What is Foreclosure Mediation?

Many court systems have provided foreclosure mediation programs by which a homeowner who is facing foreclosure on his or her home may work out a mutually beneficial solution with regard to the payment of his or her delinquent mortgage. Different jurisdictions have different requirements to qualify for foreclosure mediation, but most people who are facing foreclosure are eligible as it is in the best interest of everyone for the parties to work out an agreement rather than go through with a foreclosure action. While foreclosure mediation does not guarantee that the foreclosure will not go through, as it is up to the parties to work out an agreement that works for everyone, it is a productive way to facilitate such an agreement.

Foreclosure mediation is presided over by an independent third party — called the mediator — who will meet with the mortgagee and a representative of the lender. The mediator’s role is simply to structure discussion so that it is likely to lead to a productive solution. He or she may also take a proactive role in suggesting creative solutions that benefit both parties. Further, the mediator will often meet with either party privately to highlight the strengths and weaknesses of his or her position in the negotiation.

While foreclosure mediation does not necessarily guarantee that the foreclosure action will be stayed, delayed, or canceled, it raises the probability of a mutually beneficial outcome. One common outcome of foreclosure mediation is simply a restructuring of payments to ease the financial burden on the mortgagee, accompanied by repayment of any back debt on the mortgage. A more drastic possibility is forbearance, which is a temporary staying of payments until some event occurs where the delinquent mortgagee can better meet his or her financial obligation. Though forbearance does allow for a delaying of payment, interest will continue to accrue on the mortgage.

In coming to foreclosure mediation, it is most important that the mortgagee show his or her ability to pay given a proposed solution, or the lender will have no incentive to stay the foreclosure action. For example, If a restructuring of payments is sought, the mortgagee is well served to show why he or she will be able to indicate what is different about the proposed restructure that would allow him or her to adequately make the appropriate payments. On the other hand if forbearance is sought, then the mortgagee will typically have to show the likelihood of some event that will lead to an ability to resume payments at some point in the near future.