Foreclosure mediation is not a quick fix, but it can provide some relief to homeowners whose homes are facing foreclosure. Foreclosure mediation is an alternative to conventional foreclosure proceedings and is generally a longer process than the foreclosure auction. In foreclosure mediation, a third party, typically a neutral third party such as a foreclosure lawyer or loss mitigation professional, works with the homeowner and the lender to find a mutually acceptable solution to the foreclosure. The objective of the mediation is to help the two sides come to an agreement that is beneficial to the homeowners. The goal of the lender and the homeowner is usually to avoid a public foreclosure auction and the associated expensive courtroom battle. There are two primary benefits to the homeowners with whom the banks have an agreement to settle the foreclosure. One benefit is foreclosure relief. With the help of a third-party negotiator, homeowners who take part in foreclosure mediation may be able to save their homes from being sold at a public foreclosure auction. When the bank sells a home in a public foreclosure auction, it must sell the property “as is” or to the highest bidder. Foreclosure mediation provides a way for the homeowners to exercise their rights to redemption and get out from under the debt associated with the mortgage.
benefits of Foreclosure mediation
The second benefit to foreclosure mediation is time savings. If the homeowners agree to participate in mediation before the scheduled foreclosure auction, they do not have to wait for the scheduled auction to begin, which can be a time-consuming hassle. In addition, homeowners may also save money if they attend a foreclosure auction during a rainstorm when they would not otherwise be able to get into their home. However, some lenders and/or borrowers may choose to avoid a public foreclosure auction and resort to a short sale. A short sale occurs when a homeowner or borrower sells their house for less than is due on the loan, with the hope of being able to pay the remaining balance due to the lender. With the assistance of a third-party mediator, the homeowner and the lender may come to an agreement where the homeowner will sell the house at a predetermined price in exchange for a written document that details the terms of the sale and the amount of money due. This document is called a promissory note and is legally binding.
It is important to remember, though, that many public foreclosure auctions are actually private sales. When the lender sells a home in a foreclosure auction without first having held a foreclosure auction, it is considered a public sale. Homeowners who do not participate in the mediation are not entitled to any damages or legal fees. Such fees are only paid if the foreclosure auction fails to generate an income sufficient to settle the outstanding balance. Homeowners who lose their homes through a foreclosure auction do not stand a chance of recovering any deficiency judgment against them. Because mediation offers a unique opportunity to homeowners who would otherwise not be able to stop foreclosure, more lenders are offering this type of solution to help retain homes. When homeowners choose mediation over a foreclosure auction, they often will be able to save their homes from being sold at auction. Lenders who agree to accept the results of a mediation often have lower default rates on loans. For homeowners, this is always a better option than having to endure the potential of losing their home to foreclosure.