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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. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

  2. As a lawyer who grew up in Fort Wayne (but went to a real law school), it is not that hard to find a mentor in the legal community without your school's assistance. One does not need to pay tens of thousands of dollars to go to an unaccredited legal diploma mill to get a mentor. Having a mentor means precisely nothing if you cannot get a job upon graduation, and considering that the legal job market is utterly terrible, these students from Indiana Tech are going to be adrift after graduation.

  3. 700,000 to 800,000 Americans are arrested for marijuana possession each year in the US. Do we need a new justice center if we decriminalize marijuana by having the City Council enact a $100 fine for marijuana possession and have the money go towards road repair?

  4. I am sorry to hear this.

  5. I tried a case in Judge Barker's court many years ago and I recall it vividly as a highlight of my career. I don't get in federal court very often but found myself back there again last Summer. We had both aged a bit but I must say she was just as I had remembered her. Authoritative, organized and yes, human ...with a good sense of humor. I also appreciated that even though we were dealing with difficult criminal cases, she treated my clients with dignity and understanding. My clients certainly respected her. Thanks for this nice article. Congratulations to Judge Barker for reaching another milestone in a remarkable career.

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