a variety of avenues to aid struggling homeowners, mostly to limited success. Federal Reserve Chairman Ben Bernanke advocated that lenders "aggressively" pursue loan modifications and other alternatives to foreclosure in a paper released last week.
The Home Affordable Modification Program, which Obama announced in February 2009, had helped roughly 750,000 homeowners as of November, though it was touted as a plan to aid 3 to 4 million.
Though foreclosure mediation is available in a number of states, the Justice Department report comes as some are ending their versions of the program due to concerns over its efficacy. A Florida Supreme Court Justice ended the state's mandatory foreclosure mediation program last year, after a task force of judges recommend that it be terminated due to its low success rate, The Miami Herald reports. In Maryland, just 56 borrowers got a modification through the program in the space of a year and only 1,000 borrowers had applied, according to Mother Jones.
A 2009 study from the National Consumer Law Center found that foreclosure mediation programs can often be ineffective because they produce agreements that lack any mechanism for enforcement. Though the Justice Department report doesn't include recommendations for giving the agreements teeth, it does offer recommendations that could give foreclosure mediation programs a bit more clout.
The panel suggested creating federal guidelines for the programs, which currently vary from state-to-state, also recommending the federal government match funding for state programs that meet those guidelines. In addition, the report urges that federally-backed loans go through mediation before foreclosure can take place.
In some states the programs have already been a success even without a federal boost. More than 10 percent of Nevada homeowners in danger of default had taken advantage of the state's mediation program within the first six months of its inception. And Michigan Governor Rick Snyder extended the state's foreclosure mediation program through this year, according to Housingwire.