For homeowners AND financial institutions, Washington law is no longer clear when a financial institution may enter a home, or when a home can be determined to be “vacant.” In Jordan vs. NationStar, the Washington State Supreme Court ruled that financial institutions cannot take possession of a property unless it has foreclosed. This would sound reasonable except in the high number of cases when a homeowner walks away from a property, and that property is neglected. What, then, is the financial institution’s obligation to maintain that property, and can that obligation be required by a municipality or HOA before the NOTS?
The Supreme Court ruling in Jordan vs. NationStar creates ambiguities in the law that go beyond the scope of what may have been intended by the Court. While there have been limited standards for addressing the rights of homeowners and financial institutions when a home is clearly occupied, it becomes far less obvious when the homeowner has walked away from a property, or has told the financial institution the family has left, and yet remains. Once the home becomes a neighborhood blight, or if there is a public health or safety risk with the property – say, a water leak – when can the financial institution enter the home or change the locks? Because of the expansive nature of the NationStar ruling, many financial institutions have decided not to work on a property until after the filing of the NOTS, or until after the sale. This creates conflicts with local governments who are trying to address blighted or nuisance properties that financial institutions now will not touch.
A coalition of interests is working to determine whether legislation can pass to resolve this issue. Lawmakers, advocates for homeowners, financial institutions, and the UTA are meeting together to discuss proposed language and the reasons that a financial institution should be able to enter a home. Local governments have joined this discussion, as their costs to address blighted and abandoned properties have escalated over time. These discussions are complicated – when is the home considered to be abandoned, how does a financial institution determine that a homeowner has moved out, if there’s an error, how should the financial institution respond to the homeowner to correct the situation, etc. And, from the cities’ perspective, what are the responsibilities of the financial institution when a home is considered a blighted property, but the financial institution is unclear whether the homeowner has abandoned the property?
This is not a primary issue for trustees specifically, but goes to the larger issue of how to address properties that don’t follow the normal “flow” of a property in delinquency or foreclosure. While many foreclosures follow a couple of traditional, expected paths, foreclosures can extend on for years because of their complexity. A small number of foreclosures can come with unique circumstances – an elderly individual that is hospitalized, and his children or estate is managing the property, for example. These circumstances can extend the foreclosure process indefinitely, and make it ambiguous for financial institutions to know when they can and cannot take possession of a blighted property. Couple with this the frustrations of neighbors concerned with a perceived abandoned property by their house, or a Homeowners Association that wants the property maintained during a foreclosure, and the situation can become complex in a hurry.
The 2017 Washington Legislature is scheduled to meet for at least 105 days, which gives this coalition several months to determine what agreements can be reached on NationStar. It is likely other issues will also be placed before the Legislature, including the advocates’ suggested changes the the 2015 Brown decision. During the session, UTA members that operate in Washington state are encouraged to join us for the annual Day on the Hill at the state capitol. The NationStar case, as well as other pieces of legislation, will be discussed with lawmakers from throughout the state. Lawmakers will draft and pass legislation that directly affects how UTA members work through the Deed of Trust Act, and your input is critical. As always, any language proposed in Washington will be shared among the UTA members for your review, input and corrections. We look forward to working with you both on the NationStar issue, any other bills before the Washington Legislature in 2017.