The housing market in America is a mess, to say the least.  Home foreclosures continue to sweep across the country, much like that megatsunami from the movie Deep Impact (1998). Unlike the survivors in the film, however, your typical homeowner can’t simply “run to the high ground” to escape the unfathomable havoc that megatsumanis tend to wreak.

Just last night, President Obama, in his State of the Union Address, suggested that some of the nation’s largest financial institutions who took bailout money should start to pay back the American people their “deficit of trust.” Perhaps banks and mortgage lenders agreeing, as a matter of policy, to participate in mediation proceedings before moving forward with foreclosure could help begin to cover this gap.

Coincidentally, the Department of Justice issued a report last week entitled Foreclosure Mediation: Emerging Research and Evaluation Practices. Out of this report come several recommendations for federal action.  Common among most of these recommendations is the notion that the federal government needs to support regional, community efforts to help both distressed homeowners and banks mitigate losses and achieve relatively positive outcomes through mediation.

Of course, this all sounds very nice and fluffy in theory, but for this sort of sweeping incentive program to have any real consequences, banks will have to either agree come to the mediation table or, more probably, be forced to. Congress shouldn’t have to pass law requiring mandatory mediation proceedings before a home can be foreclosed on. Foreclosure is a lose-lose situation for all involved, after all. Mitigating losses should, in theory, be the sole objective of homeowners and banks involved in these unfortunate circumstances. As the federal government continues to research the effectiveness of already-established foreclosure mediation clinics, the data will hopefully bear the benefits these proceedings confer on both parties: mitigated financial losses for the banks and the avoidance of potential homelessness for the homeowners.

Getting banks to agree to come to the table is a major threshold issue that can’t be overlooked. Let’s hope that the DOJ’s continued research in this area firmly establishes that mediation does, in fact, best serve the interests of all parties involved.