Rep. Betty Sutton just introduced a warm-and-fuzzy-sounding piece of legislation. It’s called the Foreclosure Mandatory Mediation Act of 2010:
Rep. Betty Sutton (D-OH13) joined Ohio Reps. Marcia L. Fudge (D-OH11) and Mary Jo Kilroy (D-OH15), as well as Reps. Maxine Waters (D-CA) and Kendrick Meek (D-FL) to introduce H.R. 4635–a measure to combat foreclosures. Ohio has been particularly impacted by the foreclosure crisis and projections indicate no signs of change. In Ohio’s 13th Congressional District alone, 17,555 homes are projected to be foreclosed upon over the next four years. This legislation will require lenders of Federal loans or guarantees to enter into mediation with homeowners prior to placing the property in foreclosure or a sheriff’s sale.
Notwithstanding any other provision of law, before a qualified mortgagee may initiate a foreclosure proceeding or a sheriff sale, the qualified mortgagee shall conduct, consistent with any applicable State or local requirements, a one-time mediation with the affected mortgagor and a housing counseling agency, at the expense of the qualified mortgagee.
For purposes of this section the term ‘housing counseling agency’ means a housing counseling agency certified by the Secretary under section 106(e) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(e)); or a neighborhood housing services program established by the Neighborhood Reinvestment Corporation under section 606 of the Housing and Community Development Amendments of 1978 (42 U.S.C. 8105);
The parties are forced into mediation (even if it’s a slam-dunk case of delinquency by the borrower), and look who foots the entire bill for the mediator’s fees: the lender trying to foreclose on the delinquent borrower. When the government keeps forcing a company to incur new costs, the company must eventually pass on those costs to its customers. Otherwise the company will go bankrupt.
If this law passes, it will end up costing you more to get a mortgage. Care to guess which legislators will then wail and gnash their teeth about “predatory lenders screwing the poor” and “fat cat bankers jacking up fees” when those inevitable effects occur? Now, this is par for the course among politicians who have no clue how a free market works. They think the solution to every government-imposed problem is more government regulation and spending. What’s unusual is that this isn’t the worst part of the bill.