The New Washington Foreclosure Fairness Act Equals More Time, More Counseling, and Mediation to Distressed Homeowners that might be facing Foreclosure.
As of July 2011 there will be a new law on the books in Washington State to assist homeowners that might be facing foreclosure. The Foreclosure Fairness Act was signed off by Governor Gregoire and will go into effect in July 2011. As shown by the legislative history of the bill (HB 1362) and after a direct reading of the bill it is clear the Foreclosure Fairness Act was enacted to curb the current rise in foreclosure rates as well as rising unemployment, job loss and higher adjustable loan payments that Washington homeowners are facing.
Under the new law, Washington homeowners will be given a greater opportunity to save their homes from foreclosure. However, as a homeowner facing a potential foreclosure, you still need to take appropriate and quick steps to ensure that you are afforded the new rights under the law. The new law requires that a lender send the homeowner an "initial letter" that provides a 30 day response deadline. If you DO NOT respond to the "initial letter" you will likely be given a notice of default and the foreclosure process may move forward. However, if you DO respond to the "initial letter" within the 30 days you will be given an additional 60 days to conduct a "meet and confer" with your lender before a notice of default may be issued. The "meet and confer" period is also an opportunity for the homeowner to gain additional time and obtain either a "Housing Counselor" or an attorney to assist them in the process.
Under the Act, a "Housing Counselor" is essentially someone who can assist in representing the homeowner or borrower during the "meet and confer" with the lender. The Housing Counselor must be specifically approved by U.S. HUD or WA Housing Finance Commission. If approved, the Housing Counselor can act as the borrowers representative, just like an attorney, and request a meeting with the lender to see if potential resolution to avoid foreclosure can be reached. Potential resolutions may include a loan modification, an agreement to short sale the property, a deed in lieu of foreclosure, or some other workout plan.
But perhaps the most interesting aspect to the new law is the opportunity to request mediation with the lender. At any time after receiving the "initial letter" and prior to a recording of the "notice of trustee's sale" a housing counselor or attorney may request a mediation with the lender or bank, through the Washington Department of Commerce. The mediation process provides and opportunity to have a third party mediator review the potential resolution measures available to see if the borrower and lender can avoid the foreclosure process. Though mediation is generally a voluntary and non-binding process, it is a little more forceful under the Act as it is can be mandated and is required that both parties operate in good faith. Furthermore, the Act also provides for a Per Se violation of the Consumer Protection Act RCW 19.86 should the lender or any party fail operate in good faith.
This new law should considerably change the landscape of the foreclosure process within Washington State.