This past weekend I facilitated a meeting of the Arizona Foreclosure Mediation Task Force, and I have to admit that I did not understand the extent of the foreclosure crisis in Arizona and across the country.  One thing that struck me is that this problem is so big in scope.  For example, someone threw out a frightening statistic – 55,000 houses in Maricopa County (metro Phoenix) are either in foreclosure or are in the process of being teed up for foreclosure !!  To make matters worse, with the jobless recovery, more foreclosures are on the way.  And a recent report from the Congressional Oversight Panel (here) estimates that the number of foreclosures nationwide will reach 10 to 12 million (!!!) and the various federal programs in place will, at best, prevent only 3 to 4 million foreclosures.  It’s no wonder that those who follow this problem are very worried. 

One of the big hurdles the lenders are facing is staffing and training – they can’t throw enough people with proper training at this problem quickly enough.  Not only are they drowning in the volume of foreclosures, but in Arizona (a non-judicial foreclosure state), once the 90 day statutory foreclosure process starts, the clock doesn’t stop ticking.  This has been problematic, particularly in cases when houses have been sold through foreclosure while in the middle of mortgage modification negotiations.  This is a crisis indeed.

How does our Task Force think mediation can help in the crisis?  This specifically came to mind when the members from the housing counselors at the Community Legal Services said that they have only been able to help 40 homeowners, and their job is to focus on this problem specifically.  Yikes !!  Are we no more than the Dutch boy with his finger in the dike?  My take is that any help we can provide will be welcome, even though it may be on a much smaller scale that policy makers would like.  

As we go forward, the mediation “true believers” need to remember that mediation is not a panacea and is not a good option for every foreclosure.  This point is made nicely in an article in this month’s ABA Journal (here).  For example, one person in the article is quoted as saying, “Some people bought homes they could not afford – and that was before they lost their jobs.”  And lots of people just decided to take money out of their houses to buy cars, boats, and the like.  There’s no question in my mind that a good screening mechanism is necessary to make sure that we’re mediating those cases where (a) the lenders would in no way agree to rework a deal and (b) we would simply be putting off the inevitable for a year or two.

So the Task Force finds itself partaking in a massive exercise in Dispute System Design involving some major community players.  Talk about an interesting and important exercise!  Luckily we have several states that we can use as models to help us figure out what will work here.

And finally, I’d be remiss to fail to mention that Indisputably’s own Andrea Schneider is quoted in the ABA Journal article discussing Milwaukee’s foreclosure mediation program, which is housed at Marquette University Law School.  Congrats Andrea and Marquette !!