A new foreclosure mediation law has been enacted in Washington DC. The formal name is the Saving D.C. Homes from Foreclosure Emergency Amendment Act of 2010. What this new program does is it ensures that before a lender or bank can foreclose on a residential property in Washington DC, the borrower must be provided with the opportunity to enter into a mediation process with their lender. The goal of this law is prevent the loss of the family home to a foreclosure filing.
In addition to the mediation program, find a listing of HUD counselors in Washington DC, and learn about the solutions they offer homeowners.
The law applies only to residential properties. Residential property is defined as single family homes, condominium or cooperative units and other forms of real property that has four or fewer single-family dwellings. The home must also be the main residence of the borrower or their family, and it can’t be their second home.
The main goal of the foreclosure mediation law is to provide a homeowner the opportunity to meet face-to-face with a professionally trained mediator / housing counselor and/or the lender in an environment where they can discuss options that are available in lieu of foreclosure, such as loan modification, refinancing of their mortgage, short sales, etc.
The mediation process puts into place a two step process. If a bank or lender wishes to foreclose, the first thing that most occur is the lender needs to send the homeowner a notice of default by first-class mail as well as certified mail. The letter must go over the foreclosure mediation process. This new method is communication is a significant change for Washington DC homeowners and one of the main reasons for the change is to make sure that the borrower is notified of the default and the right to mediation under laws and regulations that are put into place.
The notice must notify the homeowner the right to participate in a mediation session. In addition, the document must contain contact information for at least one local housing counseling agency as well as the bank or lender. In addition, the letter must provide a description of all loss-mitigation, mortgage assistance and foreclosure mediation programs available from the lender, and a loss-mitigation application.
The bank or lender that is filing the foreclosure needs to pay the District of Columbia $300 for each notice of default they issue. However, if the foreclosure proceeds and eventually a sale of the home takes place and - after paying off the lender and all associated legal and auction fees - there is any surplus left for the borrower, the $300 needs to be returned to the lender.
The District's Department of Insurance, Securities and Banking (DISB) will be the government agency that appoints a mediation administrator to oversee the process, and this government agency has also been authorized to implement, monitor and enforce the law throughout the region.
Once the Washington DC homeowner receives the notice, two scenarios can take place. If either of the options below do not work for you, contact the Fannie Mae Washington DC mortgage help center for free advice.
In the first scenarios, the homeowner can decide to do nothing, and in that case the right to mediation is waived. In addition, the administrator is required to issue a mediation certificate no more than 60 days after the initial notice of default was sent to the borrower.
After that, once the certificate has been issued, the lender or bank is then free to foreclose on the home by taking the second step: in the process, which is then sending a notice of foreclosure sale and waiting the required 30 days for it to take effect.
If a homeowner wants to further explore their options and pursue the Washington DC foreclosure mediation program, that borrower must pay a mandatory $50 fee and send it with a mediation-election form to DISB within 30 days of receiving the first notice of default. At that time the homeowner must also send the loss-mitigation application to the lender.
District's Department of Insurance, Securities and Banking is then required to schedule mediation within 45 days from the date the lender mailed the default notice. The actual foreclosure mediation session will then be conducted by a neutral third party trained in foreclosure mediation and that will provide the homeowner with solutions to their mortgage difficulties. To assist the mediator along in the process, the lender is required to produce a loss-mitigation analysis. They need to show options and other solutions that are short of foreclosure that might be available to the homeowner. Options may include a loan modification, reducing interest rates, government mortgage assistance programs, and forbearance. Learn more on obtaining help with your mortgage from the mediation sessions.
The mediation session will occur, and if mediation ends up with the lender and homeowner agreeing that foreclosure is the only option, the mediator will report back to DISB. The department will then review the case, and if the department is satisfied that the rules have been met, a mediation certificate will be issued, and the lender will be free to start the foreclosure process and to take away or auction off the home.
On the plus side, if another solution is agreed upon that can provide the homeowner with mortgage relief, the department will continue to monitor the process and the agreement that was put into place to make sure that the settlement is honored. If the agreement is not followed, a bank or lender can be fined $1,000 for failure to implement the terms of the foreclosure mediation agreement with the borrower.
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