As New Yorkers and the rest of America brace for more foreclosures, the loan modification option has not helped as much as hoped. As a result, a number of states have been implementing foreclosure mediation programs and other alternative dispute resolution options aimed at nudging more mortgage banks to the negotiating table.
The Center for American Progress has published a terrific report on the topic titled It’s Time We Talk: Mandatory Mediation in the Foreclosure Process. In the report they examine the 9 states that have implemented foreclosure mediation programs and analyze which state programs are effective, which ones are not effective, and why.
Loan modification, as I explained in a previous post, is where you try to avoid foreclosure by negotiating with your mortgage lender. Maybe you can get the monthyl payments or interest rate reduced. Or perhaps the term extended. Or perhaps a range of other options as well.
Why have mortgage lenders not been so proactive with loan modifications? It seems that it would be in their interest. With the epic number of foreclosures, you’d think that they’d rather have a homeowner stay in their home and pay a little less rather than go through the costly hassle of foreclosing (which, according to a Washington Post article, has become a lengthier process) and then having to re-sell a house in the current real estate market.
Maybe their internal incentives aren’t aligned properly. Maybe they’re just overwhelmed with the number of foreclosures and loan modification requests. (Most mortgage lenders now do have “loss mitigation programs” in place.)
For whatever reason, the mortgage lenders have not stepped to the plate as much as hoped, and frankly, as much as our society and economy needs. As a result, states have taken steps to move the process along themselves. The most successful programs, according to the report, are in Pennsylvania and Connecticut, where approximately half of the homeowners who participate in the program have been able to negotiate new loan terms that enable them to keep their homes. Nevada, which suffers from the highest foreclosure rate in the U.S., also just implemented a new program that may be the strongest program of all.
What about New York? Well, New York seems to be moving towards some sort of foreclosure mediation program as well. Mayor Michael Bloomberg has been urging passage of a bill that would help homeowners stay in their homes and avoid foreclosure. (That said, given the current paralysis in Albany, who knows when such relief will actually come?)
We’ll keep our eye on the progress of a Brooklyn NY foreclosure attorneys. In the meantime, if you’re worried about foreclosure in New York and want to learn more about a loan modification. Or if you want a better understanding of all of your New York bankruptcy options, please contact us for a free initial consultation and we’ll help explain everything to you in plain English.
