The housing market has not yet stabilized, and home foreclosures continue to be a problem in Florida and many other states. Lawmakers are now considering new solutions for distressed homeowners. One idea is to enact legislation giving bankruptcy judges the power to order foreclosure mediation between homeowners and lenders, as Florida has done.

The government’s attempt to decrease the number of home foreclosures through the Home Affordable Modification Program (HAMP) has been widely criticized as ineffective. Lawmakers have faulted the program for not meeting its goals and for failing to cut through the bureaucratic system that exists at mortgage-holding banks and loan servicers.

One Senator explained his frustration with the current state of affairs where homeowners are often unable to have “the chance to talk with a responsible human being who can make an actual decision.” He went on to say that “the bankruptcy court loss-mitigation programs won’t save every home, but they can help countless frustrated homeowners cut through the bureaucratic nightmare and get answers to their modification requests.”

Foreclosure mediation programs are already being tried in some states, including Florida, to help deal with the significant backlog of court cases. A New York judge said that about half of the foreclosure mediations that he has overseen ended in a modification or another agreement that allowed the homeowner to stave off foreclosure. Banks are often willing to participate in such programs because it also serves to prevent future litigation by investors.

Some concerns brought up by critics of the mediation programs include the possibility that it will further extend the foreclosure timeline, as well as the specter of banks raising premium risk prices and making future mortgages more expensive for consumers.

Although continued analysis of foreclosure mediation programs may be required before national legislation is enacted, they do hold promise as a viable option for some homeowners who want to work out solutions with their banks and save their homes.

Source: HousingWire, “Senate committee considers foreclosure mediation program,” Jon Prior, February 1, 2011