Live at the Forum with Alon Cohen, Rachel Gallegos, and Andrew Jakabovics

Replies to This Discussion

Permalink Reply by Emily Salomon on September 30, 2009 at 12:14pm

In the report, you talk about Philadelphia’s success and attribute it, in part, to the city’s “dense urban setting with a large legal community and robust community organizations.” Do you have any thoughts on how to implement a similar volunteer-led program in cash-strapped areas that lack the same infrastructure?

Permalink Reply by Alon Cohen on October 1, 2009 at 1:35pm

In the report we detail Connecticut's efforts at outreach. The state used its full-time employees, which obviously requires money, but the techniques can be done even in states without money. For example, housing counselors in states with sparse populations can send their employees to the same sorts of "Save Your Home" events to inform homeowners of the existence of the program. Similarly, members of the executive branch at the city, county, and state levels can perform this function and can also reach out to community groups, etc. The goal is to find people already in the system who can spread word and encourage them to do so.

Permalink Reply by Rebecca Cohen on October 1, 2009 at 8:47am

Since this report was issued Nevada’s mediation program has been initiated. Can you provide any preliminary information on early results from Nevada? Similarly, efforts to better-coordinate mediation programs in Florida jurisdictions would have been addressed in a report due in August 2009. Have you seen the report, and do you have any thoughts on its recommendations?

Permalink Reply by Alon Cohen on October 1, 2009 at 1:42pm

The program roll-out in NV has gone more slowly than anticipated. The Supreme Court held multiple hearings ahead of the roll-out and the program was (and continues to be) covered regularly in the news. In the first month, only about 450 homeowners applied for mediation. Nobody is sure why, particularly given NV's foreclosure rate, but it is something we're monitoring.

Regarding FL, the Supreme Court's Report was heartening in many ways. It tracks the practices of several counties (including Miami Dade), which hired the Collins Center to run their mediation program for them. These programs provide for mandatory mediation (rather than opt in) and have seen good results so far. While the programs are not perfect, if all of FL implemented them, it would be a big step in the right direction.

Until now, FL has permitted each of its local courts to act independently, resulting in a patchwork of different approaches to the crisis, ranging from nothing to mandatory mediation. In that context, seeing the Court require that every judicial circuit adopt the latter approach is very encouraging - it means both a consistent approach and - hopefully - a good one.

Permalink Reply by Emily Salomon on October 1, 2009 at 12:16pm

While generally supportive of mediation efforts, a recently-issued paper from the National Consumer Law Center finds fault with the impact and design of existing mediation programs, asserting that they “lack mandatory rules and fail to impose sanctions for non compliance with what minimal rules exist,” and that many “set unreasonable procedural barriers that restrict large numbers of homeowners from participating.” Can you respond to findings from this report?

Permalink Reply by Ryan Sherriff on October 1, 2009 at 1:03pm

In the report, you recommend setting aside resources at the federal level to fund mediation in states and localities. Do you have any thoughts on how/whether mandatory mediation programs would be able to staff up in time to address the growing wave of foreclosures?

Permalink Reply by Rachel Gallegos on October 1, 2009 at 1:38pm

One of the key compnents to getting a program up and running is to have all the players involved in the issue at the table from the begining to help craft a program that suits your needs. Our program was created with a lot of input from our steering committee who is made up of, consumer advocates, lender attorneys, city officials etc. So now these folks can really take ownership over the program and make suggessions as to how to improve what we do. We did this in 7 weeks when we started. Our steering committee was in place for quite some time before that, but we were still able to address the issue quickly. With the number of programs similar to ours up and running, there are some great templates available for how to get up and running. These can serve as guides for those jurisdictions that are looking to get started on their own.

Permalink Reply by Keith Wardrip on October 1, 2009 at 1:22pm

Previous research has shown that some efforts to prevent foreclosure (e.g., loan modifications) have been temporary fixes, and households have fallen behind on their loans after intervention. Is there any reason to think that foreclosures prevented through mandatory remediation will be more effective and have longer-lasting results?

Permalink Reply by Andrew Jakabovics on October 1, 2009 at 1:48pm

The best data on success/failure rates for modifications is the OCC/OTS report that comes out quarterly. (The most recent report came out earlier this week and is available at http://files.ots.treas.gov/482078.pdf.)
In the past, most modifications were designed to catch borrowers up on missed payments, so they had the perverse feature of actually raising, not lowering, monthly payments. This practice was based on the pre-crisis assumption that a borrower generally could afford the loan but may have had a temporary setback. In the current crisis, many people have found the actual loan terms themselves unsustainable, so unsurprisingly, when faced with an increased payment as the result of a modification, those loans would frequently redefault. Under HAMP, modifications must lead to reduced payments, so the expected performance of these loans over the long term should be reasonably good. The OCC/OTS report shows that for loans modified in 2008 with a 20% reduction in payment, only 34% have redefaulted a year later. This is somewhat higher than historical norms for redefault, but some of that may be due to the worsening employment situation piled on top of a previous modification.
By way of this long introduction, I'd say that the mediation process provides an opportunity for better modifications to happen. We don't know yet exactly how these modifications reached through mediation have held up over time, largely because courts are concerned with the cases before them and do not have the resources to follow previous litigants over time. (There is some money now for this kind of tracking but the research is in its initial phases.) With that caveat, it is likely that mediation yields better long-term success because it provides an opportunity for meaningful dialog between the parties instead of a one-way, take-it-or-leave-it offer that often happens under other circumstances. Similarly, the presence of housing counselors as advocates for the borrowers provides an opportunity to push back and demand fairer, more sustainable modification terms.

Permalink Reply by Daniel Klaff on October 1, 2009 at 1:39pm

Thank you for your presentation and for you time. As someone interested in promoting a mediation program in my state, I am interested in how we can best demonstrate the success of these programs. The data from both Philadelphia and Connecticut certainly seems encouraging. I am not sure how much can be made of that data however. The NCLC report raised some questions about the long-term viability of modifications under the mediation program. In addition to those concerns, I am also wondering if we are measuring outcomes in terms of the correct population. That is, we seem to focus on participants (i.e. those that have scheduled mediation or those that participate). Isn't the correct population those that would be eligible for the program? Or maybe even the number of foreclosure filings? In those cases, aren't the results less encouraging?

Permalink Reply by Rachel Gallegos on October 1, 2009 at 1:48pm

In Philadelphia our data from September forward is based on every single residential foreclosure case. Because we are mandatory every case is included in this. Our data isn't final and we are currently being looked at by outside sources to do a compreshensive study of our results to determine long term sustainability of resolutions reached in our courtroom. We will hopefully have some of those results in early 2010.

Permalink Reply by Alon Cohen on October 1, 2009 at 1:55pm

The NCLC report cites the lack of data from these programs so far as a negative, but I would point out that no data is just that - no data. It doesn't tell us anything about the results of these programs in either direction. Andrew and I are strong supporters of efforts to collect this data and disseminate it between programs. It is listed on our best practices. Data collection is being done by Philadelphia, Connecticut, Nevada, Ohio, and others, and it is helping.

We're faced with a catch 22 -- we can't generate data without trying something, but - according to some - we can't try something without data to inform our actions. Given that choice, we feel that we need to act to help homeowners using the best information available now. We want better data to tell us how to tailor our programs and are pushing to get it. We were encouraged, for example, that Sen. Reed's bill included a requirement that state foreclosure mediation programs set up using federal grants track and report their data.

Incidentally, I would encourage those reading NCLC's report now to compare the recommendations there to those we published in June. I think you'll find that they track pretty closely. These recommendations weren't made because current programs aren't working; rather, these recommendations were taken from existing programs that are working.

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