Lenders not engaging in Oregon foreclosure mediation program [The Oregonian, Portland, Ore.]By Elliot Njus, The Oregonian, Portland, Ore.McClatchy-Tribune Information Services
Aug. 29--CORRECTION APPENDED
SALEM -- Private Oregon mortgage servicers have so far refused to participate in Oregon's new foreclosure mediation program, declining even to respond to requests for mediation.
The state's contractor charged with running the mediation program told an advisory committee in Salem on Wednesday that 132 eligible homeowners applied for the program on the grounds that they are at risk of foreclosure. The law allows at-risk borrowers to request a meeting with their lender even before they've missed a payment.
But none of the mortgage servicers responded to the requests within 15 days as required under the law that created the program.
"They just don't want to play," said Jonathan Conant, who is managing the state mediation program on behalf of the Florida-based Collins Center for Public Policy. He added that the five largest lenders operating in the state have indicated they won't participate in the mediation process "under any circumstances."
There is no penalty for banks that don't participate in mediation with "at-risk" borrowers, a term that isn't defined in the statute. Once the borrower is in foreclosure -- provided it's an out-of-court foreclosure -- the lender could be barred from selling the home at auction if it doesn't participate in mediation.
Meanwhile, lenders have also stopped filing out-of-court foreclosures. More are proceeding with court-supervised foreclosures, avoiding the mediation program altogether through the traditionally slower and costlier judicial foreclosure process.
Only the Oregon Department of Veterans' Affairs and Oregon Housing and Community Services, government agencies that operate home loan programs, have agreed to mediate with 11 borrowers.
Complicating matters is an Oregon Court of Appeals decision released the week after the mediation program took effect July 11. The decision requires lenders to record the entire ownership history of a loan in county offices before initiating a foreclosure outside of a courtroom. It also requires foreclosures to be filed in the lender's name rather than that of mortgage industry stand-in Mortgage Electronic Registration Systems Inc., or MERS.
Lenders are weighing the mediation program, the court decision, new servicing standards from a nationwide mortgage settlement and mortgage backers Fannie Mae and Freddie Mac, and new rules from federal agencies, said Jim Markee, a lobbyist representing the Oregon Mortgage Lenders Association.
"There is just so much coming at these folks in terms of new requirements," Markee said. "Many of them are talking to their legal counsel and other learned people trying to make rational decisions about how to proceed with this issue."
Markee and Kenneth Sherman Jr., general counsel for the Oregon Bankers Association, both told the advisory committee they couldn't explain why mortgage servicers hadn't responded to the requests for mediation.
"There's a lot of just hanging back and wanting to gather more information before going forward," Sherman said. "I don't think you should take that as any kind of definitive response."
It's a setback for the program, which moved in fits and starts through the Legislature before passing on the session's last day.
"We all spent a lot of time designing the program," said Keith Dubanevich, the outgoing Department of Justice chief of staff and associate attorney general. "To find out the banks have decided they don't want to participate is a disappointment."
This article has been revised to reflect the following correction: The Oregon Department of Veterans' Affairs has agreed to mediate with borrowers through a new state foreclosure mediation program. A story in Wednesday's Business section listed the wrong agency.
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