PRE-MEDIATION SESSION ELEMENTS
Conduct Extensive, Personalized Outreach to Borrowers
Outreach to borrowers is key to getting participation in the program. Most people do not open their mail or answer the phone when they are in foreclosure. For those that do, legal notices should be written in simple language with a clear instruction for what borrowers should do next. Programs should find ways other than mail to help borrowers access mediation programs.
One jurisdiction has dedicated funds for the program to engage community organizations in door-to-door outreach. A worker from the community receives information on recent foreclosure filings, then will go to the borrower’s home to invite them to set up a housing counseling appointment (the first step in the program). This has resulted in 36,145 borrowers contacting the program hotline to set up an appointment.
Another jurisdiction hosts outreach events at churches, community centers, and other gathering places. Borrowers can meet with housing counselors and sign up for mediation right there.
Ensure Borrowers Have a Support System
Borrowers are angry, confused, and frustrated with the foreclosure process. While mediators can address these emotions in the mediation session itself, the mediator should not also be the one educating borrowers about the foreclosure process, ensuring borrowers understand their legal rights, and encouraging borrowers to select certain options. So, to ensure the mediation session is a productive conversation about the borrower’s options, the borrower needs support prior to the mediation from someone other than the mediator.
Some programs require that the borrower meet with an attorney before mediation. This can be helpful, especially for screening the borrower for legal defenses to the foreclosure. But often, there are not enough attorneys available at a rate reasonable for the borrowers to pay. Pro bono attorneys may provide some support, but if they do not specialize in foreclosure law, they may not have enough information to advocate well for the borrowers.
Over half of current foreclosure mediation programs require that the borrower speak with a housing counselor, who is an expert on the loan modification process and other alternatives to foreclosure, before mediation. Borrowers who meet with a housing counselor are 1.7 times more likely to find an alternative to foreclosure than borrowers who do not. This meeting or meetings educates the borrower and begins the document preparation process. The housing counselor may also make a first attempt at communicating directly with the servicer on the borrower’s behalf. Some programs allow and encourage borrowers to bring their housing counselors with them to mediation.
Provide Screening to Ensure Cases Appropriate for Mediation are Scheduled for Mediation
Some programs believe that all foreclosure cases should go through mediation, so screening is not necessarily an element they need to consider. However, for programs that are not opt-out, programs should screen cases based on the programs’ goals, to ensure the right cases are sent to mediation. In a few smaller programs, the program’s manager reviews the borrower’s financials and determines whether they could afford to spend 31% of their income on a mortgage. Other programs only send cases to mediation if the parties comply with document exchange requirements first. These screening mechanisms ensure that the mediation session is a productive conversation rather than a place where documents are exchanged for the first time.
Charge Reasonable Fees
In these economic times, states express concern that creating a mediation program will result in extensive additional expenses incurred by the state. However, many programs have identified ways that the mediation program can be self-sustaining. In many settings, this includes assessing filing fees and additional mediation costs to one or both parties.
If a program chooses to require payment from one or both parties, the program needs to select reasonable fees that will not discourage borrowers from participating. Some programs, like in the District of Columbia, define reasonable as asking the parties to split the cost of mediation. This may be effective at setting the table for an equal process, but depending on the cost, it may render mediation out of reach for some borrowers. Programs that require parties to pay for mediation experience fewer participants and, subsequently, fewer agreements. For instance, Maryland’s program charges $300 for lenders and $50 for borrowers to participate. In 2010, it received only 130 mediation requests out of 55,629 foreclosures. Other programs have determined that a filing fee increase, born only by the servicer, will subsidize the mediation portion. Still other programs decide that offering mediation to borrowers for free will encourage the highest level of participation (whether the servicer pays the whole fee or the state/county subsidizes the program).
Click here for a review of funding structures for foreclosure mediation programs around the country, which includes information about whether and how parties pay for program costs. An executive summary may be found here.
Tags: access to justice, attorney, bank, borrower, budget, community, cost, foreclosure, foreclosure mediation, funding, homeowner, housing counseling, lenders, outreach