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How the Feds Might Fund Mediation

Heather Scheiwe Kulp, March 21st, 2011

As state politicians argue over budget cuts, innovative programs are often the first to go. Mediation is no exception.

Santa Barbara’s 30-year-old landlord-tenant mediation program was threatened when the City Council couldn’t figure out how to fund the part-time phone line staffer. A federal Department of Housing and Urban Development (HUD) Community Development Block Grant saved the day. Cambridge, Massachusetts’ landlord-tenant program faced similar cuts. Illinois budget cuts eliminated Resolution Systems Institute’s funding for mediation program development targeted to poor and low-income disputants in the courts. Thankfully, the Skadden Fellowship Foundation funded a two-year fellow to renew this program. Marin County, California, did not have the same luck. The mediation office, which handled 800 cases a year, was gutted to save the County $186,500.

In at least one instance, however, the economic downturn has prompted a call for more funding – at a federal level – for mediation.

The feds have oversight for mediation programs ranging from bankruptcy court to the Department of Justice. But the Preventing Homeowners from Foreclosure Act of 2011 would show new faith in mediation programs during tough economic times. Under the bill proposed by Representative Steve Cohen of Tennessee, HUD would set up a competitive grant process for states and localities seeking to start foreclosure mediation programs. This would certainly help current foreclosure mediation programs that rely on a hodgepodge of funding sources that may dry up at any time.

House Bill 1131 would also require homeowners meet with a housing counselor or pro bono attorney prior to mediation with the lender. This additional support preparing for mediation is essential to foreclosure mediation’s success. Finally, the bill requires foreclosure mediation grant recipients to report program statistics. Monitoring and evaluating mediation programs helps identify ways to improve program process and quality.

As with any bill, Cohen’s has a long way to travel before it is passed; the current bill was sent to the House Committee on Financial Services. Cohen proposed a similar foreclosure mitigation bill last year that died in committee. But, with the increasing call for alternatives to traditional foreclosure court processes, and the promise of foreclosures peaking in 2011, perhaps Congress will not only keep mediation off the chopping block, but will see it as a cost-effective means to improve communication in the foreclosure crisis.

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