Under the law, borrowers who believe they can avoid foreclosure if the terms of their mortgages are modified can ask for mediation, and lenders must attend the mediation meeting. The mediation mandate kicks in once foreclosure proceedings begin. Borrowers have 30 days to request the mediation meeting.
Lawmakers who pushed for the measure say the law is working but needs to be more consistent. Banking representatives say they are pleased with the mediation procedure and that just showing up or calling in at a mediation meeting is enough "good faith" to satisfy the requirements of the statute.
But critics argue the mediation law is a toothless sham because the program isn't following the law. Homeowners and their advocates argue that although lenders' representatives are taking part in meetings, they aren't negotiating. They charge that many lenders would rather throw homeowners out than consider loan modifications.
They argue that loan servicing firms and lenders often make more money from a foreclosed home than from a modified loan agreement and, therefore, go through the motions of a meeting without putting any offers on the table.
"Last July, we were happy because there was a new law in town, and banks were going to have to face consequences for their actions," said Kristy Sinsara, a Las Vegas-based consumer advocate. "But the sheriff, or in this case the courts, isn't enforcing the law, isn't utilizing it."
She said lenders have been standing fast on "even the worst predatory loans" and claim that just because they have a representative at the mediation, often via telephone, they have satisfied the law and don't have to put anything on the table.
"District courts are not imposing sanctions on loan modifications even though they have that power," Sinsara said. "These aren't kinks to be worked out. It's a fundamental flaw.
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