A common complaint of homeowners facing foreclosure is that it's difficult to reach lenders to modify their loans. The state is trying to help by offering mediation between the parties. Created by the Legislature this year, the program doesn't officially start until January. But it's getting a trial run at York County District Court in Sanford, which has seen the state's highest rate of foreclosures.

"Prior to today, as you know, you've missed some mortgage payments, you've been served by the sheriff," says Jennifer Gordon, as she stands in the middle of a courtroom. Gordon, a home financing counselor with the York County Community Action Program, faces about 20 homeowners who are here to learn more about the mediation program.

"You're coming in saying, 'hey, before you move forward to take my house, I think I have the ability to stay here and make those payments to you and I haven't been able to find the right person in the bank's organization to help me do that yet, so now let me get in front of mediation, in front of their attorney and somebody from the bank that I can convince that I can make these payments,'" she tells the homeowners.

So far, five judges have volunteered to serve as mediators. Homeowners welcomed the idea of a third party joining in on talks with the lender. They say they were tired of having to work with the banks or mortage brokers on their own, and getting nowhere.

"I tried making arrangements with the bank to try to make partial payments," says one homeowner, who asked not to be identified. He works in construction, and when business took a tumble, he defaulted on his monthly mortgage payments of $3,600. He's offered to pay half of that each month, instead. "I said, listen I can give you this right now. And they said, no we need the whole thing, that's it, forget about it," he says.

Under the state program, the homeowner and his lawyer get a half-day of face time with the lender - who would probably participate by phone - and the lender's lawyer. Many of the homeowners had given up any hope of meeting their lender.

"You often couldn't find anyone to even talk to you," says Juliet Holmes-Smith of the Maine Volunteer Lawyers Project, which is providing free legal counsel to homeowners in foreclosure. "If your mortgage is national or maybe international and who know who owns it, to try and find someone to say is there a way for me to work this out, especially if people are hearing that there are these government programs that are supposed to help you do work-outs and they wouldn't be able to find anyone who could give them any kind of information that would help them figure out how to do that," she says.

The state law requires that lenders who want to file foreclosures in Maine have to participate in mediation - or else. "The sanctions could include dismissing the case and barring the refilng of the suit for a period of time," says Andrew Janelle, the Maine District Court judge who is overseeing the program's launch in York County.

While lenders will see less money from modified mortages, Janelle says it's still in their best interest to bargain with homeowners.
"We all know that the mortgage market is not terrific right now so they face the prospect of holding that house for a long period of time, without being able to sell it, with the possibility that the house's value is decreasing, and the lender now has to pay the insurance, the taxes, take care of the maintenance, etc."

Foreclosure mediation programs are already up and running in more than a dozen states. Janelle says Maine's bears the most resemblance to Connecticut's, where a third of foreclosure cases have gone to mediation. In about 70 percent of those, he says, some sort of settlement is reached.

That would be a dream come true for a self-employed construction contractor from Biddeford and his wife, who were at the informational session. They've been in foreclosure for a year and a half.

"The payments were like $1,200 and we just could not make the payments," she says. "It got to be too high and we kept playing back-up so we'd make double payments to get caught up and then before I knew it they just said were going under foreclosure, and here we are."

They say they will do anything to stay in their home, where they've raised three children over the last 20 years. "This is the only home that they've basically known so it's hard. It's devastating me, you know, for something that I think we can work out," she says. The couple will get a chance to work things out with the lender at their mediation session scheduled for December.

In the meantime, program coordinators are recruiting more mediators -- candidates range from professional mediators to attorneys and mortgage bankers-- to help take the program statewide next year.