Are You Facing Foreclosure? The Foreclosure Fairness Mediation Program can help!

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In response to the subprime mortgage foreclosure crisis of 2007, the Obama administration passed legislation to create the Home Affordable Modification Program (HAMP). The HAMP program was supposed to help homeowners facing mortgage foreclosure with loan modifications.  HAMP was touted as a government ‘knight in shining armor’ for those facing foreclosure.  Under HAMP, mortgage servicers (lenders) are provided with the opportunity to enter into contracts with the Federal Government to modify homeowners’ mortgage loans in a particular and uniform fashion and receive incentive payments in return.

The first big mistake of the HAMP program was that the government actually trusted the banks to participate in HAMP program almost exclusively on their own terms and by their own free will.  For example, in the HAMP Handbook for Servicers of Mortgages from the US Treasury requires participating servicers to actively solicit borrowers to participate in HAMP before referring a loan to foreclosure or conducting a scheduled foreclosure sale. Of course, the banks were reluctant to go outside of their traditional foreclosure models because those models usually lead to the borrower being cheated out of a legitimate chance to refinance with affordable terms and additional earnings for the bank once the defaulted loan is securitized and sold on Wall-Street.

The second blunder of the HAMP program was that the incentives for the loan servicers weren’t enough to get them on board if they weren’t doing loan mods prior to the HAMP program.  The latest mortgage news is that the government has worked out a settlement deal with the five biggest banks accused of mortgage foreclosure malfeasance.  For a comprehensive report on just how ridiculous the government settlement with the banks go to here.  The five banks involved in the fraudulent activities and are required to pay approximately $25 billion to states, individuals and the government are :

• Bank of America
• Citi-Bank
• Wells Fargo
• Ally/GMAC
• JP Morgan Chase

The agreement settles state and federal investigations finding that the country’s five largest mortgage servicers routinely signed foreclosure related documents outside the presence of a notary public and without knowing whether the facts they contained were correct.
Because of this litigation and the abject failure of the HAMP program, more than 30 states have implemented their own mandatory foreclosure mediation programs.  The states that are participating in mandatory mediation are:

• California
• Connecticut
• Delaware
• WA. DC
• Florida
• Hawaii
• Idaho
• Illinois
• Indiana
• Kentucky
• Maine
• Maryland
• Massachusetts
• Michigan
• Nevada
• New Hampshire
• New Jersey
• New York
• New Mexico
• Ohio
• Oregon
• Pennsylvania
• Rhode Island
• Vermont
• Washington State
• Wisconsin

In Washington State, the Governor signed into law the Foreclosure Fairness Act of 2011. The law provides Washingtonians facing foreclosure the opportunity to be referred by a housing counselor or an attorney to mediation with their lender to review available options to keep their home. This mediation is mandatory for all lenders before they foreclose on any home in Washington State.

If you live in one of the state listed above, contact your state Attorney General and ask about a similar program.