Oregon foreclosure mediation program averts hundreds of foreclosures, but lenders question value
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on September 30, 2014 at 10:00 AM, updated September 30, 2014 at 3:01 PM
- Oregon foreclosure mediation program averts hundreds of foreclosures, but lenders question value
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August was the busiest month yet for Oregon’s foreclosure mediation program, with homeowners and their mortgage servicers meeting nearly 400 times during the month.
It’s still the case that the vast majority of foreclosures go through without a meeting between homeowner and lender, typically either because the homeowner can’t be reached or because they choose not to pay a fee to start the process.
But in hundreds of cases that end up in a “resolution conference,” homeowners on the brink of foreclosure have reached an agreement with their lender to avoid it. And even those who don’t avert a foreclosure overwhelmingly say in surveys that they approve of the program.
“I was treated with dignity and I was treated fairly,” said Carol Lentz of Depoe Bay, who has met twice with her lender through the program. “The outcome might be the same, but you’re not just cast aside and run roughshod over.”
It’s the state’s second crack at a mediation program. The first failed to get off the ground when most banks — because of legal complications outside the mediation program — started foreclosing through the court system, which wasn’t covered by the mediation program.
So the Legislature in 2013 approved a do-over, doubling down on the value of a meeting between homeowners and lenders. This version of the program abandons the “mediation” terminology to avoid the legal entanglements of traditional mediation, notably including confidentiality between the parties. But it did lump in-court and out-of-court foreclosure proceedings into the same pot.
Now the caseload is increasing, and it’s expected to grow further as lenders who were holding off on foreclosures in the revamped program’s early days will eventually have to start filing them again.
Of the 13,000 foreclosures initiated since August 2013:
- Just over 2,200 homeowners have elected to participate in mediation and submitted their fee.
- The two sides reached agreement in 593 cases, 74 of them before actually meeting in mediation. Of those, homeowners stayed in their home in 502 cases.
- No agreement could be reached in 585 cases (although in some of these cases not reflected in the Department of Justice numbers, an agreement was reached outside of a mediation session).
- In 136 cases, the program administrators said the bank didn’t live up to its responsibilities in the mediation session, usually by not having a decision-maker present. Those lenders didn’t get a certificate of compliance, the program’s enforcement mechanism, which complicates going ahead with the foreclosure.
The program itself, operated by Florida company Mediation Case Manager, is self-financed through fees paid by participating homeowners and lenders.Its overseers at the state Department of Justice see the 22 percent participation rate as a strong one, and Deputy Attorney General Frederick M. Boss said he expects that rate to grow.
And, he says, it’s built new protections into the foreclosure process that homeowners didn’t have before.
“Absent a homeowner going out, hiring their own lawyer and filing an injunction to stop the process, there weren’t any protections in place for the average homeowner” in foreclosure, Boss said. “We were able to put in a due process.”
And the state’s contracted administrators for the program point to post-conference surveys that show 80 percent of program participants say they’re satisfied with the process, even if they don’t get a favorable result.
“There’s no silver bullet for the foreclosure problem … but this is working,” said Jay Foster, president of Mediation Case Manager. “In most cases, a homeowner facing foreclosure will never get a chance to talk to someone and tell their story. These people want to be heard.”
Lentz, the Depoe Bay homeowner, said she lost much of her retirement money in the stock market and accepts that she simply cannot afford her house on the beach anymore. But selling the house has been tough in the still-slow coastal housing market. Lentz has been trying to turn the house back over to the bank to avoid the muss and fuss — and the credit damage — of a foreclosure.
Before entering the mediation program, she said, “the bank just wasn’t paying any attention at all.” Now, it’s been forced to accept and review her application according to its own rules, she said.
Lenders’ representatives, also surveyed by the program’s administrators, take a more tepid view of mediation. But few gave it a negative review.
In the satisfaction survey, 38 percent of lenders’ representatives said their view of the program overall was “neutral.” Another 37 percent said they were satisfied, and 23 percent said they were very satisfied.
But a lobbyist for the Oregon Bankers Association suggested the program is helping too few people to justify the added time and expense.
“A number of homeowners are deciding they don’t want to participate when given the opportunity to do so,” said Paul Cosgrove, a lobbyist for the Oregon Bankers Association. “We’ve got a system that results in a lot of extra paperwork and not much benefit. At the end of the day, you have to look at, is there something better?”
And while the reviews from homeowners are largely positive, the sentiment isn’t universal. Trish Williams of Oregon City was left frustrated by her experience.
She eventually got a trial loan modification from her servicer, Nationstar Mortgage, which will allow her to stay in her home. But despite two meetings with Nationstar, and several more scheduled and postponed, that modification eventually came out of an appeal outside the context of the mediation program.
The program probably bought her some time to negotiate, Williams acknowledges.
But a two-hour meeting in June was spent reviewing documents submitted electronically months earlier. The documents were uploaded to the mediation program’s portal — to which Nationstar apparently didn’t have access, Williams said.
Then, she said, the lender’s representative could accept the application, but couldn’t decide whether or not she qualified for a loan modification. The mediation law requires that lenders send a representative with the authority to negotiate, but the state hasn’t interpreted that to mean they have to be able to make an underwriting decision, such as whether a homeowner qualifies for a modification.
As a result, in most cases the two sides meet at least twice, and sometimes more — which Williams believes allows lenders to stall and drag things out. She thinks mediators need to take a tougher stance in dealing with mortgage servicers.
“They still play the same game that they played all along,” she said. “And (mediators) don’t hold the lender’s feet to the fire.”