Mayhew-Hite Report - Volume 9 Issue 2 (Student Spotlight)

Maureen Fulton
The Ohio State University Moritz College of Law
Class of 2012

In the next four years, nine million homeowners could lose their homes to foreclosure. [1] People walk away from their homes every day, losing hard-earned investments without knowing how to alleviate their financial problems. One big reason for home loss could be lack of communication. According to local judges in one county, 80 percent of homeowners who are at risk of foreclosure have not made any efforts to mitigate their mortgage troubles with their lenders. [2]

The response to the foreclosure crisis has been multi-layered and varied across jurisdictions. In nearly half the states, homeowners can combat impending foreclosures by participating in a foreclosure mediation session with their mortgage lender and an impartial third-party mediator. Foreclosure mediation can alleviate numerous issues that homeowners face in attempting to fend off foreclosure.

Foreclosure mediation facilitates communication between borrowers and lenders, a step in the foreclosure process that has been increasingly elusive as the financial crisis has grown. It can avoid unnecessary and frustrating delays in the foreclosure process. Foreclosure mediation has the ability to act as a check on foreclosures that might have been robo-filed or misplaced in the system.

These benefits and others make foreclosure mediation an essential part of every community troubled by mounting foreclosures. However, the programs can be improved in nearly every jurisdiction. Foreclosure mediation programs need to reach more people and need to reduce the power imbalance that exists between lenders and homeowners. The programs should be available to more subsets of homeowners, and mandated for all homeowners once programs have become established.

This paper addresses the problems homeowners face in dealing with foreclosures and how foreclosure mediation can help alleviate these problems. It will break down the differences in foreclosure mediation programs across states, based on what entities run the programs, what types of outreach are used to inform homeowners about the programs, who is required to attend the mediation, who is eligible to participate, the cost of programs for homeowners, and other issues in play in the process. Next, the paper argues for best practices: mandatory mediation, aggressive outreach, physical presence of lenders with authority, allowing any homeowner to be eligible, and making the mediations free to homeowners. Finally, the paper addresses the future of foreclosure mediation and how to optimize its success.

[1] Andrew Jakabovics & Alon Cohen, It’s Time We Talked: Mandatory Mediation in the Foreclosure Process at 1, Center for American Progress (2009).

[2] Id.

STUDENT SPOTLIGHT

Optimizing the Success of Foreclosure Mediation Programs