Senate committee clears bankruptcy courts to set up foreclosure mediation S. 222
Voting on the Limiting Investor and Homeowner Loss in Foreclosure Act, or S. 222, was delayed earlier in March. The bill was sponsored by Sen. Sheldon Whitehouse (D-R.I.). Judges have set up mediation programs in several bankruptcy court districts in New York, Florida, Iowa, and Connecticut. But banks have contested such action in Whitehouse's own state, Rhode Island, where a program was set up in 2009.
The Rhode Island Bankruptcy Court ruled against Deutsche Bank, which challenged the program, in January. Whitehouse said the prospect of future appeals and litigation continue to threaten the program, thus his legislation.
"Too many families in Rhode Island and throughout the country have been hurt by a broken foreclosure system fraught with long waits on the phone, lost paperwork and an inability to speak with someone who’ll give their last name or make a decision," Whitehouse said. "By bringing together homeowners and mortgage servicers for a face-to-face negotiation, the Rhode Island bankruptcy court’s foreclosure mediation program helps streamline that process and has already saved at least 120 homes."
Republicans argue that the bill only prolongs foreclosure timelines and the housing recovery.
"I understand the problem," Sen. Jon Kyl (R-Ariz.) said in a previous hearing. "But the sooner we get the cases resolved, the sooner we get to the bottom of the real estate market, the sooner we get to recover."
Still, Whitehouse said the bill puts an end to the legal challenges and encourages districts to adopt a program.
"This program will not prevent all foreclosures, but it can at least ensure that the big banks and mortgage servicers, whose practices contributed so much to the nationwide housing crisis, are giving families a fair chance to stay in their homes," Whitehouse said.