New Washington Foreclosure Fairness Act: House Bill 1362

The New Foreclosure Law Effective July 13, 2011

Below is our outline of the new foreclosure law - it may be a bit scattered and requires a fairly in depth background in foreclosure law to understand some of the issues. Nevertheless, it may be something some of you find value in.

I. Requirements for Trustee’s Sale

a. Deed of Trust contains a power of sale
b. Property isn’t used principally for agricultural purposes
c. Borrower has defaulted
d. No currently pending action by bank to take the house because of borrower’s default
e. DOT has been recorded
f. Trustee present in WA before the date of the NOTS through the date of the sale
g. Trustee has proof the bank owns the note before NOTS is recorded, transmitted, or served
i. Declaration by the bank stating that it holds the note is sufficient.
h. Bank sends borrower aNODat least 30 days before notice of sale is recorded.

II. Requirements for Notice of Default

a. Issuance

i. 30 days after bank’s initial contact with borrower was initiated (33 days after date on letter) or 30 days after satisfaction of contact requirements with no response from the borrower OR
ii. 90 days after initial contact if borrower responds

Weitz - if you respond for intitial notice for mediation, you can have at least 90 days more in the home if the modification or other alternatives do not work.

b. Notice to Borrower

i. Sent to borrower’s last known address by first-class mail, registered or certified, with return receipt
ii. Copy posted in a conspicuous place on premises or borrower personally served

c. Contains itemized account of total amount necessary to reinstate DOT

d. Includes declaration from bank that it contacted borrower, tried to contact borrower with due diligence, or borrower has surrendered property. (Foreclosure Loss Mitigation Form)

III. Bank’s Obligation to Make Initial Contact

a. Due diligence contact requirements

i. First-class letter to borrower
1. Must contain certain information
2. Response: Borrower has 30 days to respond after initial contact (33 days after date letter sent). If borrower does not respond, NOD may be issued.

ii. Follow-up phone call to borrower

1. At least 3 times at different hours on different days
2. Automated dialing system ok if call is connected to a live rep when answered
iii. Certified letter (Only f borrower doesn’t respond within 14 days after the phone call requirements are satisfied)

b. Bank can proceed with NOD without contacting if borrower has filed for bankruptcy or surrendered the property

Weitz - note that a BK could take away the mediation requirement(s).

c. Contact requirements only apply to DOTs recorded against owner-occupied residentialreal property

IV. Role of Housing Counselor/Attorney

a. Duty to act in good faith to reach a resolution within 90 days after initial contact

b. Borrower can seek assistance from a housing counselor or attorney at any time

c. Good Faith Duty to Assist Borrowers
i. Prepare borrower for meetings with bank
ii. Advise borrower about what documents are needed for a resolution
iii. Inform borrower about foreclosure alternatives
iv. Provide advice and guidance as necessary
 
d. Mediation Referral: Counselor/attorney sends notice to borrower and HUD that mediation is appropriate

i. Requirements
1. Mediation is appropriate under the circumstances AND
2. Notice of Sale has not been recorded

ii. Mediation referral doesn’t preclude trustee from issuing NOD

e. Not liable for civil damages, unless gross negligence or wanton misconduct

V. Mediation

a. Timeline Requirements
i. If borrower requests a meeting, the bank must schedule it before NOD issued
ii. Referring counselor/attorney sends notice to borrower and HUD that mediation is appropriate
iii. Within 10 days of receipt of notice of mediation referral, HUD must

1. Sends notice to bank, borrower, referring attorney/counselor, and trustee that parties have been referred to mediation

2. Select a mediator and notify parties of the selection
iv. Mediator must send written notice of time, date, and location of the mediation session to the borrower, bank, and HUD at least 15 days before it is scheduled
v. Mediator must convene the session in the borrower’s county within 45 days after receiving the referral from HUD (parties may agree to extend this time limit)
vi. Bank and borrower must try to reach a resolution within 90 days after initial contact is sent and NOD issued.

b. Content of Discussion (issues mediator must require parties to consider)

i. Assessment of borrower’s financial ability to modify or restructure the loan and a discussion of options.
ii. Borrower’s current and future economic circumstances
iii. Net present value of receiving payments pursuant to a modified mortgage loan as compared to the anticipated net recovery after foreclosure
iv. Any affordable loan modification calculation and net present value calculation when required under any federal mortgage relief program

c. Attendance of Parties: In person, unless waived by the borrower

i. Person authorized to modify or agree to alternative foreclosure resolution may participate by phone or video as long as a bank representative is there in person
d. Any modification offered by borrower’s representative is subject to borrower’s approval

VI. Duties of the Parties (required for good faith mediation)

a. Homeowner’s Duties

i. Provide bank with documentation at least 10 days before mediation or pursuant to mediator’s instructions
1. Borrower’s current and future income, debts and obligations, and past 2 year’s tax returns

b. Bank’s Duties

i. Provide borrower with documentation at least 10 days before mediation or pursuant to mediator’s instructions:
1. Statement of loan balance (as of 1st day of the month of the mediation)
2. Copies of note and DOT
3. Proof bank owns the note (bank declaration is sufficient)
4. Itemized estimate of any arrearages
5. Payment history and schedule
6. Data relevant to net present value analysis
7. Explanation of any denials of foreclosure alternatives
8. Most recent available appraisal or BPO relied on by bank
9. Pooling and servicing agreement, if bank claims it prevents a modification
 
c. Other Ways Parties May Violate Duty to Mediate in Good Faith

i. Failure to timely participate in mediation without good cause
ii. Failure to pay mediation fees as required
iii. Failure to designate representatives with adequate authority to reach a resolution
iv. Bank’s request that borrower waive future claims in connection with the DOT as a condition of agreeing to a modification

VII. Mediator

a. Mediator must send certification to HUD and trustee within 7 days after session of
i. Date, time, and location of mediation session
ii. Names of persons who attended the mediation
iii. Whether resolution was reached
iv. Whether parties participated in good faith
v. Description and result of the net present value test used

b. Trustee cannot record the NOS before receipt of certification
i. If he does not receive it, he can record it 11 days after the date it was due. However, if the mediator subsequently issues a certification alleging that the bank violated its good faith duty, the trustee can’t proceed with the sale

c. Certification that Parties acted in Good Faith
i. Bank can proceed with foreclosure if no agreement is reached
d. Certification that Bank Failed to Act in Good Faith
i. Constitutes a defense to the nonjudicial foreclosure action
ii. Not a defense to a judicial foreclosure action or a future nonjudicial foreclosure action if a loan modification is agreed on and the borrower subsequently defaults

e. Certification that net present value of the modified loan exceeds the net present value of the anticipated net recovery at foreclosure
i. Constitutes a basis for borrower to enjoin the foreclosure

f. Certification that failed to act in good faith

i. Authorizes the bank to proceed with foreclosure

g. Fees: Mediator can charge reasonable fees (can’t exceed $400 for a 1-3 hour session unless waived or parties agree otherwise)
i. Mediator must provide an estimate before the mediation
ii. Fee must be equally divided between bank and borrower
iii. Bank and borrower must tender their half 7 days before mediation

h. Mediator qualifications
i. Attorneys, housing counseling agencies, retired WA judges
ii. HUD may establish a required training program for mediator approval

VIII. Foreclosure Fairness Account

a. Banks must pay HUD $250 for deposit into the foreclosure fairness account for every owner-occupied residential real property for which they issue an NOD.

For more information on your rights in Foreclosure, Short Sale or Bankruptcy, consider contacting a Kirkland Foreclosure Attorney.

Our Firm:

Weitz Law Firm, PLLC
520 Kirkland Ave, ste 103
Kirkland, WA 98033
(425) 889-9300

weitzlawfirm.com