Analysis of Foreclosure Fairness Act: Homeowner's Guide

On Friday, 4/8/2011, the State legislature delivered a bill to the Governor for signature on 04/14/2011 which will significantly change the process of foreclosure in the State of Washington.  The major change is that the legislature has delivered to the homeowners, a statutory right to sit down and talk turkey about modifying the loan that has become the bane of homeowners everywhere.  In 2007, the median net worth of a family in Washington was around $150,000.  Since that time, we have seen the stock market crash and the housing bubble burst, unemployment rise, real wages drop, and interest rates on mortgages climb.  On average, the American Household lost $125,000 by 2009.  When you compare the statistics, we should be plus side, $25,000.  The problem is, that the mortgage that secured the average home, didn’t go anywhere, and the though the median and the averages were in the $150,000 realm of net worth, those buying homes and refinancing in 2007 and earlier, were doing it on 100% loan to value terms and it is unlikely they were near the median in net worth.  Thus the average losses that impacted the portfolio didn’t turn into a mere $25,000 remainder, but left them insolvent and starring at bankruptcy. It is likely, that of the 33% of homeowners that have a mortgage that is underwater in the Puget Sound, your financial situation is sinking but this bill may provide a much needed life saver.

The Foreclosure Fairness Act will provide the homeowner the opportunity to force its banker to the table to discuss the realities of modifying the loan.  Prior to this, homeowners have fussed with lost documentation, forbearance agreements and the actions of a banking industry that border on the criminally negligent. In addition, the bill requires the bank to provide specific information in making a determination of what the best outcome will be based on present values of modification, foreclosure, short sale, deed in lieu, and whatever workouts may otherwise be arranged.  The problem will be getting through the hoops to make that banker sit there and look you in the eye with a mediator looking on and provide you this information.

Previously, the process of nonjudicial foreclosure in Washington was that the owner of your mortgage, the bank, would stop receiving the monthly payment.  In turn, the bank would declare the loan to be in default, and contact a trustee to initiate the nonjudicial foreclosure.  The trustee would send a Notice of Default out no earlier than seventy (70) days after the first missed payment and the home would be auctioned off about 120 days later.  The homeowner would then be forced to move by the twentieth day after the sale.  Thus the whole process would take about seven months or 210 days.

With the changes, the statute imposes on the bank a requirement that it send out a notice a full thirty 30 days before recording the Notice of Default that details your rights in sitting down with the bank.  If you don’t answer that letter, don’t worry, the bank will call you three times by telephone, and then send a certified letter.  Failure to meet that requirement means the bank cannot foreclose. 

If you do respond to the letter.... TO ACCESS THE REMAINDER OF THIS ARTICLE, and trust me you want to get the detailed analysis of this statute, PLEASE REGISTER FOR A FREE SEMINAR HERE. Just click on the green "register now" button for either a live event or the webinar, and the article will be emailed to you shortly.


My good friends at the Financial Revival Group liked my analysis last week that they bought the rights and are incorporating it into their workshops.  Must be good if someone is willing to buy it.

AG Foreclosure Settlement and the Little Red Hen

I am fond of the children's story, The Little Red Hen.  To me, it has always stood for self reliance and capitalism.  When individuals share in the work, they share in the rewards, but when an individual cannot be bothered to lift a hand in the cause of industry, they are left to what they put their hands.  The Little Red Hen offered to include everyone, everyone declined, until she had produced her bread and then everyone wanted a slice.

Last Thursday, the individual states Attorneys General gathered in Washington, DC to discuss a settlement with the biggest banks over the improprieties in handling foreclosures throughout the United States.  The number that was reached, at least as reported in some places is $20 billion.

To you and me, that sounds really big.  $20 Billion with "b."  But, as you start to delve into the number, I have a flash back to Austin Powers and Dr. Evil putting his pinky to his teeth when he says a "million dollars" as if that were some astronomical amount of cash which would shock the civilized world.  Instead, we pat our mouths as the yawn emerges.

Imagine that in the US, where we have a population of nearly 300 million people and of that vast number of individuals, there were 1 million households that were affected by the housing crash.  No imagine, that these people that have lost anywhere from 15 to 50% of their house value in the course of 3 to 4 years, would offering them $20 billion even seem like it would act like a bandaid for the financial scar on their lives?  The amount being sought, is $20,000 per household.  That doesn't even cover the down payment most of these people put on their now underwater homes.

These families have searched the internet, sought out housing counselors, short sale specialists, and the smart ones have found attorneys that understand the significance of the battle that is being fought and have put up a good fight.  These little red hens, if you will, have gathered the wheat, ground it, made their dough, and baked it.  As they sit down to eat, it would appear that every farm animal that was too busy to be bothered has enlisted the AG's to broker a deal to get them a slice.

To be clear, I am not for the settlement, I think the consumer is being sold down the river.  The banks are going to walk with a slap on the wrist while the little red hens are told they can't eat their bread because the AG's made a bad deal, with bad people, all in the name of taking care of everyone.  The fact is, if you want protection (bread) get your own.  I work with a handful of good attorneys in the Puget Sound that have secured settlements and negotiated deals that make $20k look like pennies on the dollar.  The AGs can keep their settlement if it means that I can't do for my clients what I have been doing.