The Washington State Foreclosure Fairness Act Mediation Program

The Washington State Foreclosure Fairness Act Mediation Program began on July 22, 2011. The program, signed into law earlier in 2011, made Washington the third non-judicial foreclosure process state in the country.  The program, designed to assist homeowners facing foreclosure proceedings, has met with mixed reviews. 

Under the Act, lenders and servicers conducting more than 250 foreclosures in Washington State in the previous year are required to pay $250 for each Notice of Default issued. The fee provides funding for free homeownership counseling, attorneys to prosecute violations of the Washington Consumer Protection Act.

Borrowers facing foreclosure who have received a Notice of Trustee’s Sale but whose house has not been sold as of July 22 and those who have received a Notice of Default but have not yet received a Notice of Trustee’s sale may request mediation with their lender or servicer through a housing counselor or attorney.

Once a housing counselor or attorney refers a borrower to the Washington Department of Commerce (“DOC”), the DOC assigns a mediator and issues an initial mediation referral letter to the borrower, lender and the newly assigned mediation.  Under the Act, the parties then have 45 days to exchange documents, pay the mediation fee of $200 per side and complete the mediation.  

Our firm, Paramount Mediation, currently has 26 mediations assigned to our mediators.  Not one of these mediations has occurred within the statutorily required 45 day period.  It is my understanding that other foreclosure mediators are having the same experiences. 

At mediation, a DOC approved mediator will work with the borrower and lender to reach a fair, voluntary and negotiated agreement. If a homeowner is found to be not acting in good faith, the foreclosure proceedings may proceed. If a lender or servicer is found to be not acting in good faith, the homeowner may attempt to stop the foreclosure by going to court, or may report that finding to the Washington Attorney General’s Office for possible violation of the Washington Consumer Protection Act.  If both parties are acting in good faith the results will almost always come down to whether the borrower can afford to stay in the home.  If the borrower can, the lender will be required to modify the loan.  If the borrower cannot, the lender will proceed with the foreclosure process.

While the program is still new, and it has many bugs to be worked out, many Washington lenders, borrowers and others remain optimistic that the program will help homeowners remain in their homes and allow lenders the opportunity to resolve otherwise complex matters in a significantly simpler way. 

Written by James M. Waldon.  Jim is a mediator with Paramount Mediators in Seattle, Washington.  Jim can be reached at 206-612-7938 or at [email protected] for more information.