In October 2014, the Connecticut Judicial Branch released an evaluation of its Mortgage Foreclosure Mediation Program. The Connecticut study evaluates six years of foreclosure mediation program data, dating from the program’s inception in 2008. As RSI prepares the first evaluation of Illinois’ six foreclosure mediation incubation programs, the earliest of which began accepting cases in December 2013, it’s interesting to review Connecticut’s data and how the program has evolved over time.
Given Connecticut’s six year history with foreclosure mediation, the report is able to explore how homeowners who participate in the foreclosure mediation program have fared over time. This information is very valuable, since the long term sustainability of mortgage modifications, such as those offered through HAMP, have often been called into question. According to a recent SIGTARP report, homeowners receiving permanent HAMP modifications in 2010 had redefault rates of 40-46.8%. One thing we would love to better understand is whether the agreements that homeowners and lenders reach through mediation are more sustainable than agreements that parties negotiate on their own.
The Connecticut mediation program reports that “in the first 6 years of the program, approximately 10% of homeowners reentered the program.” Of this 10%, the program concludes that many homeowners reenter the program because of an ongoing case, rather than because they have slipped into a new foreclosure. The report concludes that low program reentry rates suggest that “positive effects for homeowners appear to be sustainable over time.” It’s unclear whether all homeowners who default after obtaining a loan modification went back into the program. Nonetheless, it’s promising to know that mediation programs that have been in existence for a number of years, like Connecticut’s, have not seen the unraveling of agreements and high numbers of repeat players on the homeowner side. It was also exciting to learn that Connecticut plans to continue exploring these issues of sustainability and long term success, recommending “a subsequent evaluation that examines the causal impact and cost effectiveness of the program using an experimental design such as a randomized encouragement design.”
As RSI’s foreclosure mediation programs continue to serve homeowners and lenders and collect more data, we will be interested to explore how the programs evolve. In terms of sustainability, some programs have been able to track statistics for if and when temporary payment plans, which lenders often offer as the first step towards a modification, do in fact convert to permanent loan modifications. Our program participant surveys also reveal that mediation program services result in homeowners having a significantly better understanding of their options and how to work with their lender, both indications that homeowners in mediation are better equipped to make a more informed and lasting decision about how to move forward. We will have more exciting and in-depth information to share when RSI’s foreclosure mediation evaluation comes out in April.