Even if your lender begins foreclosure proceedings you may still be able to get your mortgage back on track with a foreclosure mediation program. These programs use neutral third parties to help lenders and homeowners resolve mortgage issues without foreclosure. Mediation programs are great resources, but they aren’t available everywhere.
Written by Attorney Paige Hooper.
Updated November 22, 2021
Everyone experiences financial hardship at some point, and most people eventually begin to see their finances improve again. But in the midst of a monetary crisis, it can often feel like you’re drowning, especially if your situation causes you to fall behind on your mortgage payments. Don’t lose hope. Even if your lender begins foreclosure proceedings, there are still ways to get your mortgage back on track.
For example, you may be able to participate in a foreclosure mediation program. In these programs, neutral third parties help lenders and homeowners work together to resolve mortgage issues without foreclosure. Mediation programs are wonderful resources for people facing foreclosure, though they aren’t available in all areas. This article covers how foreclosure mediation works and how to find a program near you.
What Is Foreclosure Mediation?
In foreclosure mediation, a homeowner and their mortgage lender or servicer meet with a mediator. The mediator is an impartial third party, meaning they don’t represent the lender or the homeowner. The mediator’s job is to help steer the negotiations between the bank and the borrower to work out an agreement that benefits both sides. Foreclosure mediation benefits borrowers by letting them stay in their homes, and it benefits lenders by allowing them to save the time and expense required for foreclosure.
Where To Find Foreclosure Mediation Programs
Some states offer statewide foreclosure mediation programs that are established by the state’s supreme court or legislature. There are also mediation programs created by county or city laws or courts, which are usually only available for that city or county. Foreclosure mediation programs aren’t available everywhere.
You can check online to find out whether there are any foreclosure mediation programs in your area. You can also check your state’s laws to see if a mediation program has been established for your state. Keep in mind, though, that state statutes won’t contain information about local ordinances or administrative orders. Another way to learn about any available foreclosure mediation programs is to consult with a local foreclosure attorney.
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How Foreclosure Mediation Programs Work
The specifics of the foreclosure mediation process vary from program to program, but most follow the same general format. The mediator will communicate with you and your lender to try to reach an agreement that balances both sides’ interests. It’s important to understand that there isn’t a “winner” in mediation. Mediation usually results in an agreement that neither side likes but both sides can live with.
Depending on the program, you might represent yourself, or you might be represented by an attorney or a housing counselor approved by the U.S. Department of Housing and Urban Development (HUD). The mortgage company’s representative may also have an advisor or attorney. Before the mediation session begins, you’ll likely need to submit documents, such as pay stubs and bank statements, to the mediator (even if you’ve already submitted them to the lender).
If a foreclosure mediation program is available where you live, your bank and mortgage servicer must follow the program’s rules. That doesn’t mean the lender is required to reach an agreement with you. It just means your lender must make a good-faith attempt under the mediation program’s rules.
These rules usually take effect as soon as your lender begins your state’s foreclosure process. For example, your mortgage servicer must comply with any program requirements for notifying you that mediation is available. For most programs, your bank must send you information about the mediation program along with the notice of foreclosure required under your state’s laws. This information includes a notice that a mediation program is available, instructions for how to enroll in the program, and contact information for local HUD-approved housing counseling agencies and relevant low-cost legal services.
Many mortgage foreclosure mediation programs are free for homeowners. The fees are often either covered by the government or included in the filing fees paid by mortgage companies when they start foreclosure cases. A handful of programs require homeowners to pay a portion of the mediation costs. If you can’t afford this, though, you can usually have your fee waived or reduced. Eligibility requirements vary somewhat, but most mediation programs are available to homeowners within a certain geographical area who are facing foreclosure on their primary residence (not a rental or vacation property).
Does the Foreclosure Stop During the Mediation Process?
Every homeowner who takes part in a foreclosure mediation program also has a pending foreclosure action. Participating in mediation doesn’t automatically stop the foreclosure, though, so you’ll still need to meet any court-imposed foreclosure deadlines, such as the deadline for answering the complaint.
You and your mortgage company may agree to pause the foreclosure process during negotiations. In some places, you may also need to file a notice with the circuit court to let them know that mediation is underway.
Is Foreclosure Mediation Always Successful?
There’s no guarantee that mediation will save your house or permanently stop the foreclosure. Unfortunately, some mortgage situations are beyond salvaging. Also, your lender isn’t required to agree to a solution, especially if it appears you can’t afford it.
In other words, you could complete a foreclosure mediation program and still end up losing your house to foreclosure. That said, it’s almost always beneficial to participate in a mediation program if one is available where you live. Program statistics indicate that lenders that participate in foreclosure mediation programs are more likely to agree to solutions other than foreclosure. You could learn about a loss mitigation option that you hadn’t previously considered.
If nothing else, participating in a mediation program usually delays the foreclosure sale, which buys you more time to live in your house. Since you aren’t making payments during this time, this at least gives you a chance to save up some money that you’ll need to find housing after the sale.
What’s Discussed During Mediation?
The goal of residential mortgage foreclosure mediation is to find a way to resolve your mortgage problems and keep you in your home. During the mediation process, you can expect to discuss issues, such as:
Your current loan status, including the principal balance, the total past-due amount, and any escrow shortages or other issues.
Your financial situation, including what happened that led to the missed payments, your available resources, and your ability to carry out any proposed solutions.
Your mortgage terms, remaining payments, and interest rate to see where adjustments could be helpful.
The possible foreclosure alternatives available and which is a good fit for your situation.
Some potential solutions might include loss mitigation options, such as refinancing the loan, entering into a loan modification, setting up a repayment plan, executing a deed in lieu of foreclosure, or holding a short sale. Even if you and the mortgage company can’t reach an agreement through mediation, you may still be able to negotiate later, or you may continue discussions with the lender’s loss mitigation department. If you need help finding a foreclosure mediation program or want more advice about mediation, consult with a local foreclosure attorney.
Foreclosure mediation is often an excellent option to help homeowners communicate with their lenders and work out a deal to avoid foreclosure. These programs are only available in some states, cities, and counties. If a program is available in your area, your lender usually must send you a notice about the program along with your official notice of foreclosure. Participating in a foreclosure mediation program doesn’t automatically stop the pending sale, but it may give you a chance to save your home or at least buy some time before the sale date.