Four HLS students in the Negotiation and Mediation Clinical Program have just finished an ambitious, semester-long project with Kenneth R. Feinberg, Special Master of the 9/11 Fund and a leading expert in alternative dispute resolution, to help staunch the widespread mortgage foreclosure crisis by bringing banks and homeowners together to refashion mortgage agreements.

The students and Feinberg created a multi-tiered plan that includes outreach to banks, homeowners, and state attorneys general, urging the use of a mediation model created as part of the project. The plan includes proposals for training mediators who can meet with lenders and homeowners to negotiate restructured mortgages so people can remain in their homes.

The students have reached out to attorneys general of the 50 states and received interested responses from the AGs of Massachusetts and Maryland, and will be meeting with them soon to discuss the system. They’ve also contacted half a dozen major banks across the U.S., describing the proposal. Feinberg is hopeful that all stakeholders will recognize the benefit of the plan and its non-litigation model for resolving problems. “My grandest hope is that everyone says, ‘We want to use this’ in every state,” says Feinberg, but he adds that he’d be glad to get even one lender and one AG on board.

The project began last September, when Feinberg – who has often lectured to negotiation classes at HLS at the invitation of Robert Bordone ’97, assistant clinical professor of law and Director of the Negotiation and Mediation Clinical Program – expressed interest in working with students to address the sub prime mortgage crisis. As Special Master of the September 11 Victim Compensation Fund, Feinberg was in charge of distributing more than $7 billion of government funds for death and injury claims related to the terrorist attacks. He also oversaw distribution of $7 million to victims of the Virginia Tech slayings. His Washington, D.C. firm, The Feinberg Group, is the foremost firm in the nation specializing in the negotiated resolution of complex legal disputes.

Feinberg and Bordone agreed that the current real estate market, with the high risk of default for mortgage holders, requires an innovative approach—namely, a tailor-made dispute management system that would bring stakeholders together to avoid court. During the semester, the four students on the project — Erin Walczewski ’10, Erin Katzen ’10, Nevin Kamath ’09, and Sam Prevatt ’10 – were simultaneously enrolled in Bordone’s seminar, Dispute Systems Design. Their first step was to research the US mortgage crisis and analyze their findings. Next, they conducted extensive interviews of representatives of the various interested groups. Their final product included a sophisticated analysis and comprehensive report of the current US mortgage crisis as well as a corresponding dispute management structure, and a summary of best practices for a future dispute management model. Then they reached out to the interested parties to explain the plan.

The issue is an ideal one for mediation, because neither side benefits from foreclosure, Bordone and Feinberg say. “The lender is not in the real estate business, and the borrower doesn’t want to leave home,” says Feinberg. “So our proposal is designed for more efficient and effective outreach, for getting the lender and borrower in the same room, but also using mediators who would then create a mediation procedure based on substantive criteria agreed on in advance with lenders.”

Walczewski, who became interested in ADR after taking Bordone’s Negotiation Workshop last spring, asked to be assigned to the foreclosure project when she heard that Feinberg, “a legend of sorts in the field of negotiation, mediation, and ADR,” as she puts it, was involved. “I knew about his work as the Special Master for the 9/11 Victim Compensation Fund and other high-level projects and was really eager to work for someone who has had such an impact on dispute resolution,” she says.

But Walczewski knew little about the foreclosure crisis before the project began. “This was my first exposure to any work in the mortgage crisis, so it was baptism by fire,” she says. “Our team spent a lot of time at the beginning of the semester reading as much as we could about the issues and enlisting the phenomenal research help of June Casey from the HLS library.” Because the mortgage foreclosure crisis affects millions of people, they examined other large-scale challenges to find examples of system design, including the insurance settlements after Hurricane Katrina.

She says working with Feinberg was especially valuable. “Ken is a big thinker and a big ideas person, and is very energizing to be around.”

But “the volatility of the financial world threw a new wrench into everything we were working on,” Walczewski says. “It seemed that every morning in the paper there was a new twist as another institution went bankrupt or another bank was acquired by someone else. The whole project would have been a lot easier if we could have broadcast a message to the financial market that said, ‘Hey, could you guys just pause all the collapsing and all the meltdowns for a while? We’re trying to work on a clinical here.’”

She adds: “We consulted a lot with Bob and with Ken to ensure that our project still made sense considering the changed circumstances. If anything, the financial crisis just increased the need for more solutions, so we were happy to be able to offer one for at least part of the problem.” The positive response from the attorneys general of Massachusetts and Maryland are encouraging, she says. “It’s very gratifying to see our work turn into real-world results.”

Students in the Negotiation and Mediation Clinic are currently involved in other ambitious projects, including one with the National Resources Defense Counsel’s Beijing office, designing a three-day training curriculum for elite environmental attorneys in China. The project, which the students will present when they travel to Beijing during spring break, includes consensus-building tools to help attorneys deal with Chinese officials. It is particularly complicated because of government constraints on discussion in China and the vast cultural differences between the East and West, Bordone says.