Post on 25-Feb-2016
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Foreclosure:step-by-step
CENTS
Foreclosure Warning Signs
Unexpected Life Changes: Loss of employment or change in income Illness/injury Divorce/seperation Death of a spouse
Financial: Changes in mortgage payment Maxed out credit cards Using credit for daily expenses Late payments Minimum payments to credit cards Opening new lines of credit after maxing out other cards Choosing which bills/expenses to pay
Mortgage Delinquency:
Mortgage Delinquency: failure to make mortgage payments on time or in full Late Payment(s) Collections Loss Mitigation
Foreclosure Process:*Washington
Foreclosure laws and timelines differ by state Washington State:
Foreclosure Fairness Act of 2011 (FFA): RCW 61.24 Judicial v. Non-Judicial foreclosure
Judicial Foreclosure: requires court action to foreclose a home Non-Judicial Foreclosure: procedure used when a Deed of Trust
secures the home loan Washington has a non-judicial process for the vast majority
of home loans Steps/Stages: Pre-Foreclosure, Notice of Default, Mediation,
Notice of Trustee’s Sale, and Trustee Sale
Foreclosure Timeline
Pre-Foreclosure
Pre-Foreclosure occurs after the homeowner has defaulted on a mortgage payment
Notice of Pre-Foreclosure Options (NOPFO): notice to homeowner Includes right to “meet and confer”
Right to discuss foreclosure alternatives Homeowner response within 30 days of notice – gives an
additional 60 days to meet and confer with servicer or lender If homeowner does not respond within 30 days, the servicer
or lender may send the Notice of Default
Notice of Default
Notice of Default: sent to homeowner if No resolution during “meet and confer”; or No response to NOPFO within 30 days
Gives the option to request Mediation Mediation request must be made through a HUD-certified
housing counselor or an attorney Must be sent 30 days before Notice of Trustee’s Sale can
be served or recorded
Mediation: What is it?
What is it? Face-to-face discussion between homeowner, lender, and
neutral 3rd party Discuss alternatives to foreclosure Both parties must act in Good Faith
Lender’s rep has authority to modify loan Mediator has been provided with all necessary documentation
by parties Mediation fee has been paid ($400 – each party pays $200) Homeowner or authorized rep attends mediation
Lender may not proceed with foreclosure until mediation has concluded
Mediation Documentation
The mediator will specify the required documentation Homeowner will typically need to provide:
Most recent paystubs Documentation of debts and other obligations 2 years of tax returns
Lender will typically need to provide: Note and Deed of Trust Proof of ownership of Note Loan balance List of fees and charges Payment history Present value of home and other loan modification information
Mediation Timeline
May be requested from time Notice of Default is received, up to 20 days after Notice of Trustee Sale was recorded
Department of Commerce (DOC) notifies parties mediation was requested within 10 days of request
Mediation fee must be paid within 30 days of DOC’s notice Homeowner documentation sent to lender and mediator within 23 days of DOC
notice Lender documentation sent to homeowner and mediator within 20 days of receipt
of homeowner’s documentation Mediation is within 70 days of mediator selection (DOC selects) Mediation date/time is set 30 days prior to mediation Mediation session runs 1-3 hours
Post-Mediation
Mediator issues certificate of results and good faith within 7 days post mediation
If an agreement is NOT reached: Upon issuance of mediator’s certificate or 17 days post-
mediation, the lender may proceed with foreclosure If an agreement is reached:
Foreclosure is avoided
Per se Consumer Protection Act violations
What if the lender does not act in good faith during mediation? Not-in-good-faith mediation certificate Per se Consumer Protection Act violation: the
homeowner may sue to enjoin (stop) the Trustee Sale.
Notice of Trustee’s Sale
Must be recorded by the trustee at least 120 days prior to sale Must be recorded in the county where the property is
located Trustee must provide notice (service or posting) at least
90 days prior to sale Must be published 2 times
1st Publication: between 28-35 days prior to sale 2nd Publication: between 7-14 days prior to sale
Trustee Sale
Trustee Sale: the auction of the property Must occur on a Friday or if Friday is a legal
holiday, the sale will occur on the following Monday.
What’s the best option for you?
Stay in your home? Communicate with your servicer/lender to discuss options Seek mortgage assistance www.makinghomeaffordable.gov Mediation Bankruptcy
Leave the home? Sell Work-out: Short Sale or Deed in Leiu Assumption Allow the home to foreclose
Protections & Consequences
Mediation process in Washington provides borrowers at risk of foreclosure with: More notice, time, and options
Consumer Financial Protection Bureau (CFPB): federal agency tasked with implementing reforms to the mortgage servicing industry Restricted Dual Tracking Notification Access to servicing personnel Fair review process No foreclosure until alternatives are considered
Taxes: *Mortgage Forgiveness Debt Relief Act (applies to cancelled debt 2007-2013) cancelled debt does not have to be claimed as taxable income – up to $2 million
Negative impact on Credit Score: Delinquency, short sale, deed-in-lieu, & foreclosure
Common Mistakes
Ignoring calls/letters from your servicer or lender Throwing away correspondence from your servicer
or lender Not seeking out a HUD-certified housing counselor Falling victim to scams
Best Practices
Keep lines of communication open with your servicer/lender Open and read any letters Keep all notices and correspondence (including the envelope) Work with a HUD-certified housing counselor Know the warning signs of a scam: if you suspect a scam – report it!
A housing counselor requiring a fee Claims of a “special relationship” with servicers/lenders Guarantees to resolve foreclosure issues Discouraging communication with your servicer/lender High pressure tactics to sign paperwork, sell property, transfer ownership Advises to direct mortgage payment to the housing counseling business
Resources
www.makinghomeaffordable.gov 1-888-995-HOPE (4673)
Washington Homeownership Center www.homeownership.wa.gov
1.877.894.HOME (4663)
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Questions?