Foreclosure Laws and Procedures in Washington, D.C.

In the District of Columbia, a foreclosure can be judicial or nonjudicial.

Federal and state laws heavily regulate mortgage loan servicing and foreclosure processes. Most of these laws give protections to borrowers. Servicers generally have to provide borrowers with loss mitigation opportunities, account for each foreclosure step, and strictly comply with foreclosure laws. Also, most people who take out a loan to buy a residential property in the District of Columbia sign a promissory note and deed of trust. These documents give homeowners some contractual rights in addition to federal and other legal protections.

In a Washington, D.C., foreclosure, you'll most likely get the right to:

  • get a preforeclosure notice called a "breach letter"
  • apply for loss mitigation
  • get notice of the foreclosure
  • receive special protections if you're in the military
  • pay the overdue payments, plus fees and costs, to bring the loan current
  • pay off the loan to prevent a foreclosure sale, and
  • get any excess money after a foreclosure sale.

So, don't get caught off guard if you're a District of Columbia homeowner who's behind in loan payments. Learn about each step in a Washington, D.C. foreclosure, from missing your first payment to a foreclosure sale. Once you understand the process, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible.

What Is Preforeclosure?

The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. (Sometimes, people refer to the period before a foreclosure sale actually happens as "preforeclosure," too.) During this time, the servicer can charge you various fees, like late charges and inspection fees, and, in most cases, must inform you about ways to avoid foreclosure and send you a preforeclosure notice called a "breach letter."

Fees the Servicer Can Charge During Preforeclosure

If you miss a payment, most loans include a grace period of, say, ten or fifteen days, after which time the servicer will assess a late fee. Each month you miss a payment, the servicer will charge this fee. To find out the late charge amount and grace period for your loan, look at the promissory note you signed. You can also find this information on your monthly billing statement.

Also, many District of Columbia deeds of trust allow the lender (or the current loan holder, referred to as the "lender" in this article) to take necessary steps to protect its interest in the property. Property inspections are performed to ensure that the home is occupied and appropriately maintained. Inspections, which are generally drive-by, are usually ordered automatically once the loan goes into default and typically cost around $10 or $15.

Additional types of fees the servicer might charge include, among others, fees for broker's price opinions, which are like appraisals, and property preservation costs, such as for yard maintenance or winterizing an abandoned home.

Federal Mortgage Servicing Laws and Foreclosure Protections

Under federal mortgage servicing laws, if the property is your principal residence, the servicer must contact, or attempt to contact, you by phone to discuss loss mitigation options, like a loan modification, forbearance, or repayment plan, no later than 36 days after you miss a payment and again within 36 days after each following delinquency. No later than 45 days after missing a payment, the servicer has to inform you in writing about loss mitigation options that might be available and appoint personnel to help you try to work out a way to avoid foreclosure. A few exceptions are in place for some of these requirements, though, like if you've filed for bankruptcy or asked the servicer not to contact you pursuant to the Fair Debt Collection Practices Act. (12 C.F.R. §§ 1024.30, 1024.39, 1024.40).

Federal mortgage servicing laws also prohibit dual tracking (pursuing a foreclosure while a complete loss mitigation application is pending).

What Is a Breach Letter?

Many District of Columbia deeds of trust have a provision that requires the lender to send a notice, commonly called a "breach letter," informing you that the loan is in default before the lender can accelerate the loan. The breach letter gives you a chance to cure the default and avoid foreclosure.

When Can Foreclosure Start?

Under federal law, the servicer usually can't officially begin a foreclosure until you're more than 120 days past due on payments, subject to a couple of exceptions. (12 C.F.R. § 1024.41). This 120-day period provides most homeowners with ample opportunity to submit a loss mitigation application to the servicer.

What Is the Foreclosure Process in the District of Columbia?

Foreclosures in Washington, D.C. can be judicial (through the court) or nonjudicial (an out-of-court process). In the past, most foreclosures in the District of Columbia were nonjudicial. But because the District implemented a foreclosure mediation program to accompany the nonjudicial process, lenders sometimes opt to foreclose in court to avoid mediation.

Because a foreclosure in the District of Columbia could be judicial or nonjudicial, this article covers both processes.

How Judicial Foreclosures Work in Washington, D.C.

A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. The lender gives notice of the suit by serving you a summons and complaint. If you don't respond to the suit, the lender will ask the court for, and probably receive, a default judgment, which will allow it to hold a foreclosure sale.

But if you choose to defend the foreclosure lawsuit, the case will go through the litigation process. The lender might then ask the court to grant summary judgment. A summary judgment motion asks that the court grant judgment in favor of the lender because there's no dispute about the critical aspects of the case. If the court grants summary judgment for the lender—or you lose at trial—the judge will enter a judgment and order your home sold.

How Nonjudicial Foreclosures Work in Washington, D.C.

The lender mails a notice of default to the borrower that includes the amount required to reinstate the loan. The lender also has to record the notice of default in the land records, which is the first official step in the nonjudicial process. (D.C. Code § 42-815, § 42-815.02).

Along with the notice of default, the lender has to send the borrower details about the foreclosure mediation program. (D.C. Code § 42-815.02). In mediation, the borrower, lender, and a neutral party (the mediator) meet to discuss whether the borrower qualifies for a foreclosure alternative. To participate in mediation, the borrower has to send in the provided mediation election form no later than 30 days after the form is mailed.

Next, if the borrower and lender aren't able to work out a way to avoid foreclosure, the lender sends a notice of the intention to foreclose to the borrower and a copy to the mayor at least 30 days before the sale. The 30-day period starts to run on the date the mayor receives the notice. (D.C. Code § 42-815). The notice includes the sale date.

The deed of trust will outline any public notice requirements. Notice about the sale is typically advertised in a newspaper.

The Foreclosure Sale

With either process, the lender usually makes a credit bid at the foreclosure sale. The lender can bid up to the total amount owed, including fees and costs, or it may bid less. In some places, including District of Columbia, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower. If the lender is the highest bidder, the property becomes what's called "Real Estate Owned" (REO).

But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds—that is, money over and above what's needed to pay off all the liens on your property—you're entitled to that surplus money.

How Can I Stop a Foreclosure in the District of Columbia?

A few potential ways to stop a foreclosure include reinstating the loan, redeeming the property before the sale, or filing for bankruptcy. Of course, if you're able to work out a loss mitigation option, like a loan modification, that will also stop a foreclosure.

Reinstating the Loan

In a nonjudicial foreclosure, the borrower gets the right to reinstate at any time up to five business days prior to the commencement of bidding at the foreclosure sale. But not more than one time in any two consecutive calendar years. (D.C. Code § 42-815.01).

Also, your loan contract might give you the right to reinstate or your lender might agree to a reinstatement.

Redeeming the Property

One way to stop a foreclosure is by "redeeming" the property. To redeem, you have to pay off the full amount of the loan before the foreclosure sale.

Some states also provide foreclosed borrowers with a redemption period after the foreclosure sale, during which they can buy back the home. In the District of Columbia, however, the borrower doesn't get the right to redeem the home after a nonjudicial or judicial foreclosure.

Filing for Bankruptcy

If you're facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy. Once you file for bankruptcy, something called an "automatic stay" goes into effect. The stay functions as an injunction that prohibits the lender from foreclosing on your home or otherwise trying to collect its debt, at least temporarily.

In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy might be the answer. To find out about the options available to you, speak with a local bankruptcy attorney.

Deficiency Judgment Laws in Washington, D.C.

In a foreclosure, the borrower's total mortgage debt sometimes exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a "deficiency." For example, say the total debt owed is $700,000, but the home sells for $650,000 at the foreclosure sale. The deficiency is $50,000. In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount—in our example, $50,000—from the borrower.

In the District of Columbia, that lender can file a lawsuit to get a deficiency judgment after a nonjudicial foreclosure. (D.C. Code § 42-816). In a judicial foreclosure, the lender can ask the court for a deficiency judgment as part of that action.

Where to Find Foreclosure Statutes and More Foreclosure Resources

In this article, you'll find details on foreclosure laws in the District of Columbia, with citations to statutes so you can learn more. Statutes change, so checking them is always a good idea.

How to Find Federal Foreclosure Laws

If you're looking for federal laws, you might want to visit the Library of Congress's legal research website, which provides links to federal regulations and federal statutes.

How to Find District of Columbia Foreclosure Laws

To find the District of Columbia's foreclosure laws, search online for "District of Columbia statutes" or "Washington, D.C. laws." Make sure you're reading the most recent, official laws. Usually, the URL will end in ".gov" or the statutes will be on an official legislature webpage.

More Foreclosure Resources

For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.

Although the programs under the Making Home Affordable (MHA) initiative have expired, the MHA website still contains useful information for homeowners facing foreclosure.

Getting Help

How courts and agencies interpret and apply laws can change. And some rules can even vary within a state. These are just some of the reasons to consider consulting a lawyer if you're facing a foreclosure. If you have questions about the foreclosure process in Washington, D.C. or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.

It's also a good idea to talk to a HUD-approved housing counselor if you want to learn about different loss mitigation options. You can use the CFPB's Find a Counselor tool to get a list of HUD-approved housing counseling agencies in your area. You can also call the Homeownership Preservation Foundation (HOPE) Hotline, which is open 24 hours a day, seven days a week, at 888-995-HOPE (4673).

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