Villaraigosa: Mandatory Mediation Needed Between Lenders and Homeowners Near Default.

Hoping to stem the rising tide of foreclosures in Los Angeles, Mayor Antonio Villaraigosa today announced he will ask the state Legislature to require mandatory mediation between mortgage lenders and homeowners at risk of default.

Such a plan was first enforced in Philadelphia a year ago, and has been successful in saving 1,200 homes from foreclosure. Another 1,500 homes are currently in settlement negotiations.

President Barack Obama used Philadelphia's plan as a model for his own $75 billion foreclosure fix. Under his "Making Home Affordable Program," judges would be able to intervene and mediate loan modifications between lenders and homeowners.

During a conference call with the U.S. Conference of Mayors today, Villaraigosa said, "This issue of mandatory mediation is one that I'm getting behind. We're gonna do it because this program works. In Philadelphia, they've demonstrated that more than 70 percent of the folks that participate in this program are able to stay in their homes -- that's a good thing."

He said the program requires state law, so he will ask the Legislature next week to "work on this on an emergency basis, and replicate what they have in Philadelphia."

During the same conference call, New York Mayor Michael Bloomberg added, "we've got to get these mandatory meetings. The current situation is intolerable."

Bloomberg said he may use city and private funds to run the program, and may apply for state and federal funding if necessary.


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"I think the less money that's involved here, the more straightforward it is," he added. "Just lender and borrower -- maybe lock them in a room with a big pot of coffee and no bathroom. That will get them to come to an agreement quickly."

Philadelphia Mayor Michael Nutter, who is credited with developing the mandatory mediation program, urged state governments to "step up, whether it's to change laws or put dollars behind these programs and support what cities are doing."

He said the federal government has invested money to deal with foreclosed properties under the Neighborhood Stabilization Program. However, he said, "That's after the fact. What we really need is help on the front end -- dollars to prevent mortgage foreclosures and prevent families from literally being thrown out into the street."

The Association of Community Organizations for Reform Now, better known as ACORN, helped organize today's conference call. In a report, it said Philadelphia's program is so effective because it is mandatory, uses very effective community outreach, is easy for homeowners to participate in, and utilizes the expertise of housing counselors.

ACORN officials said more than three out of four homeowners who have entered Philadelphia's program remain in their homes today, where in other jurisdictions they would have lost their homes.

In Los Angeles County, the number of homes slipping toward foreclosure increased by 37.6 percent during the first quarter of this year, compared to the same period in 2008.

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