MN Attorney general Lori Swanson proposed mandatory mediation for foreclosures at a press conference yesterday. Strib reports:
The Homeowner Lender Mediation Act, patterned after a program from the mid-1980s that helped about 14,000 Minnesota farmers stay on their land, would put a foreclosure on hold for three months if a borrower asks to renegotiate mortgage terms to an affordable level.
So this is essentially a foreclosure moratorium under separate cover. To which we say: Fine. Great. To the extent that it helps lenders and borrowers make rational decisions, and gets servicers that aren't negotiating in good faith with borrowers to the bargaining table, it's a good thing.
We do maintain a healthy skepticism about the extent of relief a moratorium of any kind will bring. There are simply many, many foreclosures that will happen, no matter what. It is an unfortunate fact of a declining real estate market and faltering economy.
Also, as we shared with Chris Snowbeck at the Pioneer Press on this subject, if we are going to enlist the power of the state to professionally renegotiate mortgage terms on behalf of borrowers, there's real concern in many quarters that we are rewarding many that, perhaps, took ill-considered risks, and punishing those who stayed within their means. A quick scan of the angry comments on this article at the Strib is telling.
That said, with Fannie and Freddie announcing their own foreclosure moratorium, we're mostly beyond the point where flip arguments about "moral hazard" and "unintended consequences" are even relevant to the current conversation. The banks, the servicers, and the borrowers need time. Time to get control of the process and allow other relief efforts to take effect.