I’ve been writing about how foreclosure mediation and funding for legal services are two small-bore areas that can make a difference for homeowners facing the threat of foreclosure. Studies have shown that foreclosure mediation has been successful in many instances in keeping people in their homes. They haven’t been panaceas, but they have had an impact in forcing servicers to the bargaining table with homeowners, aimed at a solution.
But if these mediation strategies are to be effective, legal aid for foreclosure victims must come along with it. As I’ve said repeatedly this week, Dodd-Frank authorized $35 million dollars for this purpose, but Congress hasn’t appropriated the money, and doesn’t look likely to do so in the lame duck session.
To that end, the Vice President announced today a series of new initiatives designed to allow homeowners to better access legal services. But they don’t amount to a whole lot.
DoJ and HUD issued a report which evaluated effective foreclosure mediation programs. While this may benefit cities and states looking to adopt these strategies, it doesn’t offer any funding to support the programs. It’s just an OK road map for communities that want to engage in foreclosure mediation programs.
HUD also issued a guidance to what resources can be used for housing counseling. In particular, the memo says that Community Development Block Grant and Neighborhood Stabilization Funds could be used for counsel for housing purchases, default, foreclosure prevention and foreclosure mediation. It also said that CDBG funds can be used for emergency mortgage (or rent) payments for foreclosure prevention. They also announced a series of trainings, webinars and workshops for homeowners, attorneys and mediators.
This is not a substitute for actual funding for legal aid for homeowners. The Treasury could authorize TARP money, perhaps some of the unused HAMP allocation, for this purpose. And this is urgently important. People are dropping out of HAMP because they find it uniquely unhelpful and even dangerous. The main avenue left is through either mediation or legal action. Pro bono attorneys basically discovered the robo-signer issue and have driven the issue of foreclosure fraud into the national consciousness. Lawyers like Bubba Grimsley are doing invaluable work for their clients, who are typically destitute.
If there’s any such thing as a “bailout” for the banks in this matter, it’ll be from the lack of resources for the attorneys who are schooling them in court. It’s quite cost-effective, as bailouts go. But the effects are devastating for families facing foreclosure, leaving them with basically no help at all.