New law gives foreclosure help

Mediation: Homeowners will get up to 60 days to work out agreement

April 15, 2011 

Help is on the way for some Washington homeowners facing foreclosure under a bill Gov. Chris Gregoire signed into law Thursday.

House Bill 1362, which goes into effect in July, will give indebted homeowners more time, more counseling and third-party mediation with their lenders before they lose their homes. The move makes Washington the third nonjudicial foreclosure state to pass a mediation law.

“I’m very proud,” said Rep. Tina Orwall, a Des Moines Democrat and the measure’s primary sponsor. “It puts us out leading in the nation to help homeowners through this crisis.”

The final bill was the result of negotiations between banks and anti-poverty advocates, said state Housing Finance Commission Director Kim Herman. It’s designed to give lenders and homeowners more opportunities to reach agreements that keep residents in their homes.

Under the new law, homeowners who fall behind on their mortgage payments will have 30 days from the time that they get an initial letter from their lenders to respond and ask for a period of time called “meet and confer.” If they do, they’ll get 60 days to talk with their lender and counselors before the lender can issue a notice of default, followed by a notice of trustee sale.

Any time between the first letter and the notice of trustee sale, a housing counselor or a lawyer can refer a homeowner to a new third-party mediation process. If they get that referral, borrowers will be able to have in-person negotiations with their lenders and a third-party mediator who will make sure both parties “act in good faith,” meaning they bring the right documents and attend when they’re supposed to.

The new law lengthens the amount of time that homeowners who respond to their lender’s letter will have before they can lose their houses.

Bruce Neas, an attorney with Columbia Legal Services and chief negotiator for homeowners during the revision process for HB 1362, said that strengthens the meet and confer process considerably.

“It’s very toothless as it is,” Neas said.

Neas also said the new law can benefit homeowners who are already going through foreclosure. As long as borrowers’ houses have not been sold by the time the law goes into effect, they’ll be able to get a referral for mediation as well.

Under the new law, banks will pay a $250 fee every time they foreclose on someone, money that will fund a doubling or tripling of counselors, now at just 45.

State housing counselor Marnie Claywell said those reinforcements were badly needed. “The workload is crazy,” she said. “You want to help everyone.”

So far this year there have been 12,979 foreclosures in the state, according to the website RealtyTrac.

Claywell said she thought the meet and confer time extension would also help the homeowners she works with because it takes a while for many of them to come to terms with their foreclosure and seek help.

Bank lobbyist Denny Eliason said banks supported the fee and the increase in housing counselors because counselors help homeowners understand the foreclosure process.

In early hearings on the bill, Eliason testified against the mediation requirement, saying it was dangerous to let mediators determine whether both sides were acting in good faith. He said he supported the compromise bill, though, because “good faith” is better defined and lenders in other states have found that housing counselors help borrowers reach agreements with their banks before mediation is even necessary.

Neas says the new law means Washington will join Nevada and Maryland, the other two non-judicial foreclosure states, or states where foreclosures don’t have to go through the courts, to have enacted a mediation process.

Nevada, which enacted the program in 2009, continues to have high foreclosure rates, but about 46 percent of the 4,212 people who participated in mediation in the first year were able to stay in their homes, said its lead program analyst, Michael Sommermeyer.

Katie Schmidt: 360-786-1826

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