The program would allow borrowers at risk of losing their homes to request a mediation process with the lender, who would be legally bound to participate in talks regarding the terms of a home loan modification workout in order to avoid foreclosure of the property.
“There are thousands and thousands of homeowners who are desperately trying to communicate with their banks and they’re not being successful and it’s not because they are not trying,” said Assemblyman Pedro Nava, D-Santa Barbara, author of a bill that would set up the mediation program. “It’s ridiculous – there’s clearly a disconnect between how the banks see the problem and how homeowners see the challenge.”
The bill, Nava said, is a work in progress. Any proposal would have to include financing mechanisms to pay for the program, Nava said. Nevada, for example, has a foreclosure mediation program in which both the borrower and lender pay $200 fees, which are used to compensate the mediator. Nava said he wants to make sure the California courts are closely involved in administering the program, as they are in Nevada.
At a recent Assembly Banking and Finance Committee hearing on the bill, lawmakers heard from consumers who detailed months of frustrating phone calls without resolution. They also heard from representatives of three major banks who argued that the mediation process is unnecessary because President Obama’s Making Home Affordable program already offers help for homeowners at risk of losing their homes. (Haha)
Borrowers told the Assembly committee that the federal program is no help when consumers cannot even get someone from their lending institution on the phone.
Barbara Buckley, speaker of the Nevada Assembly, testified at the recent hearing that her state’s program isn’t just about helping individuals stay in their homes – it’s a stopgap measure to help entire communities from being ruined. Foreclosures, she said, should be a “remedy of last resort,” and she noted that the No. 1 complaint she hears from homeowners is their inability to reach someone at their bank to talk to. The mediation program opened for business just this month, she said, and is already showing results.
“We’re caught in a vicious cycle of declining home values, and each wave of foreclosures, when adjustable rate mortgages adjust, leads to more declining property values,” she said. “It affects everyone, including those who didn’t do anything wrong. … These are not normal times. We see people who have never been financially in trouble in their lives … and all they want is somebody to talk to.”
Bank officials argue that the federal program is working, pointing toward hundreds of thousands of approved loan modifications in the past year and the increase in staffing at call centers equipped to help borrowers.
Nava said he will talk to counseling agencies and consumers about the bill in December, then come back in January with a final version, when the Legislature is back in session.
“I find it hard to discount the testimonials and anecdotal evidence,” he said. “We’re talking about a significant economic drain on our country, not to mention the emotional impact when children have to leave schools and families are split up. … I’m quite frankly growing impatient with the excuse that banks don’t know how to do it.”