Summary of HB 1362

Michelle Mierzwa, Esq.

By Michelle Mierzwa, Esq., Counsel, Cal-Western Reconveyance Corp.

HB 1362 has been enacted, and the majority of the provisions become effective on July 22nd.  This Bill brings Mandatory Mediation to Washington State and will significantly lengthen the nonjudicial foreclosure process. 

• The Bill requires the beneficiary/servicer to make an enhanced pre-foreclosure notice (containing specific statutory language) to the borrower of the right to request a pre-foreclosure in-person meeting to discuss alternatives to foreclosure. The Department of Commerce has indicated that the required form of the pre-foreclosure notice letter will be available on its website in the first week of June.  See attached Memo.
  
  
• If the meeting is requested within 30 days, requires the beneficiary to wait another 60 days before any Notice of Default can be issued in order to conduct or make due diligence to conduct the in-person meeting.
  
  
• An enhanced Beneficiary Declaration “Foreclosure Loss Mitigation Form” must be attached to the Notice of Default to reflect compliance with these new provisions.
   
  
• The Bill also provides the borrower the option to request mediation during the foreclosure process if referred by a housing counselor or attorney. The housing counselor or attorney must send a notice to the borrower and the Department of Commerce stating that mediation is appropriate. The Department of Commerce has indicated that the mediation referral document will be made available on its website two weeks prior to July 22, 2011. See attached Memo.
  
  
• Within 10 days of receiving the notice, the Department must send a notice to the borrower, housing counselor/attorney, beneficiary and foreclosure trustee advising of the referral to mediation, and select a mediator and notify the parties of the selection.
  
  
• The mediation shall occur within 45 days of the referral, unless the parties agree in writing to an extension of time and the beneficiary provides the foreclosure trustee with notice of the extension.
  
  
• There are detailed provisions regarding the conduct of the mediation, and the Department of Commerce is tasked with creating the required forms for notification and processing of the mediation.
  
  
• If mediation is requested within the 30-day time period from the issuance of the NOD, the Notice of Sale cannot be issued until the mediation is completed.
  
  
• The mediator is to issue a report within seven days of the completion of the mediation, and if not issued within the 10 days after this deadline, the Notice of Sale can be recorded by the trustee.
  
  
• Both the pre-foreclosure notice and the mediation program apply only to owner occupied properties.  Owner occupancy is determined at the time the pre-foreclosure notice is issued.  The previous limitation to deeds of trust recorded between January 1, 2003 and December 31, 2007 has been REMOVED, so these provisions are applicable to ALL owner occupied properties.

SOME OF THE SECTIONS OF THE BILL WERE EFFECTIVE April 14, 2011 and required action by May 14, 2011.

Section 11 requires the Washington State Treasurer to establish a Foreclosure Fairness Account.

Section 12

• By May 14, 2011, a beneficiary must prepare and submit a report with the number of Notices of Default (only one per property) related to the foreclosure of owner-occupied residential real property that it issued in Washington for the 3 months prior to April 14, 2011.
  
  
• By May 14, 2011, a beneficiary must pay to the Washington State Department of Commerce Account $250 per non-duplicate NOD in a lump sum, along with submission of the NOD report.  Instructions from the Department of Commerce regarding the initial payment are attached.
  
  
• On a quarterly basis, beginning October 1, 2011, the NOD report and a lump sum payment (for the number of NODs issued in the prior quarter) to the Washington State Department of Commerce will be required.  The Department of Commence has indicated that additional instructions regarding these quarterly payments will be provided later, and we will update you as soon as possible.
  
  
• Exemption to reporting and payment provisions for “federally insured depository institutions” that have issued “fewer than 250 notices of default in the preceding year.”

Section 16

• Requires the Washington Statement Department of Commerce to: create rules and forms to implement the foreclosure mediation program and administer the funds.