Pre-Foreclosure Options Letter - Foreclosure Fairness Act

So this morning, I got this wonderful call on my new HTC Evo.  I love my new phone.  Anyway, the meeting was with Rick Torrance and Valerie Grigg Devis from the Public Safety Unit of the Department of Commerce.  I know, your saying, "who?!? why?!?, what the..."  Well, the new law signed by Governor Gregoire that implements HB 1362 on July 22, 2011 is being administered, at least in part by the Department of Commerce.  The Department of Commerce, or COM as they like to call it has the unenviable duty of manufacturing a number of notices which will be used by attorneys and housing counselors to access the new provisions which will be codified in RCW 61.24.

The first notice, and this is the one the banks have been asking for specifically, is the newly minted Pre-Foreclosure Options Letter.  We have to thank Mr. Bruce Neas for the snazzy title and really, he should be thanked for much of the product that is the Foreclosure Fairness Act.  This is the first notice included under section 16 of the new act and it specifically requires that notice be given in English and Spanish from the lender notifying the homeowner of its options, including mediation.

This letter is being developed with model language and should be approved by the AG's office next week when it will be sent out for translation into Spanish.  You must note, that the banks were unwilling to foot the cost in translating this item.  They would rather that the tax payers eat the cost of translation.  I guess they will still need make sure they have a Spanish speaking attorney available to verify that COM got it right.  So, here is to job creation!

This notice will be sent to homeowners and will contain most of what we find in section 5(c) of the law which will amend RCW 61.24.031.  The Notice will say you have 30 days to contact the beneficiary (bank) and request mediation, I mean options.  You will note, in Section 8, the bill allows you to request mediation on or after July 22 as long as you have received a notice of default.  So you won't be left out.


Though this Pre-Foreclosure Notice is the top priority for COM, it is not the one of the most interest to me.  COM has until June 22nd to post and provide the Notice for Referral which will detail what must happen prior to an attorney making a referral to mediation.  This notice is also detailed in section 16 and refers to new section 7 which states in part, "[An] attorney referring a borrower to mediation shal send a notice to the borrower and the department, statement that mediation is appropriate."  The only thing that I did not get out my conversation this morning is what the heck does "appropriate" mean?

This form is also in production and I was told it will be posted early next month but as of this time, the forms are still unavailable for public perusal.  There are four additional notices which are produced either by COM or the mediator which the homeowner has little or no control over.  Those will also be available but of much less interest.

There does seem to be a rush by the banks to get NODs out before July 22nd.  However, that rush really is to avoid the recording costs, not to avoid the law, well maybe it is to avoid the law, but section 8 puts them squarely in it.  The issue is going to be this, if you have a sale date set for July 22nd (which ironically is a Friday and the day the law goes into effect) and my office faxes a referral to mediation to COM before the sale, does the Trustee have to push off the sale and the bank set up the mediation?  I believe the answer to this question is YES, YES, and YES!!! if you didn't hear me.

So, I am going to be holding a Midnight party at my offices on July 21st to send off mediation referrals for anyone that would like one.  Once 12:01am hits, the fax will be a humming.  I am kidding...or am I.  I guess maybe you should give me a call on my new EVO before Thursday, July21st. 425-314-6737.

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.

Foreclosure Mediation is Here...but its not a Knockout!

Last night at 10pm the Seattle Times posted that Governor Gregoire had indeed signed the bill that the legislature laid at her feet some 7 days prior.  The Bill, now called the Foreclosure Fairness Act as proposed in HB 1362 has some great new features for homeowners but the way Times describes it, its a knockout for homeowners, and it is not.

The Seattle Times took the effort to document some of those features but its glaze leaves more than a little to be desired.  The article talks in definitive terms of what it does for homeowners when in reality they are just jabs.  The bill for one, does not automatically extend an additional 60 days for homeowners that respond to the request for mediation.  Neither does it automatically stop the foreclosure if the lender is in bad faith unless the homeowner has properly engaged counsel and been referred to mediation.

I want to be clear, there are tremendous advantages created by this bill, but there is a lot of work to be done.  If you want those provisions to benefit you, it is highly recommended that you sit down with someone, preferrably an attorney because of the attorney's ability to land a knockout blow.  The bill does extend a new fee of $250 for housing counselors, which there is no requirement that a housing counselor have any specific license.  They are not attorneys.  And while we're on the subject, I feel inclined to point out that from the article, "Without Prompting, the Washington Bankers Association offer to pay a $250 fee for every default notice filed [not true, only the first notice], with the stipulation that 80 percent of the money pay for housing counselors."  (emphasis added.) 

The Banks are paying for the housing counselors, and I am sure it is out of the kindness and goodness of their ever expansive corporate heart.  Wait...corporations don't have hearts?  Are you sure?  Yep, they don't breath or have blood...sounds like a vampire.  The corporations have alternative motivations for pushing homeowners off on housing counselors.  One, if you know who butters your bread, you take care of them right?  Two, housing counselors cannot sue you if the note was assigned by Linda Green.  (If you don't get that reference, please check this blog posting out, 60 Minutes Story - The next housing shock (crash).

It is no surprise that banks want homeowners to go to someone they pay.  Prior to the housing counselors provided by HUD, the banks were asking you to call them.  TARP assets were being set aside to pay for HAMP and HAFA, yet the banks did very little, a national average of 3.5% success rate in actually modifying mortgages despite billions of dollars being thrown at the problem.  The counselors were then invented, paid for by banking money, as a substitute for bank employees who would counsel with homeowners on budgets designed to free up cash to pay for the mortgage. 

There are alternatives to freeing up your liquid cash to pay on a property that acts like a shredding machine instead of like an ATM.  The problem for housing counselors is that they cannot talk about those alternatives in a comprehensive way, they simply don't have the tools.  So, if you are looking for some relief under the Foreclosure Fairness Act, and would like a sit down mediation with your bank, remember its not as easy as one call that's all! There are hoops to jump through and arguments to be won.  Do you want a bank sponsored housing counselor in your corner or a real fighter, I mean attorney?  I'll let you decide.