During the economic turmoil that hit the country in 2008, many people found themselves in severe economic distress as many lost their jobs and other means of support. Many people suddenly found themselves unable to keep up with expenses especially their mortgages for their homes. Facing foreclosure, many homeowners sought to negotiate new mortgage terms with their lenders in order to keep their homes. In order to encourage and facilitate this process, Washington State passed the Foreclosure Fairness Act in 2011 which gives homeowners the ability to temporarily stop the foreclosure process and force lenders to consider alternatives to foreclosure.
In a mediation, both the homeowner and the lender, together with their respective attorneys, will meet with a neutral third party who serves as a mediator. With the mediator’s help and encouragement, both the homeowner and lender discuss possible loan modification programs that the homeowner may qualify for and other options to avoid foreclosure.
If you have become delinquent in your mortgage, you will receive a Notice of Pre-Foreclosure Options notice. This will give you a chance to talk with your lender one-on-one to discuss possible options to avoid foreclosure. This puts the foreclosure process on hold for 90 days. If nothing is agreed upon, or if you decide not to meet the lender in this manner, you will receive a Notice of Default informing you that you are delinquent in your mortgage payments and are in danger of foreclosure. Once you have received this notice, you can request a mediation session with your lender in the presence of your attorney or a HUD housing representative. You will need either an attorney or HUD housing counselor to submit a referral for mediation to the Department of Commerce. By law, homeowners cannot do this by themselves. You can request a mediation any time after receiving the Notice of Default and up to 20 days after a Notice of Trustee Sale (the next notice you will receive after the Notice of Default) has been recorded. The lender is required by law to participate in the mediation in good faith and, until the mediation session has been completed and certified by the mediator, the foreclosure process it put on hold.
The Department of Commerce will exa mine the referral and then assign a mediator to arrange a date for both the homeowner, lender, and their representatives to meet. Typically this meeting will be within 70 days of the Department of Commerce assigning a mediator, but it can be delayed longer if both the homeowner and lender agree to postpone.
After receiving the Notice of Mediation from the Department of Commerce, you will generally have 23 days to send in the required documents to the lender and mediator and the lender will have 20 days to send their documents to the homeowner and mediator after receiving documents from the homeowner. The documents you will need to provide typically include mortgage assistance applications, bank statements, payment stubs, tax records, and other financial information.
The lender will examine various documents and determine if you are eligible for a loan modification under a government program or the lender’s own in-house programs. They do this by taking the homeowner’s financial data and do a Net Present Value (NPV) test that calculates the current value of the home, how much is currently owed on the property, and your monthly income (and other financial factors) to determine what new modified mortgage will be affordable to the homeowner and viable to the lender. If there is a federal or bank program that the homeowner qualifies for, the bank will modify the mortgage. If they qualify, a homeowner first will have to make new payments under the modified loan for a trial period of three months before the modification becomes permanent.
In cases in which a loan modification is not possible, the lender will then inform you of other options to avoid foreclosure, but without retaining your house. These usually entail putting up your home for short sale (selling the home for less than what you owe on your loan, with the lender’s approval) or simply voluntarily transferring ownership of your home back to the bank (deed-in-lieu). Both options allow you to avoid a foreclosure appearing on your financial record and damaging your credit.
How Integrity Law Group Can Help You
One of our foreclosure mediation attorneys can help guide you through the mediation process and help collect and process the necessary paperwork that will be required should you pursue the mediation option. We will respond to lender requests and other obligations necessary in order to qualify and prepare for your mediation date. During the mediation, we will represent your best interests and work with your lender to find the best program or solution to avoid foreclosure. Contact Us Today >