Connecticut established the first statewide foreclosure mediation in the United States. The program was free and mediations conducted by staff of the judicial branch. The evaluation of this program, which looked at cases that were filed from July 2008 through June 2014, found that those who participated were significantly more likely to retain their homes (68% v 42%). Lower retention rates were associated with minority status, unemployment and bankruptcy, and larger amount owed and higher interest rates. Higher retention rates were associated with higher incomes. Participation in the program lengthened the time from filing to closure. This was especially true if the lender/servicer did not behave in a manner consistent with the goals of mediation.
Description of Study: Comparative study of a statewide foreclosure mediation program, in which approximately 31,000 homeowners participated from July 2008 through June 2014.
Method: Examined data from the judicial branch e-filing system as well as from the foreclosure mediation program. Collected information on income, gender, race and ethnicity from foreclosure mediation participants. Used regression analysis to compare outcomes between participants and non-participants, and geospatial analysis based on census tract to compare outcomes based on property location.
Comparative: Yes
Comparison Groups: Program participants and those homeowners who submitted a Foreclosure Mediation Certificate to participate in the mediation program and were determined to be eligible, but did not attend an initial meeting to begin participating in the program. Some comparisons were made between those who participated in the mediation program and all eligible homeowners.
Variables Examined: Settlement rate, outcomes, durability of agreement
Program Variables: Mediation was opt-in statewide. Mediation was free and conducted by mediators who were employees of the judicial branch.
Findings: From 2008 through 2014, 46% of eligible homeowners requested mediation and 33% attended the first mediation session. Of those who participated, 68% avoided foreclosure. This contrasts with 42% for all eligible homeowners. However, of those homeowners who requested mediation but did not attend mediation, 56% avoided mediation.
Minority status was associated with a 7.76% increase in the probability of obtaining a loan modification. Other associated factors were income (higher incomes were associated with a higher likelihood of home retention), unemployment and bankruptcy (associated with a higher probability of foreclosure), loan characteristics (larger amount owed and higher interest rate were associated with a lower likelihood of home retention)
Participation in the mediation program lengthened time from filing to closure by 255 days. If settlement was not reached in mediation, time to closure was 320 days longer than for non-participating homeowners. The length of the case was significantly associated with plaintiff behavior. When plaintiff behavior was consistent with the goals of mediation, cases took 70 days shorter than in cases in which their behavior was not. (It was not clear what it meant to be consistent with the goals of mediation.)
10% of homeowners who went through the mediation program reentered foreclosure proceedings after exiting the program.