In January 2009, the New Jersey state government and courts implemented a foreclosure mediation program to help both homeowners and banks resolve outstanding balances on home mortgages. A homeowner can ask the court to be entered into the voluntary mediation program at any time during the foreclosure process. At that point, the foreclosure case will be stayed pending the mediation. The home owner will be required to meet with a HUD-approved counselor, essentially to determine what the homeowner can afford in regards to a potentially modified mortgage loan. After that happens, the court will schedule a date for a mediation between the homeowner and the bank. The mediations are held at the courthouse. Both the counselor and mediator are compensated by a fund established by the state of NJ.
In essence, as I’ve explained before, the bank does not want your home. In most cases, the balance of the loan is more than the value of the house and the bank does not want to own a home in a bad real estate market. While holding the home, they have to pay property taxes, etc. They would rather settle — if it makes economic sense — than foreclose. Loans can be modified in a number of ways (change of the balance due/prinicpal amount, payment schedule, interest rate, type of loan, etc.), all of which the counselor can assist the homeowner with. The counselor is also required to be at the mediator to help the homeowner during negotiations. The state and federal government as well as the FDIC, Freddie Mac and Ginnie Mae all have programs to help homeowners.
Please keep in mind that this is not a panacea. Some mortgage loans have been resold and repackaged making modifications difficult or impossible. Some homeowners, even after the numbers are run, simply cannot afford the home they are living in. In the latter case, the mortgage company may pay you to leave the home without an expensive legal battle to have you evicted.
The NJ courts have published a foreclosure resource guide (opens in new window) to help homeowners navigate a complex system. As I’ve stated before, the worst action you can take is to ignore all of the notices you get in the mail — doing nothing will surely lead to the loss of your home. Also, be cautious of people or companies who want to help by transferring title on your home for any purpose. Those are likely scam artists.