State's Foreclosure Mediation Lacks Teeth, Advocates Say

December 20, 2013
Baltimore Sun 
mortgage lending news

Although a 2010 law in Maryland granted homeowners in foreclosure the right to mediation, legal advocates say that it has not been very helpful and that some of the practices that the law was meant to stop are still going on. "They're more of a status conference than an actual negotiation or substantive discussion about ways in which a home can be saved," said Owen Jarvis, a staff attorney for the St. Ambrose Housing Aid Center.

Lawmakers drafted the law to encourage banks to consider alternatives to foreclosure. Still, Maryland's foreclosure rate was the third-highest in the country as of November 2013, with nearly 4,000 foreclosure filings, according to real-estate information company RealtyTrac. This is an increase from 42 percent in the same time last year. Since the mediation law took effect, about 24 percent of eligible homeowners chose to participate. Requests for mediation reached a record 519 in October, reports the Maryland Department of Housing and Community Development. Out of about 9,000 foreclosure mediation cases closed through November, about 26 percent ended in agreements between the homeowner and the lender, ranging from short sales to a commitment to review the case. Most of what the state considers agreements are contingent resolutions, which require additional steps. Homeowner advocates say contingent agreements often lead to repetitive document exchange, and many lenders resist writing down the agreements and the foreclosure proceeds. Cheryl Hystad, executive director of the Baltimore nonprofit Civil Justice, and others say they want to see Maryland toughen up the mediation process next year, adding provisions to require written agreements and empowering judges to determine if banks are acting in good faith.

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