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Bill would force mediation before foreclosure

RALEIGH Banks would be required to go through formal mediation with a homeowner before beginning a foreclosure under the terms of a bill pending in the N.C. Senate.

It’s a response to the continuing trouble borrowers have had in saving their homes, despite a massive legal settlement designed to make the process easier.

“To the public, it looks very confusing,” said Sen. Clark Jenkins, a Tarboro Democrat, who introduced the bill. “You’ll find people in absolute horror stories.”

State attorneys general and federal agencies directed five of the nation’s largest banks to clean up their mortgage servicing and foreclosure practices as part of a $25 billion settlement reached last year. One area in particular was “dual-tracking,” or pursuing loan modifications and foreclosure at the same time.

The Observer reported last week that despite efforts to stop the practice, many forms of it continue. The settlement’s rules in many cases give banks latitude to schedule foreclosure hearings and send legal notices even as they work with a homeowner on a loan modification, the Observer found.

Jenkins’ bill would effectively end that, he said. The mediation program it spells out is modeled after similar rules in Connecticut and Washington State. Nearly half of U.S. states have some form of foreclosure mediation, according to research by the N.C. Justice Center.

“There’s still problems with the big banks and their mortgage servicers on getting good mortgage servicing,” said Al Ripley, the center’s director of consumer and housing affairs. He worked with Jenkins to craft the bill.

Both Jenkins and Ripley said they weren’t sure how the bill would be received. It failed to find a co-sponsor, and Jenkins is in the minority party in Raleigh.

Bank of America, which is part of the $25 billion settlement, did not respond to requests for comment. Wells Fargo declined comment.

Dunn: 704-358-5235 Twitter: @andrew_dunn
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