How to Prevent Foreclosure, Ohio Style

Ohio Attorney General Marc Dann has one of the best plans for reducing foreclosures that I've seen yet. It targets homeowners rather than lenders, it costs a known and not particularly large amount of money, and it has the potential to be extremely effective. Luke Mullins has the Q&A, in which Dann says that he thinks he can prevent "the vast majority" of foreclosures. How?

The state has enlisted more than 1,300 lawyers--from state agencies and the private sector--to help struggling homeowners avoid foreclosure by reaching agreements with lenders or, if need be, through litigation.

A good lawyer is a friend indeed to a homeowner facing foreclosure. Dann has already persuaded Ohio's 10th District Court of Appeals that any bank foreclosing needs to have physical possession of the mortgage note, which often is not the case these days. And in general if the foreclosing bank knows it will face expert legal opposition, it's going to be that much more likely to negotiate an alternative.

If this Ohio scheme proves effective, there's no reason why it shouldn't be rolled out nationwide. And the great thing about it is that even the lenders could end up winning in the end. Foreclosing is the lazy way out for a mortgage servicer: swamped by delinquencies, lenders know how to foreclose and have a tendency to do so even if there are better alternatives which take more time and more individualized attention. If the states staff up and make foreclosure more difficult, maybe the servicers will staff up too and make work-outs easier.