The latest changes to the federal government’s program to rescue homeowners from foreclosure is an acknowledgment that the original program wasn’t working and that the foreclosure crisis is not going away.

On Friday, President Obama authorized the use of some of the $75 billion set aside in the Troubled Asset Relief Program to back federal loans for people to refinance or modify existing loans that would make their payments affordable.

The changes would help two groups of people. The first are those who are having trouble paying their mortgages because they lost their jobs and not because they over-extended during the cheap-money housing boom. The second are those who owe more than the value of their homes because of declining values.

Both programs are geared toward increasing the number of people who have been able to modify their loans under the federal program. There are an estimated 10 million to 12 million foreclosures expected in the next three years, and the federal program hopes to prevent 3 million to 4 million of them. But so far it hasn’t even been close to the target. About 1 million have signed up for help, and only 170,000 have successfully modified their loans.

There could be more success if a new Maine law was implemented in more places. Beginning in January, mediation is a required step in every foreclosure proceeding. You wouldn’t think that you would need a law that requires creditors to sit down and talk with the person who owes them money before starting an expensive legal process, but because of the way a few national banks service so many loans, it is difficult to get a decision-maker’s attention.

Mandatory mediation is a good fit with the federal programs that give creditors more security while making homeowners’ monthly payments more realistic.

This recession began with a collapse of the housing market and it will take a recovery of property values to bring the Main Street economy back. The latest Obama plan is a good step, but it will probably take more to really address the problem. A mandatory mediation program like Maine’s would be another.


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