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Foreclosure mediation programs allow homeowners facing foreclosure to work out a mutually beneficial settlement with their mortgage lender. Mediation is conducted by an independent third party mediator who structures the discussion and suggests creative solutions. While mediation does not guarantee that foreclosure will fail, it increases the likelihood of a mutually beneficial outcome, such as a restructuring of payments or forbearance. It is important for the mortgage lender to demonstrate their ability to pay given a proposed settlement.
Many court systems have provided foreclosure mediation programs by which a homeowner facing foreclosure on their home can work out a mutually beneficial settlement regarding their defaulted mortgage payment. Different jurisdictions have different requirements to qualify for foreclosure mediation, but most people facing foreclosure are eligible as it is in everyone’s best interest for the parties to work out a settlement rather than take foreclosure action. While foreclosure mediation does not guarantee that the foreclosure will fail, since it is up to the parties to work out a settlement that works for everyone, it is a productive way to facilitate that settlement.
Foreclosure mediation is conducted by an independent third party – called a mediator – who will meet with the mortgage lender and a representative of the lender. The mediator’s role is simply to structure the discussion so that it can lead to a productive solution. He or she can also take a proactive role in suggesting creative solutions that benefit both parties. Also, the mediator will often meet with one of the parties privately to highlight the strengths and weaknesses of her position in the negotiation.
While foreclosure mediation does not necessarily guarantee that the foreclosure action will be stayed, delayed, or reversed, it does increase the likelihood of a mutually beneficial outcome. A common outcome of foreclosure mediation is simply a restructuring of payments to ease the financial burden on the mortgage lender, accompanied by the repayment of any outstanding debt on the mortgage. A more drastic possibility is forbearance, which is a temporary suspension of payments until an event occurs in which the defaulting mortgage lender can better meet their financial obligations. While the forbearance allows for a late payment, interest will still accrue on the mortgage.
In coming to foreclosure mediation, it is very important that the mortgage lender demonstrate their ability to pay given a proposed settlement, or the lender will have no incentive to stay the foreclosure action. For example, if you are asking for a payment restructuring, the mortgage lender is well served to show why he will be able to point out what is different about the restructuring proposal that would allow him to adequately make the appropriate payments. On the other hand, if forbearance is requested, the mortgage lender will typically need to demonstrate the likelihood of an event that will lead to an ability to resume payments at some point in the near future.
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