Mar 10, 2009 11:16 pm US/Central
Bill On Foreclosure Mediation Clears Senate Panel
ST. PAUL (AP) ―
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The Homestead-Lender Mediation Act is designed to help more people avoid foreclosure by giving them a chance to modify their mortgages or refinance. (File)
CBS
Forcing lenders to offer homeowners mediation before starting the foreclosure process could help more Minnesotans stay in their homes, supporters of a state Senate bill argued Tuesday.
The Homestead-Lender Mediation Act, which cleared the Senate Commerce and Consumer Protection Committee, is designed to reduce the number of foreclosed homes by giving people a chance to modify their mortgages or refinance. Too often, Minnesota homeowners are forced out of their homes after trying to work with lenders who ignore them, said bill author Sen. Linda Scheid.
"Knowing you have to come to the mediation table -- that you have to send someone -- will make these lenders more responsible," said Scheid, DFL-Brooklyn Park.
The bill has passed out of its first House and Senate committees and will be heard in more committees later this week. But Scheid and other supporters have yet to convince banks that the new requirement wouldn't cause problems such as restricting the flow of credit and lengthening the foreclosure process.
Minnesota bank representatives told committee members Tuesday that they're already putting forth their best efforts to avoid foreclosure proceedings and shouldn't be forced into mediation.
Noah Wilcox, president and CEO of Grand Rapids State Bank, told the committee that the bank tries everything before foreclosure.
"We've already mediated it to death," said Wilcox, who suggested that lawmakers exempt community banks from the bill.
Scheid said her bill isn't aimed at community banks or at banks that work with homeowners to modify loan terms when possible. "This is about getting people to the table that we hadn't been able to get before," she said.
Homeowners and foreclosure counselors told committee members that includes out-of-state lenders who make homeowners jump through hoops just to get even the most basic information about what options they have.
"Sometimes we've had to call 10 times before we get through to the correct department," said Cheryl Peterson, manager of the Twin Cities Habitat for Humanity foreclosure counseling service in Minneapolis.
Stan Gurek, who is trying to avoid foreclosure on his home in Columbia Heights, said he's called his mortgage lender to see what his options are. But the phone calls have just led to paperwork, more phone calls and more paperwork without any progress, he said.
"This is where I get the snowball effect," said Gurek, 57, a truck driver who lives with his wife and granddaughter. "I don't have anyone to talk to."
Bank representatives also suggested that President Barack Obama's plan that provides incentives for lenders to work with homeowners to modify mortgages would do enough.
But that initiative is voluntary in most cases, said Ben Wogsland, spokesman for Attorney General Lori Swanson. Swanson proposed the mediation legislation last fall. "There are some incentives, but there's no absolute requirement to come to the table," he said.
Most committee members said they agreed with the intent of the bill, but some said that concerns raised by the banking industry showed the bill needed more work before moving forward.
"We want to keep people in their homes, but what's the best and most appropriate way to do that?" asked Sen. Chris Gerlach, R-Apple Valley. "We have to be careful not to have unintended consequences."
Gov. Tim Pawlenty vetoed a bill last year that would have allowed some struggling homeowners to defer foreclosure while they worked to catch up on payments.
Pawlenty hasn't committed either way to the mediation proposal, but spokesman Brian McClung said his decision will take into account the federal government's plan to allow some homeowners to modify their mortgages.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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