July 21, 2009

Mortgage Mediation Act Unveiled

Taylor Puts Bill Forward to Help Both Parties in Foreclosure Process

(MADISON) In what promises to be a better way forward for both homeowners and lenders, Senator Lena Taylor (D-Milwaukee) unveiled her Mortgage Mediation Act today, which attempts to mediate a foreclosure proceeding between a homeowner and lender. This legislation patterns other successful programs in Minnesota and other states around the nation. Given the recent surge in foreclosures, Senator Taylor is taking positive steps to help Wisconsin’s homeowners.

“Nobody wants to see people losing their homes and out on the streets,” said Senator Taylor. “When a family loses their home, that means that the lender is no longer collecting payments, the municipality is no longer collecting property taxes, and the family no longer has a roof over their heads. It is a losing situation all around and, hopefully, it is a situation that can be worked out via mediation. This bill will help out the working class of Wisconsin and help those people who are experiencing hard times hold on to their piece of the American Dream.”

Under current law, if foreclosure is brought upon a property, the homeowner is served with a summons and complaint and the normal rules of pleadings, discovery of evidence, pretrial, and trial apply. If the court issues a judgment for foreclosure, the homeowner loses their home. Unfortunately, communication between the two parties is usually difficult and burdensome. The homeowner is often unaware of the rules and regulations and is lost in a labyrinth of telephone numbers and paperwork. The process moves slowly, and by the time contact and progress is made, the home may be foreclosed. This crisis is having a devastating impact on the economy, home values, and our property tax base. Projections are that Wisconsinites will lose tens of billions of dollars in home value by 2010.

This bill creates a process to protect homeowners who own a first or second mortgage on a residential property. They would be able to seek mediation if they went into default on a loan and the foreclosure process has begun. If the homeowner has missed two consecutive loan payments, the lender must send the borrower a notice when beginning to foreclose. The lender then would provide the homeowner with a written solution to the problem, which includes contact information about credit counseling services available. The homeowner then has a right to request mediation from the director of state courts, which will assign a mediator and report the results to the court. Parties must act in good faith in order to receive a positive review from the mediator.

The legislation is widely supported and has been drafted with the help of bankers, community banks, mediators, the Courts and various University systems, in addition to legislative colleagues and, most importantly, from the input of homeowners.