Foreclosure: step-by-step

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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?