In response to the ongoing foreclosure crisis in this country, many states, like Washington, have implemented statewide mediation programs to assist borrowers in finding ways to avoid foreclosure. Read on to learn more about how Washington’s mediation program works and how you can benefit from the process.
(To learn about other options for dealing with foreclosure, visit Nolo's Foreclosure section.)
(For more articles on foreclosure in Washington, visit our Washington Foreclosure Law Center.)
Foreclosure mediation is a process that is used to help homeowners avoid foreclosure by coming up with an alternate solution that benefits both the borrowers and the lender. Mediation consists of a meeting between:
At the meeting, the parties discuss the borrower's financial situation and try to negotiate a way for the homeowner to keep the home or give up the property without going through a foreclosure. Potential outcomes of mediation include:
(To get information about each of these options, see our Alternatives to Foreclosure area.)
In Washington, most foreclosures are nonjudicial, which means the lender does not have to go through state court to get one. Instead, the lender initiates the foreclosure by sending a notice of default and then recording a notice of sale in the county land records. (To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)
To learn about the specific foreclosure laws in Washington, see Summary of Washington's Foreclosure Laws.
In 2011, Washington implemented a statewide foreclosure mediation program for owner-occupied residential properties. In addition, borrowers are entitled to a pre-foreclosure meeting with their lender.
Before the foreclosure officially starts, the lender sends a pre-foreclosure notice informing the borrower of the opportunity to meet with the lender to try to work out an alternative to the foreclosure. (If the homeowner does not request a meeting, the lender may proceed with foreclosure 30 days after the date of the letter.)
If the homeowner requests the meeting, the lender cannot issue the notice of default until 90 days after the date of the letter. If the homeowner and lender meet, but cannot reach a resolution during this 90-day period, the lender may proceed with the foreclosure by issuing a notice of default.
Once the notice of default has been issued, the homeowner becomes eligible for mediation.
Homeowners are not able to opt-in to the mediation program without a referral. To request mediation, homeowners must contact a housing counselor or attorney who will provide a referral to the program, if appropriate for the situation.
The referral to mediation may be made any time after a notice of default has been issued, but no later than 20 days after the date a notice of sale has been recorded. (If the homeowner is referred to mediation before the notice of sale is recorded, the notice of sale cannot be recorded until the mediation has concluded.)
Once the homeowner is referred to mediation, the Washington State Department of Commerce (the administrator of the program) will assign a mediator. The mediator will schedule the mediation for no later than 70 days after the date he or she is selected, unless the homeowner and the lender agree on a different date.
The Department of Commerce will send out a notice of mediation informing each party about their responsibilities, such as which documents must be provided for mediation. The homeowner must send certain documents to the mediator and the lender within 23 days of receiving the notice of mediation. The lender must send its documents to the mediator and homeowner within 20 days of receiving the homeowner’s documents.
At the mediation, an attorney or housing counselor may represent the homeowner. The lender must appoint a representative to attend the mediation (in-person or by telephone) who has authority to modify the loan or negotiate an agreement.
If the mediation is successful and the parties agree on a loss mitigation option, like a loan modification, then the foreclosure is stopped. However, if the parties cannot reach an agreement, the foreclosure will continue.
Both the homeowner and the lender must act in good faith during the mediation process. If the lender does not mediate in good faith, the homeowner may be able to stop the foreclosure sale. (To learn more, see our Fighting Foreclosure in Court area.)
The homeowner and the lender each pay a $200 fee prior to mediation.
Foreclosure mediation programs have proven to be effective in many instances. Even though participating in the Washington foreclosure mediation program does not guarantee that a foreclosure will be avoided, it doesn't hurt to attend the meeting. The lender may be more likely to agree to a nonforeclosure solution at a mediation than if you approach it outside of the program. Or you might qualify for a loss mitigation option that you hadn’t previously considered.
For more information on Washington’s foreclosure mediation program, go to www.dfi.wa.gov, then click on “Foreclosure Help,” and “Mediation Program” on the right side of the webpage.
If you want to obtain free housing counseling and learn about foreclosure assistance, you can call Washington State’s homeownership information hotline at 1-877-894-HOME (4663).