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Group criticizes foreclosure mediation programs

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A report released today by the National Consumer Law Center examining foreclosure mediation programs believes states, including Indiana, need to make substantial changes before the programs can be effective.

In "State and Local Foreclosure Mediation Programs: Can They Save Homes?" the NCLC looked at 25 programs in 14 states, all which started in 2008 or 2009. Senate Enrolled Act 492, which took effect July 1, requires lenders to inform mortgage holders about their right to participate in a settlement conference if the lender files an action to foreclose and if the borrower meets certain criteria, such as assuring that the home is the borrower's primary residence.

According to the report, court-supervised mediation programs will be more beneficial to homeowners if the lender is required to give the homeowner a document showing its affordable loan calculation; the lender produces specified documents, such as loan originating documents; the lender complies with all mediation obligations in good faith and establishes proof of the mortgage holder's standing and status as the real party in interest; and the lender is required to document its considered specific alternatives to foreclosure.

SEA 492, now Indiana Code Section 32-30-10.5, requires lenders to give homeowners notice they have 30 days after the notice is served to schedule the settlement conference; a conference must be conducted no later than 60 days after the date of notice. The act requires the lender to provide certain documents to engage in good faith negotiations.

According to the report, there are several flaws in Indiana's newly implemented settlement mediation program. It lacks formal systems for tracking most basic data on outcomes of mediations or conferences. The program requires homeowners to opt-in within 30 days and the NCLC believes this may exclude some homeowners who don't understand the opt-in procedures. Indiana's program also doesn't involve direct court supervision.

The law center would like to see direct court supervision over the enforcement of lender obligations to mediate. It also wants states to make participation by homeowners automatic; allow mediation requests to be made up until the time of the foreclosure sale; stay all proceedings until it's determined the lender complied in good faith with program obligations; provide funding for outreach, housing counselors, and qualified counsel for homeowners; prohibit lenders from shifting its attorneys' fees and costs to the homeowner; and require junior lien holders to be notified and allowed to participate in the mediation process.

"Under most of the existing foreclosure mediation programs, servicers have all the discretion and homeowners have little or no power," study author and NCLC staff attorney Geoffrey Walsh said in a statement. "If the programs continue to demand little or no accountability from servicers, they will likely go the way of federal efforts to control foreclosures that have failed as a result of relying on voluntary compliance by the lending industry."

NCLC is a nonprofit organization that works with and offers training to legal service, government, private attorneys, and community groups and organizations representing low-income families. It seeks marketplace justice on behalf of low-income and vulnerable Americans.

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  1. Thank you, John Smith, for pointing out a needed correction. The article has been revised.

  2. The "National institute for Justice" is an agency for the Dept of Justice. That is not the law firm you are talking about in this article. The "institute for justice" is a public interest law firm. http://ij.org/ thanks for interesting article however

  3. I would like to try to find a lawyer as soon possible I've had my money stolen off of my bank card driver pressed charges and I try to get the information they need it and a Social Security board is just give me a hold up a run around for no reason and now it think it might be too late cuz its been over a year I believe and I can't get the right information they need because they keep giving me the runaroundwhat should I do about that

  4. It is wonderful that Indiana DOC is making some truly admirable and positive changes. People with serious mental illness, intellectual disability or developmental disability will benefit from these changes. It will be much better if people can get some help and resources that promote their health and growth than if they suffer alone. If people experience positive growth or healing of their health issues, they may be less likely to do the things that caused them to come to prison in the first place. This will be of benefit for everyone. I am also so happy that Indiana DOC added correctional personnel and mental health staffing. These are tough issues to work with. There should be adequate staffing in prisons so correctional officers and other staff are able to do the kind of work they really want to do-helping people grow and change-rather than just trying to manage chaos. Correctional officers and other staff deserve this. It would be great to see increased mental health services and services for people with intellectual or developmental disabilities in the community so that fewer people will have to receive help and support in prisons. Community services would like be less expensive, inherently less demeaning and just a whole lot better for everyone.

  5. Can I get this form on line,if not where can I obtain one. I am eligible.

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