State and local foreclosure mediation programs suffer from the same affliction as the federal government's loan modification program: a lack of servicer accountability, according to a new report from the National Consumer Law Center (NCLC).
The report, which reviewed 25 mediation programs in 14 states, finds that such programs ‘often lack mandatory rules and fail to impose sanctions for noncompliance with what minimal rules exist.’
‘Under most of the existing foreclosure mediation programs, servicers have all the discretion and homeowners have little or no power," says the study's author, NCLC staff attorney Geoffrey Walsh. "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 servicers."
The NCLC says mediation programs can play a pivotal role in ensuring servicers' compliance with the Home Affordable Modification Program.
"The data released so far on servicers' compliance with HAMP guidelines reveals a pressing need for more oversight," the report says. "Mediation programs should play an important role in this review."
The center recommends that mediation programs, whose guidelines vary from one program to another, require servicers to share with homeowners the net-present-value calculations used to determine modification offers, as well as pooling and servicing agreements, loan origination documents, appraisals and loan-payment histories.
The NCLC additionally suggests that programs adopt guidelines requiring servicers to establish proof of standing and to document that they have considered foreclosure alternatives (e.g., modifications, applications for state and federal assistance programs, short sales).
Foreclosures should not be allowed to proceed unless a mediator or court has certified a servicer's compliance with such requirements, the center adds.
SOURCE: National Consumer Law Center