Press Release:
Federal Reserve Bank of Boston Releases "State Foreclosure Prevention Efforts in New England: Mediation and Assistance"
September 29, 2011
Contact:
Meghan Reilly, (617) 973-3336
BOSTON – Foreclosure initiations spiked in all the New England states during the recent economic downtown, ranging from a peak of less than 3.0% of outstanding mortgages in Vermont in 2010 to a peak of 5.5% of outstanding mortgages in Rhode Island in 2009. Across the entire New England region in 2010, more than 7% of all mortgage holders– nearly 133,000 homeowners – were seriously delinquent in making payments. In response, state and local policymakers have created their own foreclosure prevention programs to supplement those available nationwide.
In a new research report by the Federal Reserve Bank of Boston's New England Public Policy Center, "State Foreclosure Prevention Efforts in New England: Mediation and Assistance," Policy Analyst Robert Clifford reviews and analyzes the New England states' foreclosure prevention programs. The report identifies two major prevention strategies: foreclosure mediation programs and financial assistance programs.
The mediation process provides homeowners a channel of communication with their lenders that has been difficult for most to establish on their own. As these programs have yielded results, they have grown in popularity: in 2008 only 5 states had mediation programs; by 2011 21 states had some form of mediation program in place. Five of the six New England states have initiated mediation efforts, while Massachusetts has implemented a program to facilitate two-party negotiations without the additional presence of a neutral mediator.
Financial assistance programs channel aid directly to homeowners who are at risk of foreclosure. Maine and Connecticut are the only New England states offering this type of program.
- The successes and obstacles in New England's programs provide key lessons for states looking to create new or modify existing foreclosure prevention efforts, including:
- Intervene early, bringing together homeowners and lenders as soon as a foreclosure complaint is filed or allowing homeowners to apply for financial assistance before their situation becomes dire;
- Maximize participation, perhaps through opt-out provisions, automatic enrollment for homeowners in mediation, or removing unnecessary barriers to qualify for financial assistance;
- Tap existing expertise and resources, taking advantage of the judicial system or state housing finance authorities in the administration of prevention programs;
- Carefully weigh funding strategies, considering adverse incentives, limits on program scale, and availability of federal funding; and
- Collect information and analyze results, using statistics to evaluate program strengths and weaknesses and help build public support for effective strategies.
Stay Connected
Tom Lavelle
617 973-3647
Thomas.L.Lavelle@
bos.frb.org
Joel Werkema
617 973-3510
Joel.Werkema@bos.frb.org
Full Report and Multimedia: State Foreclosure Prevention Efforts in New England: Mediation and Assistance