CONCORD – More than 6,000 families in New Hampshire lost their homes to foreclosure over the past two years. While foreclosure rates have dipped, the state’s court system has started a new program aimed at helping homeowners stay put.

The Foreclosure Mediation Program will bring troubled borrowers together with lenders, in hope of helping them find ways to refinance or restructure home loans, to avoid foreclosure.

The new program is voluntary and free to users but offers no guarantees that it can save every home. Court officials announced it this week and have created a Web page with information and application forms for the program.

Foreclosure rates declined slightly in New Hampshire in recent months but only after climbing for several years, from a total of 462 in 2005 to 3,563 in 2008, according to the New Hampshire Housing Finance Authority. Foreclosures in 2009 look likely to have dropped slightly from 2008, with 3,152 through the end of November, the agency reports.

The Foreclosure Mediation Program was designed by a group of lawyers involved in mediation, representatives from the bank and mortgage industry and lawyers who represent troubled borrowers, said Karen Borgstrom, head of the court’s mediation program.

Borgstrom and a mediator who works in state probate courts, Connie Rakowsky, got the project started after seeing the need and realizing that the court’s existing mediation programs could help meet it.

The program will be funded by grants from the New Hampshire Housing Finance Authority, the New Hampshire Charitable Foundation and the Oleander Jameson Trust, and there is no cost to participating borrowers or lenders, Borgstrom said.

When it works, mediation will result in the restructuring or refinancing of a mortgage loan, Borgstrom said, enabling homeowners to keep their home, and the lender to keep collecting steady payments.

Once mediators wade into the details of individual cases, however, there is no single, simple solution to foreclosures, Borgstrom notes. Trained mediators can help lenders and borrowers try to find something that works for their particular situation and may also be able to help steer homeowners into alternative programs.

“We’re not going to micromanage the lenders,” Borgstrom said. “That’s the beauty of mediation; it’s not one size fits all. Every case is different.”

For homeowners, the downside of foreclosure – losing one’s home and any equity left in it – is painfully obvious. Foreclosures also tend to drag down property values throughout the neighborhood and sap profits from lenders.

“Foreclosure is always an expensive process. It’s not uncommon for a lender to take a loss on a foreclosure,” said Jerry Little, president of the New Hampshire Bankers Association, one of the groups involved in designing the mediation program.

“Now they don’t have to foreclose; it’s not going to lower the property values,” Borgstrom said. “It’s a win-win, if they can do it.”

Lenders generally prefer to work with borrowers to avoid foreclosure, and the local banks generally will do so on their own, Little said. When those efforts fail, mediation offers another chance to try again, with a fresh, neutral view.

All lenders, from a small local bank to the colossal mortgage holding companies, are obliged in the end to try to do what’s best for their own bottom line, Little notes.

“It’s another tool that people can use to try to find that least-cost resolution solution,” Little said.

Homeowners should generally try talking directly with their lenders as soon as they see trouble, Little said. Local lenders will usually try to work with borrowers and adjust the terms of a loan if possible.

“It can be as simple as refinancing, or as complex as lopping a chunk of principal off the note and holding it out as a soft second,” Little said, referring to a type of second mortgage that doesn’t come due for payment until after the first loan has been paid off.

Lenders see the mediation as a sort of last-stop effort, after direct talks between the debtor and lender have failed, Little said.

“This program is designed for folks who have been through a process and a discussion already, and it’s clear that foreclosure is about to ensue,” Little said.

“There’s a lot of reasons why sometimes a direct conversation between lenders and borrowers wouldn’t work,” Borgstrom said.

Little said he expects that most of the cases that go to mediation will already have been through the federal Making Homes Affordable program, which was also designed to encourage lenders to restructure loans to avert foreclosure.

The program can only work for people who have some ability to pay back a loan. Borrowers who swam too far into the sea of debt may find themselves beyond rescue.

“There are some people whom we are not going to be able to help,” Borgstrom said. “You don’t want people to refinance or get into some other agreement and still not be able to pay.”

“The quality of the underwriting that went into many of those notes really almost doomed them from the start. For many of those folks, there is simply not much that can be done,” Little said.

Andrew Wolfe can be reached at 594-6410 or awolfe@nashuatelegraph.com.

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