[credit provider=”Daniel Goodman / Business Insider”]
The Department of Justice came out yesterday in support of a report calling on the government to get behind foreclosure mediation programs. The lengthy report was based on a spring 2011 foreclosure modification workshop attended by dozens of foreclosure mediation program stakeholders and researchers.
Mediation programs have really taken off in the last couple of years and are typically designed for communities hardest hit by the housing crisis.
State and local lenders generally enlist the help of a third-party moderator to help hammer out a compromise with struggling homeowners. (See ways to get out of your mortgage mess.)
But the general consensus from researchers is that these types of programs won’t work without rigorous federal support and oversight.
The central issue is such initiatives are still relatively new and as of yet there are no federal guidelines to dictate exactly how they should function in communities. Also, no one even knows just how well they’re working yet.
“Although the impact of well-crafted programs appears promising, only a few jurisdictions have engaged in an in-depth study of program outcomes, and to date there has been no comprehensive study comparing outcomes for homeowners in mediation to similarly situated homeowners who have not had the benefit of mediation,” the report says.
At least 25 states are playing host to 30 such programs, according to the DOJ. Bank of America is among the largest private lenders to launch its own outreach efforts and claims more than 50,000 borrowers have participated so far.
Congress-backed nonprofit NeighborWorks debuted a foreclosure mediation workshop in 2010 and is now one of the largest funders of foreclosure-mitigation counseling in the nation.
At the workshop, participants asked the federal government to require all federally-backed loans (which represent the bulk of mortgages in the country) to go through some sort of mortgage modification process before a foreclosure can take place. It’s clear the last thing anyone wants is another robosigning scandal.
There will also need to be a careful review process in place to evaluate programs and ensure they’re functioning properly. At the very least, homeowners would have peace of mind knowing they’re receiving a legitimate service and help them steer clear of shady mortgage rescue firms.
See the DOJ’s full report here.