Extra Help for Washington State Troubled Homeowners Under the Foreclosure Fairness Act

SEATTLE, Washington (August 15, 2011) – On July 22nd, 2011, Washington State became the third non-judicial foreclosure state to enact a law that requires lenders to meet face-to-face with borrowers before initiating foreclosure. This is welcoming news for troubled homeowners. Minh T. Tran, a lawyer at Seattle-based bankruptcy law firm Arrow Law Group, PLLC, explains that the new law will provide another avenue for homeowners to prevent foreclosure.

“The problem with new laws such as this,” said Tran, “is that there is little to no guidance on how it will work out. From the statute, we know Step 1, Step 2, and Step 3. What we do not know is procedurally how long it will take and what relief is available to ensure that both sides cooperate. Unlike ordinary legal proceedings, there is no right to appeal built into the process. Many borrowers have already lost trust in their lenders from previous loan modification attempts that usually end with the lender losing essential paperwork or taking so long to review documents submitted by borrowers that the information becomes outdated and requires resubmission. Still, the new law requires, and not just encourages, lenders to work with borrowers. This is welcoming news to all of us.”

The new law, titled the Foreclosure Fairness Act, was enacted to rectify growing complaints from consumers that lenders were being unresponsive to borrowers’ request for assistance. Under the new law, lenders are required to attend a face-to-face meeting with the borrower to discuss loss mitigation options before it can foreclose. “This should prevent lost paperwork or delay,” said Tran.

Although lenders can “meet” over the phone, the law requires delegated agents to have legal authority to make decisions on loan modifications. Lenders, who are overwhelmed with the number of troubled borrowers knocking at their doors can no longer choose to foreclose simply because it is easier, faster, or cheaper for the lender. Before the new law, Washington State allowed lenders to foreclose within six months of a borrower’s default. Borrowers with pending loan modification applications often held their breaths until the last minute, when their application is suddenly denied days before the foreclosure sale, and their home swept from under their feet without any time to seek other relief. Under the new Foreclosure Fairness Act, if a borrower is awaiting mediation, the lender cannot foreclose. And if the mediation is unfavorable to the borrower, the borrower will be allowed additional time to seek other relief. Given the troubles that homeowners are already facing while trying to navigate HAMP, a program started by the federal government that was supposed to help make loan modifications easier, Tran recommends homeowners to contact a HUD counselor or a qualified attorney right away and not wait until the last minute. Only an attorney can give legal advice.

Borrowers should be aware that the law was a compromise. Only lenders who foreclose on a high number of homes are governed by the law, and only borrowers who timely and affirmatively ask for relief will benefit. Washington State Department of Commerce is charged with heading the mediation process, including enacting regulations. Borrowers should seek legal counsel as soon as possible so deadlines are not missed; this means that the borrower should contact a HUD counselor or an attorney as soon as the borrower is behind on the mortgage. Borrowers who wait can risk losing all benefits under the new law.

Arrow Law Group, PLLC, is a Seattle-based bankruptcy and debt relief law firm who represents debtors under the bankruptcy code. The firm has offices in Seattle, Washington and Everett, Washington Information about Arrow Law Group can be found at: http://www.arrowlawgroup.com

Contact Information

Minh Tran

Managing Attorney

Arrow Law Group, PLLC

(1) (206) 467-1785

info@arrowlawgroup.com