Washington Mediation Will Be Narrow

Holly Chisa

By Holly Chisa, Tower Ltd.

Washington legislators have spent the last several months attempting to address the continued foreclosure issues in Washington.  Since December a group of stakeholders have been meeting to try and reach agreement on language to strengthen the meet and confer requirement, and attempt to avoid a mandatory mediation process similar to Nevada.  The tentative agreement reached recently on House Bill 1362 and Senate bill 5275 does bring mediation to Washington state, but in a narrow way, and without the certification requirements found in Nevada.

Here are the details:

• Meet and Confer – From date of first notification, the homeowner and the beneficiary have 90 days to have a physical meeting to try and negotiate an agreement.  During that time period, the homeowner is encouraged to attain legal counsel or a housing counselor.  Once the meet and confer requirement has been completed, the beneficiary can ask that the NOD be filed.

• Mediation – If, after meet and confer, there are still issues between the homeowner and the beneficiary, mediation can be requested.  That request can only come from legal counsel or the housing counselor – it cannot be requested by the homeowner.  The mediation process takes 62 days, but can be extended with agreement by both parties.  A report must be issued 7 days after the mediation session occurs – a trustee can file the NOS after 10 days if that report hasn’t been issued.  (This is an attempt to address the problem in Nevada with trustees waiting months for certificates.  If they don’t get the trustee the report in ten days, the process moves forward.)

• There is no mandatory loan modification language required in the bill, only that there is discussion of options for the homeowner – including foreclosure.  During mediation both the homeowner and beneficiary must bring documents, and provide those documents to the mediator before the mediation session.  There is no requirement that the physical note be present; the sword affidavit still holds as we’ve used in past years.

• Financial institutions have offered up $250 per NOD filing to pay for housing counselors – about $7.5 million in new funds.

• Financial institutions that have filed less than 250 NODs in the last year are exempt from the new requirements, and from the fee.  (Basically credit unions and community banks.)

The bills still have a significant way to go in the process, and there are still advocacy groups arguing that there should be a requirement to produce the actual note, and arguing that the bills don’t go far enough for homeowners.  I believe, however that because we have already reached agreement, these issues won’t get traction.  They’ll need to be monitored.

Trustees also attempted to hang language into a bill that would have taken a negative piece of legislation and turn it into something productive for the industry.  SB 5309 originally was a bad bill, requiring the beneficiary to produce a chain of custody for a note, among other issues.  Trustees worked with those who were supporting the bill to strip out that language and other, problematic sections, in exchange for addressing some of their minor issues.  Trustees would have gained significant benefit, including resolving issues around the Udall case.  Unfortunately, the amendment was drafted without enough time to fully vet the issues with all parties including the Chair of the committee, and the bill died.  However, we have agreement to bring the bill to the Legislature in 2012, and parties have agreed to meet during the summer to draft legislation folks can support.