Document Type

Research Report

Publication Date



The inability of homeowners to communicate with holders of securitized mortgage obligations has been a significant barrier to completing affordable loan modifications that might prevent foreclosures or minimize losses and keep more homeowners in their homes. Increasingly, legislators and the courts are looking at mediation as a potential solution to the problem.

In a little over a year, from mid-2008 to mid-2009, more than 25 distinct foreclosure mediation programs were launched in fourteen different states. State legislatures, state supreme courts, and local courts played roles in creating these programs. Mediation is being favored over litigation due to concerns such as those raised at a recent Senate hearing about Legal Aid groups as to whether more federally subsidized foreclosure lawsuits by low-income borrowers are the best method of representing their interests2

Many housing counselors believe mediation programs provide a structure for negotiations. This structure saves time in establishing lines of communication with loan servicers. Even attorneys have endorsed mediation saying they found foreclosure mediation programs helpful for providing them and the homeowner-clients much needed time to investigate the facts of a client’s case, and that this respite led to more informed decisions about potential legal claims. .

Analysis of available data, however, indicates that foreclosure mediation programs, either court connected or independent, have little chance of delivering on their full potential. Interestingly, this failure has more to do with federal and state legislation on foreclosure mediation than the actual design of the respective foreclosure mediation programs in operation.



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