Foreclosure mediation is a process initiated to address the growing number of foreclosures throughout the country. During this process, the consumer meets with their mortgage lender and a mediator. It provides all parties with the opportunity to find a viable solution instead of foreclosure.
What Is the Result of Mediation?
The outcome of foreclosure mediation depends on the financial circumstances of the borrower. If the borrower is capable of paying a reduced value, the lender may offer a loan modification. This could decrease the monthly payments and make the loan more affordable.
A Forbearance Agreement
A forbearance agreement allows the borrower to stop payments for a predetermined length of time. The lender doesn’t penalize the borrower with late fees. However, interest that accumulates during this time is applied to the mortgage.
A Short Sale
A short sale is another probability. During a short sale, the property is placed on the market to acquire the balance of the mortgage. These options don’t always produce the full value of the mortgage. In some cases, the lender may file a loss for the remaining balance. However, they could hold the borrower accountable for this outstanding balance. The agreement during foreclosure mediation defines what happens if there is a balance owed after the sale.
What Are the Requirements for Mediation?
The property must be in foreclosure. The lender must file the necessary documents to start this process. A request for mediation is filed through the attorney.
Who Pays for Mediation?
In most cases, the state of Maryland pays the fees associated with foreclosure mediation. However, in some instances, the lender is responsible for paying these fees if they agree to the process. Select low-cost mediation programs require the consumer to pay the cost of mediation. The responsible party is identified according to the program selected.
Foreclosure mediation is a process that could help the consumer and lender avoid the foreclosure process. Foreclosure is costly for both the lender and consumer. It could have a catastrophic impact on the consumer and prevent them from acquiring a new mortgage in the future.