Minnesota Law Offers Foreclosure Mediation to Homeowners- By: Leticia Carvalho
Attorney General Lori Swanson has proposed a plan, the Homeowner Lender Mediation Act, which will require lenders to offer homeowners in Minnesota to renegotiate their mortgage terms to avoid foreclosure.
The proposed plan is patterned after the program, Farmer Lender Mediation which helped almost 14,000 farmers in Minnesota remain on their land and avoid foreclosure.
The Farmer Lender Mediation initiative requires that before enforcing foreclosure, a lender should notify a homeowner of his right to mediation. The borrower is given 14 days to request for mediation, and both parties must set a meeting within 20 days after the submission of request.
Under Swanson’s program, foreclosure would be deferred for at least three months if borrowers ask to modify their mortgages to terms that they could afford.
Swanson said that her proposal would benefit homeowners who lost their jobs and those who could not avail of the federal government’s $700 billion bailout plan for the financial market.
She added that her proposal is important to alleviate the sufferings of homeowners and their communities because Minnesota is expected to lose $70 billion or 30 percent of its collective housing market value by 2010.
Some of the terms that can be mediated under Swanson’s plan are principal forgiveness, extending payment schedules and lower interest rates. Every homeowner in Minnesota who are facing the threat of foreclosure can request for mediation.
A controversial provision of the plan is the burden on lending companies to negotiate all mortgage terms, including those acquired by investors in bundles. Lenders argue that they could not modify the terms of those mortgages because they have sold them and therefore, no longer own those loans.
Swanson claimed that the success of her office’s voluntary mediation program showed that the process has the potential to help homeowners avoid foreclosure and for lenders to recover most their investment.
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Leticia Carvalho has been educated in the finer points of the foreclosure market over 5 years.