Diane Thompson of the National Consumer Law Center, who was a rock star at yesterday’s hearing, made a point that has gone overlooked. She said that you can get much better compliance on loan modifications if you actually fund mediation programs and legal services attorneys. There are mandatory mediation programs up and running in Philadelphia and New York, and they have been far more successful in preventing foreclosures – by about 50%, according to Thompson. It’s just a matter of getting the servicers into these mediation programs instead of hoping they will initiate modifications on their own.

As for legal services, as I said a couple days ago, Dodd-Frank authorized $35 million dollars for legal services for homeowners facing foreclosure, but never appropriated the money. Thompson said, “All of the robo-signing allegations were only discovered, brought to light by aggressive, competent attorneys working very diligently to represent their clients. Homeowners cannot negotiate these kinds of issues without lawyers. Low-income homeowners particularly need the lawyers… we urgently need that funding.”

I’ve been taking a look at this issue over the past couple days, contacting people on the Hill, and it doesn’t look good. The funding does not exist in the Treasury/HUD appropriations bill, one of the routine spending bills that need to be passed. It’s not entirely likely they’ll get passed at all, let alone that the report will get reopened to insert that funding in there.

Some Senators are looking for other ways to get the funding through. Some want to allow TARP funds to get used for legal assistance. Others, like Sherrod Brown, have been asking for expansions of legal aid since June. He wants the Treasury Department to allow the Housing Finance Agency’s Hardest-Hit Fund (HHF) to be used in counseling and legal aid services for foreclosure victims.

“Legal aid services are immensely useful to homeowners who fall behind on their mortgage payments, sometimes because they are unable to access benefits like unemployment insurance. Foreclosure counseling is a similarly vital service,” Brown wrote. “Ohio homeowners and their hardworking counselors and legal aid lawyers deserve a sufficient explanation as to why they are being denied funding for vital housing services.”

Sadly, there’s been no movement. This is the lifeline of the foreclosure fraud crisis. Lawyers need to be in the field so borrowers have a fighting chance at due process, to protect themselves from predatory servicers and prevent illegal foreclosures. Without more funding, the efforts at accountability may just wither. News organizations are doing a great job but the lawyers need to be funded.

Hopefully Thompson got the attention of lawmakers with her remarks at the hearing.