This page is a summary of a larger comprehensive evaluation, which can be viewed in full here.
In 2013, the Office of the Illinois Attorney General, following a settlement with several banks over claims related to the mortgage foreclosure crisis, funded the development of foreclosure mediation programs across the state. In all, eight such programs were launched between 2013 and 2016, and received funding from the AG through August 31, 2018. Over the course of five years, these programs served nearly 5,000 homeowners, and kept 1,100 people in their homes. Nearly every homeowner who went through the mediation process reported that he/she better understood his/her options, and felt like he/she were being treated fairly and with respect - vital outcomes for people plunged into such a disempowering situation.
Under this grant, Resolution Systems Institute monitored the programs, and completed a previous evaluation in 2015. RSI has now evaluated the programs after four years, and shares this report as a summary of the most essential findings.
Background
What is Foreclosure Mediation?
The details of the process vary from program to program, but the essentials are the same. Homeowners must have a foreclosure case filed against them in order to participate in the foreclosure mediation programs. If the homeowners enter the program, their lender must participate as long as the homeowners stay in the program. The main task of the mediation program is to determine whether the homeowners can retain their home.1
The first step after entering the program is for the homeowners to put together a loan modification packet2 and submit it to their lender. Once the homeowners submit their packet, their lender determines whether any further documents are needed and requests that the homeowner submit them. Once the lender has all the documents, it determines whether the homeowners qualify for a loan modification. Then the lender is ready to communicate its decision to the homeowners. Generally, this is when mediation takes place; although in three programs, this communication occurs in pre-mediation and mediation is seldom used, though the discussion is generally the same.
The most intense work with the homeowners and lender should happen prior to mediation, with the facilitation of the document exchange. Sometimes this process continues into mediation, but that is not as effective as completing the exchange prior to mediation. This need for intensive work prior to mediation is one way in which foreclosure mediation programs differ from other types of mediation. Another difference is the constraints placed on what agreement the parties can reach. Unlike mediation for other case types, in which the parties can develop a wide range of terms on which they can agree, the possible outcomes of foreclosure mediation are limited by the homeowners' financial situation and the investor guidelines placed on lenders regarding what they can offer the homeowners.
Program Models
The programs used different methods to recruit homeowners and had different requirements for participation. Based on these differences, they can be categorized into three program types:
- One-Step Entry:3 The 1st Circuit, 6th Circuit (Champaign), 6th Circuit (Macon) , 20th Circuit (current) and 21st Circuit programs programs require the lender to schedule a pre-mediation session before filing the foreclosure. The homeowners are then instructed that they must appear for the scheduled session date, as they would be for any court hearing. Once they appear, they have entered the program.
- Multi-Step Entry: The 17th Circuit, 19th Circuit (current) and 20 th Circuit (through September 2017) programs tell the homeowners that they have the opportunity to participate in mediation. The notification of mediation also includes the two or more steps they need to take in order to do so. For purposes of this evaluation, the 20 th Circuit program is considered to be a multi-step entry program because its move to a one-step entry program type occurred only three months before the end of the evaluation period (January 2014 - December 2017).
- Hybrid: The 16th Circuit and 19th Circuit (through February 2016)4 programs instruct homeowners in their notification of mediation that they must contact the program coordinator for an initial conference. It also tells them what else they have to do in order to participate.
Who the programs help
Judges and program staff see the programs as helping all involved: homeowners, lenders, the court and the community.
Even if homeowners do not come to an agreement with their lenders to retain their homes, they have access to experts who can help them understand their situation better and explain how to navigate the foreclosure process. They also have the opportunity to hear from individuals representing their lenders about how they are making decisions. The judges also believe the programs help homeowners by humanizing the process, making it more respectful and less degrading. Finally, homeowners have the chance to avoid foreclosure, whether that means saving their home or coming to an agreement to leave it in such a way that does not result in a foreclosure on their credit report.
| Homeowners | Learn how to navigate foreclosure process, hear from the lender, participate in a more respectful and less degrading process, and possibly retain their homes or gracefully exit them |
| Lenders | Working with homeowners is more efficient, particularly the document exchange, so they spend less time trying to get the documents they need in order to review the loan modification packet |
| The court | Program keeps homeowners accountable while also taking case out of the traditional court; those that return to court are more efficient because the homeowners have been oriented to the process |
| The community | When people stay in their homes, there are fewer empty houses in the community; fewer foreclosures mean higher property values |
By helping homeowners, the foreclosure mediation program moves cases from the traditional court process and still keeps lenders and homeowners accountable. Additionally, unrepresented homeowners tend to slow down the court call because they do not know what they need to do or how to do it properly. By orienting the homeowner to the process, and helping them to complete paperwork, the programs are making the court foreclosure process more efficient.
Lenders also benefit because the process is more efficient, and they can remove foreclosures from their books more quickly. They further benefit from the help homeowners receive with the document exchange. If homeowners provide the proper documents, lenders spend less time trying to get the documents they need in order to properly review loan modification packets.
The community is helped because the programs keep families in their homes or move the process forward so the lender can sell homes more quickly, leading to fewer empty homes. Additionally, property values in the community are better maintained if there are fewer foreclosures.5
Findings & Recommendations
Program Performance
The programs helped almost 5,000 homeowners
From 2014 through 2017, the combined programs helped 4,766 homeowners facing foreclosure. This is 23% of homeowners facing foreclosure in the counties the programs served.
| Judicial Circuit | Homeowners Helped | Foreclosures Avoided | Homes Saved | Graceful Exits |
|---|---|---|---|---|
| 1st | 263 | 66 | 55 | 11 |
| 6th - Champaign | 269 | 99 | 73 | 26 |
| 6th - Macon | 116 | 28 | 19 | 9 |
| 16th | 1323 | 291 | 253 | 38 |
| 17th | 694 | 218 | 209 | 9 |
| 19th | 1016 | 202 | 184 | 18 |
| 20th | 565 | 153 | 144 | 9 |
| 21st | 520 | 214 | 163 | 51 |
| Total | 4766 | 1271 | 1100 | 171 |
The programs saved 1,100 homes
The programs helped 1,271 homeowners to avoid foreclosure, with 1,100 of those saving their homes. The saved homes represent 5% of those in facing foreclosure in the program counties.
Most homeowners left their first session with a better understanding
All programs provided most homeowners with the information they needed in order to navigate the foreclosure process. This included understanding their options and how to work with their lender. Because they gained this understanding in their first session, all homeowners who entered the programs received this benefit.
Almost every homeowner felt they were treated very fairly and with respect
Almost every homeowner who completed pre-mediation and mediation surveys said they were treated very fairly and very much with respect by the person who facilitated the process – a housing counselor, program administrator or mediator.
| Program | Could talk about all or most issues | Mediator "very much" understood | Treated with "very much" respect | Treated "very much" fairly | Process very fair |
|---|---|---|---|---|---|
| 16th | 85% | 86% | 97% | 96% | 77% |
| 17th | 88% | 89% | 93% | 94% | 72% |
| 19th | 87% | 89% | 97% | 97% | 71% |
Programs made significant changes, which made them more effective
Since the 2015 evaluation, the 16th Circuit, 19th Circuit and 20th Circuit programs all made changes to how they operated, with significant success. In the 16th Circuit program, changes led to a better program completion rate. In the 20th Circuit program, they led to a much higher participation rate. In the 19th Circuit program, multiple changes led to a significant increase in the percentage of homeowners facing foreclosure who contacted the program, the percentage who then completed the steps to enter the program and the percentage who completed the program.
The programs had efficient timelines
Homeowners moved through the programs within a few months, with a range of 77 days to 142 days, indicating that the programs are successfully addressing concerns from judges and lenders that mediation would unreasonably delay the foreclosure process.
7 of 8 programs were sustained after the grant funding ended
All of the circuits, with the exception of the 1st Circuit, successfully worked with their associated, county governments, administrative organizations and stakeholders to develop and implement a plan to become self-sustaining.
Factors that Affect Performance
Program type had the largest impact on proportion of homeowners helped
The one variable that had a significant impact on homeowner contact and participation rates was the program type. One-step entry programs (in blue below) had significantly higher rates than either the multi-step entry or hybrid programs, and hybrid programs had significantly higher rates than multi-step programs.
| 1st Circuit | |
| 6th (Champaign) | |
| 6th (Macon) | |
| 16th Circuit | |
| 17th Circuit | |
| 19th Circuit | |
| 20th Circuit | |
| 21st Circuit |
Recommendation: Make barriers to entry low
Programs that made entry as simple as possible had the highest participation rates. Courts interested in having a high participation rate should devise entry requirements that are easy to complete.
A mandatory message with a deadline improves contact rates
One-step entry and hybrid models send the homeowners a “mandatory” message telling them they must appear for their first session or contact the program. The one-step entry programs include a date and time for their appearance. Hybrid programs provide a deadline by which they should call and follow up with reminders. One-step entry and hybrid programs each exceeded multi-step programs in percentage of homeowners facing foreclosure who contacted the program.
Recommendation: Draft the Right Message
Those programs with a more directive message had the highest contact rates. Programs should use mandatory messaging and provide a deadline for contacting the program.
An orientation at first contact improves participation
Those programs in which the homeowner receives information about their options and how the program can help them had a higher percentage of homeowners who contacted them take the steps to enter it.
Recommendation: Explain the program at the first contact
To encourage a higher percentage of homeowners who contact the program to participate, make the first point of contact a person who can explain the program and how it can benefit the homeowner.
Judge referral increases participation and home retention rates
Many homeowners ignore their summons and don’t take action to participate in mediation programs. Judicial referral offered these homeowners a second chance to participate and led many of them to save their homes.
Recommendation: Offer motivated homeowners a second chance to use the program
To benefit the most homeowners, judges should order appropriate cases into the program. These should be homeowners with sufficient incomes who have demonstrated that they have previously tried to work with their lender.
Legal representation had the largest impact on program completion
Whether the homeowner had attorney representation was the single largest factor influencing whether that homeowner would complete the program. This is significant because so few homeowners had access to an attorney.
Housing counselors also affected probability of program completion
Within the 6th Circuit (Champaign) and 20th Circuit programs, homeowners were also more likely to get to the point at which they could discuss their options with their lender if they had the help of a housing counselor.
Recommendation: Partner with housing counseling and legal services
Legal services and housing counseling maximize the probability that homeowners will obtain all the benefits that courts want for homeowners: respectful treatment, understanding and a fair shot at saving their home. Courts should, whenever possible, partner with agencies that can provide these services.
Conclusion
The Attorney General-funded foreclosure mediation programs were created with one major goal in mind: to give homeowners facing foreclosure a fair chance to save their homes. The courts’ efforts to create these programs by and large came from a shared experience of homeowners coming before them not knowing how to navigate the foreclosure process and frustrated in their attempts to communicate with the lender and to arrive at the point at which they could obtain a loan modification or other foreclosure avoidance option.
To remedy this, the courts wanted to create a process in which homeowners learned more about their situation and received the assistance they needed to move forward. They also wanted a process in which homeowners were able to communicate with their lenders in a forum in which homeowners were treated fairly and with respect. They wanted to ensure that all this happened within a process that held both homeowners and lenders accountable and kept the cases moving forward in a timely manner.
Despite each having a different program model with unique strengths and areas for improvement, the programs all provided a process that accomplished these objectives. Each model had its strengths and its areas for improvement, but each performed the essential tasks well. They helped participating homeowners keep their homes. They provided a process in which homeowners were treated fairly and with respect. They helped homeowners to understand their options for their home and how to work with their lender. And they did all of this in an efficient process that was completed within just a few months.