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Although Governor O’Malley’s legislation is being called a mandatory mediation bill, mediation is not the most important element of it. The key is that it will force lenders or loan servicers to make an affidavit before they file for foreclosure indicating that they have tried all other options first.
Various federal and state programs can help homeowners to modify their loans, and other outcomes besides foreclosure can help bring both sides to a softer landing. But many homeowners don’t know about them, and lenders or mortgage servicers don’t necessarily offer the information. Mediation would come into play if the two sides dispute the conclusion about whether the homeowner is eligible for any of the assistance programs, but as it is, too many troubled borrowers don’t even get to that point.
In the romanticized notion of mortgages, such rules wouldn’t be necessary. The story we often hear is that foreclosures are no better for the lender than they are for the borrower and that both sides have an incentive to work things out through loan modifications, extensions or other means
From the Baltimore Sun
