A new report released February 6 by the National Consumer Law Center suggests that one effective solution to fixing the broken housing market may already be out there. Foreclosure mediation programs in some states are preventing thousands of foreclosures and saving billions of investor and taxpayer dollars.

Many existing state mediation programs are both inexpensive and effective at reducing costs and foreclosure rates. In most cases, mediation fees are negligible, but they rarely exceed $1,000, compared with typical losses of $145,000 to investors when a house is foreclosed on, according to the report. The state of New York conducts roughly 80,000 foreclosure conferences per year, and about one-third of Staten Island homeowners who have participated received loan modifications. Lenders who do not participate in the conferences are subject to penalties, including being barred from foreclosing on a homeowner.

Homeowners also typically have access to mortgage counselors through the conference process, and two-thirds of those who work with a counselor are able to maintain their re-negotiated mortgage. This compares to only 8 percent who can sustain the renegotiated loans without consultation.

President Barack Obama recently announced a plan to pour $5 billion to $10 billion into programs designed to help consumers renegotiate their mortgages. Homeowners could renegotiate to record low interest rates, saving roughly $3,000 per year on average.

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