We now also offer representation in foreclosure “mediation”. If you receive a written notice from your lender regarding foreclosure, you need to make sure your legal rights are protected by requesting timely conferences and mediations in attempt to avoid or delay foreclosure. New law in WA requires large lenders to participate in good faith mediations with borrowers. We can counsel you through the process and help negotiate with the lender.
Washington Foreclosure Fairness Act RCW 61.24
The state of Washington has adopted a new law to try to help stem the rising tide of housing foreclosures in our state. In 2007 some 7,000 home foreclosures occurred in the state of Washington. In 2011, over 40,000 homes were in foreclosure and no end is in sight yet. This housing crisis adversely affects not only the homeowners and lenders, but the value of other homes in the area. When suffering financial difficulty such as loss of a job, many homeowners have reported significant frustration and difficulty in trying to get their lenders to work with them to restructure mortgages to enable the homeowner to meet their financial obligations without necessity of foreclosure.
The Act became effective July 22, 2011, and was first amended effective December 11, 2011 to work out some of the “kinks” in the original law. An additional amendment that will adjust some of the time periods and other procedures of the Act will become effective June 7, 2012. The Act is intended to require large lenders to attempt to resolve the debtor’s financial obligation defaults, without foreclosure if possible.
The Act requires large lenders to engage in good faith mediation with the homeowner. A person “with authority” to modify loans must be present for the lender at mediation. The mediation is meant to facilitate immediate, reasonable loan modifications of existing mortgages to enable homeowners to stay in their homes. If, due to the situation of the borrower this is not possible, at mediation the borrower and lender may also explore other arrangements to enable homeowners to exist with dignity. These arrangement might include for instance, short sale, “cash for key” or “deed in lieu of foreclosure”.
FREQUENTLY ASKED QUESTIONS
1. Who is eligible for relief under this new Act (RCW 61.24)?
In order to initiate rights under the Act, a person must:
• Occupy the residence being foreclosed as their primary residence
• Be an owner of the property and borrower on the “deed of trust” (mortgage) loan
• Timely comply with the requirements to initiate mediation as stated in the “Notice of Trustee Sale” provided to the debtor following mortgage default, and
• Have a “housing counselor” or Washington attorney request the mediation by certification to the Washington Department of Commerce that the homeowner is eligible.
• In addition, the Act does not require a lender to participate in Fair Foreclosure Act mediation if the lender has conducted less than 250 foreclosures in the last year and has been exempted by the Washington Department of Commerce as a result. A list of exempt lenders may be downloaded from the Commerce website. If a lender is not on this Department of commerce “exempt” list, the lender must comply with the Act.
Details, including a toll-free telephone help line, are now required to be included in the documents the defaulting homeowner receives in the “Notice of Default” from the lender. IF YOU RECEIVE ANY WRITTEN NOTICE FROM YOUR LENDER REGARDING FORECLOSURE YOU NEED TO IMMEDIATELY CONTACT THE TOLL-FREE HELP LINE FOR FURTHER INSTRUCTIONS.
2. Who decides if I can get my mortgage loan modified, or obtain other foreclosure relief, at mediation?
The lender decides. The purpose of mediation is to enable the borrower to have a sit down meeting with a representative of the lender who has authority to modify the loan, on the spot. This helps the borrower “cut red tape” and actually have the opportunity to persuade the lender that the borrower can, with some modification of the terms of the mortgage debt, resume regular mortgage payments and remain in the home.
3. Why would the lender agree to modify my loan?
What’s in it for the lender? Lenders are businesses and as such must in general make decisions based on their “bottom line”. Foreclosure may be in the lender’s best interest as the lender sees it. On the other hand, there are some situations in which the lender may at mediation, decide that the lender’s best interest is to modify the loan or take other steps that avoid foreclosure. The Act requires that both parties provide the relevant information (such as current income, bank records, wage stubs etc. for the borrower) and that the data be analyzed using an established method of determining the “Net Present Value” of the property to the lender. “Net Present Value” [NPV] gives the parties and their mediator the opportunity to compare “apples to apples” by calculating the estimated dollar recovery amount to the lender of foreclosure vs. the dollar amount the lender would recover if the loan were modified and the homeowner allowed to keep the property. Using the algorithms provided by the federal government FDIC and HAMP (Home Affordable Modification Program), the parties and mediator can easily compare the “foreclose or not” scenarios. If it makes better financial sense to the lender not to foreclose, but rather, work with the debtor, the PNV calculations may well result in the lender agreeing to modify.
4. What is to make the lender act in good faith in modification mediations?
The mediation may or may not result in an agreement to modify the mortgage loan. The lender is not obligated to modify the mortgage even if the PNV comparisons show that the lender would be in a better financial position over the long run to modify the loan rather than foreclose. However, the Act provides some real legal pressure on the lender to mediate in good faith: following the mediation, the mediator must file a “good faith certificate” with the Washington Department of Commerce”. The mediator must also file the FDIC and HAMP calculations with the certification. If the calculations show that the lender would have benefited financially from the modification, rather than by foreclosure, or if the mediator gives the lender a “bad faith certification” the borrower may be able to get a court order restraining the sale and/or bring a Consumer Protection Act claim in court against the lender. In addition, the foreclosure Trustee may refuse to go through with the foreclosure sale if a “bad faith certification” is filed by the mediator with the Department of Commerce.
5. Who gets to choose the mediator and how can I be sure the mediator is objective and competent?
The Act requires the Department of Commerce to train and assign mediators when a “housing counselor” or attorney timely requests mediation for a borrower. The Department conducted its first attorney/mediator training session in July, 2011 and will continue to conduct such training and certification under the Act. Neither the lender nor the borrower can select or have any influence on the choice of mediator by the Department.
6. How much does it cost to mediate?
A fee of $400 is collected, $200 from the lender and $200 from the borrower, by the Department of Commerce before scheduling mediation. In addition, a borrower may bring an attorney, housing counselor or other advisor to mediation, at their own expense.
7. What if I have a Fannie Mae or Freddie Mae mortgage?
The federal Home Affordable Modification Program [HAMP], announced by President Obama in March, 2009, may afford relief. Under HAMP a homeowner make be eligible for a HAMP modification (1) if Fannie Mae or Freddie Mac owns the mortgage or (2) the mortgage servicer has signed a “Servicer Participation Agreement” [SPI] with Fannie Mae as fiscal agent for the U.S. Treasury. SPI agreement require the servicer to evaluate all borrowers who are subject to foreclosure, using HAMP calculations and to grant modifications to all homeowners who pass the HAMP/NPV test. The federal HAMP program hoped to modify up to 12 million mortgages by the end of 2012. However, as of March 2010, a mere 230,000 defaulted loans had been modified. Advocates are increasingly turning to the courts to interpret and apply HAMP to “give it teeth”. Servicer failure to comply with HAMP requirements has provided successful defense to some foreclosures in many states. A borrower may raise non-compliance of the servicer with HAMP requirements during mediation as evidence of “bad faith” by the lender and thereafter use a mediator’s bad faith certificate” to dismiss or delay the foreclosure by court order.
8. May I force a Fair Foreclosure Act mediation if the house is in my name after the divorce, but my ex-spouse’s name is still on the mortgage loan?
Yes. The ex-spouse may be required to attend unless the documentation you produce, including Decree of Dissolution and/or Quit Claim Deed are deemed sufficient by the lender to excuse the attendance and cooperation of your ex-spouse.