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Foreclosure: step-by-step

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

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Foreclosure: step-by-step

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  1. Foreclosure:step-by-step CENTS

  2. 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

  3. Mortgage Delinquency: • Mortgage Delinquency: failure to make mortgage payments on time or in full • Late Payment(s) • Collections • Loss Mitigation

  4. 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

  5. Foreclosure Timeline

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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.

  13. 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

  14. 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.

  15. 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

  16. 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

  17. 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

  18. 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

  19. Resources • www.makinghomeaffordable.gov • 1-888-995-HOPE (4673) • Washington Homeownership Center • www.homeownership.wa.gov • 1.877.894.HOME (4663)

  20. Questions?

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