Second Effort To Provide Mortgage Mediation

Scheid, Swanson

Gene Sparrow simply cannot find a person at his mortgage-holder’s company to discuss problems he has with his monthly payments.

If the Minnesota attorney general’s office had not become involved, "I would be sleeping out in a sleeping bag," the 70-year-old Stillwater man said Wednesday, supporting a bill that would force lenders to sit down and talk to homebuyers facing foreclosure.

Sparrow’s four-bedroom house was two weeks away from a sheriff’s sale last year when his lender, a Goldman Sachs subsidiary, stopped the foreclosure proceedings following a letter from Attorney General Lori Swanson’s office.

Still, he added, the situation is not resolved. "I’m still wondering what tree I will sleep under."

Swanson and some state lawmakers are trying a second time to pass legislation they say could help Sparrow and others who face home foreclosure by allowing them to force lenders into mediation. A mediation process brings the buyer and lender together to work out financial difficulties.

Sen. Linda Scheid, DFL-Brooklyn Park, agreed with Sparrow that finding "a live person" to discuss a mortgage problem often is difficult.

"We need to cut through the red tape," Swanson added.

Based on the farmer-lender mediation act of 1986, credited with saving many Minnesota farms, the bill would give those who face foreclosure a chance to sit down and talk with lenders.

Gov. Tim Pawlenty vetoed the bill last year, but its sponsors say they are confident they can tweak the measure enough to get his approval in 2010.

Sparrow sent 20 letters to people involved with financial policy, from President Barack Obama on down. Swanson’s office quickly sent a letter to his lender, buying time for him, but Sparrow said many others are in similar positions and need help.

"We are open to discussing this bill with legislators, but continue to have concerns, including the provision that would require all lenders and borrowers to pay for the mediation program, even if they are not involved in a foreclosure," said Pawlenty’s spokesman, Brian McClung.

In a May 22 letter explaining why he vetoed last year’s bill, Pawlenty said it is not fair to charge everyone facing foreclosure $125 more to fund a mediation program only some would use. He also wanted to allow telephone or video meetings between lenders and buyers to be allowed, while legislators voted to require at least some of the meetings to be in person.
The law would establish a procedure that before a foreclosure action could be finalized, the two sides meet with a mediator to try to work out differences. However, that would happen only if the homebuyer requests mediation.

When foreclosure actions go to court, Swanson said, judges already order mediation before they rule in the cases.

Swanson said foreclosures are at a record high, with 28,000 across Minnesota in 2008 and about as many in 2009.

Scheid said that foreclosures affect not only those who cannot make mortgage payments. "It has a direct impact on the value of your home."