Friday, March 18, 2011

Washington State Legislature Moves to Extend Foreclosure Timelines and Require Face To Face Meeting With Homeowner Before Initiating Foreclosure

The State is putting together legislation to require lenders to offer face to face discussions with distressed homeowners before initiating foreclosure. This new legislation is called the "Foreclosure Fairness Act". In a move to protect distressed homeowners from unnecessary foreclosures, the State of Washington is working on HB1362 . The legislature states that Washington's non-judicial foreclosure process does not have a mechanism for homeowners to access a neutral third party to assist them in a fair and timely way for a work out or mediation regarding their mortgage delinquency. The legislation intends to:

  • Encourage homeowners to utilize the skills of housing counselors;

  • Create a framework for homeowners and lenders to communication with each other;

  • Provide a process for mediation when recommended.

The 3 main parts of the new legislation are:

  • Opportunity for borrower to request a "face to face" meeting with lender;

  • Opportunity for mediation with a neutral third party;

  • $250 filing fee for Lender's Notice of Default.

One important change for the homeowner is that if the homeowner responds to the initial contact by the lender within 30 days, the bill provides the homeowner an additional 60 days to attempt a work out solution with the lender, before a Notice of Default can be filed. During this period the homeowner can request a "face to face meeting" with the lender and at this "meeting", a representative of the lender must be in person. TIP: I would definitely be recording this conversation!

"The subsequent meeting scheduled to assess the borrower's financial ability to repay the debt and discuss options to avoid foreclosure must be in person, unless the requirement to meet in person is waived in writing by the borrower or the borrower's representative"
It is important to note that the borrower must contact an approved housing counselor or attorney to protect their right to mediation, as mediation can only be requested by an approved housing counselor or attorney.
This must be done before issuance of a Notice of Trustee Sale. Once a referral to mediation has been made, a mediation session must occur within 45 days, or can be extended by agreement of all parties. This mediation could be a very powerful and effective tool for homeowners who are having difficulty with loan modification efforts with their lender. WHY? Because at this mediation session the lender must "lay all their cards on the table". Information that may have been withheld from the borrower will be disclosed including:
"A Net Present Value (NPV) of receiving payments pursuant to a modified mortgage loan as compared to the anticipated net recovery following foreclosure."

Sound confusing? You bet. This is a formulated spreadsheet that the lender uses with undisclosed numbers to determine if they will come out ahead better through modification or foreclosure! Also, the lender will not disclose this information to you if you are attempting to modify your loan yourself. Additional documentation must also be provided, such as:

  • An accurate statement containing the balance of the loan;

  • Copies of the Note and Deed of Trust;

  • Proof the Lender is the owner of the Note;

  • An itemized statement of arrearages;

  • An itemized list of fees and charges;

  • Payment history for last 12 month or since default, whichever is longer;

  • All borrower-related and mortgage-related input data used in any net present value analysis;

  • An explanation regarding any denial for a loan modification or alternative;

  • The most recently available appraisal or broker price opinion;

  • The excerpt of the pooling and servicing agreement AND documentation or a statement detailing the efforts of the beneficiary to obtain a waiver of the pooling and servicing agreement.
The last item is of particular interest. Keep in mind most lenders no longer "own" your mortgage. They are only collecting (servicing) your monthly payment on behalf of the owner of your mortgage, usually a security instrument owned by a pool of investors.

This item requires the lender to disclose any efforts that have made with the investors to try to get them to negotiate a modification on your mortgage, unless there is already language in the agreement that prohibits modifications.

There are many other condition and time lines contained in the bill and we highly encourage homeowners that are suffering financial hardship to seek professional guidance through these issues.

This new bill will result in the State having to set up programs for homeowners that are not now in place. This will include forms, websites, lists of approved housing counselors, attorneys and mediators for the homeowners to access, along with training for all those involved. There is also a $400 cap on the mediation session up to 3 hours. This charge is split 50/50 between the homeowner and lender and must be paid 7 days before mediation.

TIP: Mediation is only for owner-occupied residential properties. Do not abandon your home and mortgage if you wish to have access to mediated loan modifications.
It may be the best $200.00 a distressed homeowner can spend!
Although this legislation is a step in the right direction, the success of the program will be dependant on getting the word out to consumers. I didn't see anywhere in their program regarding any PR or advertising costs.

Also, as is with all rules, there are exceptions. Lenders who file less than 250 foreclosures per year are not held to the mediation rules. If the consumer is not opening their mail from the mortgage lender because "they know it's just another late notice", they may not see the information included that explains these new rules and their rights to request a "face to face" meetings and mediation possibilities.

Second, I feel that the consumer is in need of a "Home Owner's Bill of Rights".

How is it that someone who makes timely mortgage payments for 10-20 years and suffers a temporary financial hardship or loss of income can lose their home to foreclosure in 120 days? There is something fundamentally wrong with this scenario. We are well versed on foreclosures, short sales and loan modifications. If you or anyone you know need some help or direction, please call us. We are here to help and there is never any charge or Fee. Please use us as a resource to help during these difficult times.
AND never pay anyone for a loan modification - If someone wants to charge you a fee up front - run in the opposite direction because it's a scam.

Disclosure: This bill has not been finalized and is subject to change. Nothing in this article should be construed as legal advice and homeowners are always encouraged to consult with an attorney for legal interpretation of the bill, as there are many other requirements and timelines that must be met that are not covered in this article. The full House Bill 1362 can be read here: HB1362


Unknown said...

This bill is good, with one exception. The exception is the proof of ownership, which unfortunately is already law in this state.

RCW 61.24.030(7)(a) needs to be stricken from the books, as it allows the "lender" to sign a document to provide ownership. We have already seen these documents signed by the infamous robo-signer, Margaret Dalton. And we have already caught these institutions committing perjury with impunity. There has been no prosecution. I'm not sure why we would have a law on the books that doesn't provide enough deterence to dissuade the criminal. I have testified to our Washington State Senate that the penalty should be revocation of state charter. Let these assholes break the law and the penalty would be "bye bye Bank of America in the state of Washington." Now, that would be a penalty I could wrap my head around. Perjury? Just another day of doing business as a TBTF.

We are striving for proof of ownership to be "clear, unbroken chain of title." That would be the only acceptable proof of ownership. After all, a homeowner wishing to sell his property has to sign a Warranty Deed claiming that, to his knowledge, the title is not encumbered by a lien or any other encumbrances. The title officer provides Reconveyance only when a clear chain of title can be assertained. Why shouldn't the banks have to provide the same warranty to provide proof of ownership???

Unknown said...

Also, one more thing....we have title officers being instructed BY THE BANKS to submit a "Lost Note Affidavit" concurrently with the filing of "Deed of Reconveyance." AS A REGULAR COURSE OF DOING BUSINESS!!!

What we homeowners believe, is this is because these criminal financial institutions shredded every note because the evidence of the crime would be eliminated should anyone subpeona the documents. We also believe these notes were sold into many more times than just once. We believe the banks have sold the same note into many different tranches. And, again, if our theories are correct, the shredding of each note would eliminate the evidence.

Why else would the banks INSTRUCT the title officers to file this LOST NOTE AFFIDAVIT ON EVERY SINGLE RECONVEYANCE?????

Real estate at this stage of the game is buyer beware. Or at the very least, I would put an offer on a property barring that prior to sale, a Quiet Title could be completed.

Julie Lyda said...


You are absolutely right. The legislature should add in the Bill to require proof of chain of title. Sounds like a simple solution to me and I will email our representatives to add this language to the bill.

michaeloco said...

This is a good rule. Foreclosure is a serious business that involves a big amount of money that is why face-to-face negotiation is really important. irs form 2290

Unknown said...

I support this bill. I believe homeowners are also entitled on being interviewed prior to foreclosure to properly evaluate the reasons why they were not able to pay for the mortgages. A business accountant adelaide friend of mine considers this action as amicable for both parties.

andieclark said...

At least they now have a new way of approaching the home owners. We all hope they foreclosure issues would be settled. Otherwise, they should get loan modification lawyers to help them out.