By Holly Chisa, HPC Advocacy, UTA Washington State Lobbyist
The Washington housing market continues to thrive, with housing prices trending above the national average since mid-2023. We have one of the lowest foreclosure rates in the country, ranked by SoFi as 41st in the nation. There is little need to make significant adjustments to our Foreclosure Fairness Act (FAA) or the supporting statutory structures but there is interest in continued clean up in provisions of the statute.
Currently, the Washington State Department of Commerce (COM) is rewriting the guidance documents used by all parties which participate in the FAA mediation program. There were three meetings over the summer and these meetings included:
- – Mediators
- – Attorneys for homeowners
- – Financial institution representatives
- – UTA members
- – Civil legal aid attorneys
- – Other parties
Most of the discussion focused on best practices and training for mediators. One of the more contentious issues relates to the payment of fees. Financial institutions are able to pay their fees without significant delay, typically within the 30-day requirement and as requested by the mediator. There is concern, however, for homeowners. Under the current guidance document, mediator fees are due to the mediator 30 days from receipt of Commerce’s notice UNLESS INSTRUCTED OTHERWISE BY THE MEDIATOR. Mediators and homeowner representatives disagree on this practice. Advocates for homeowners believe 30 days should be the minimum standard to protect borrowers. Mediators argue there is work to be done prior to mediation and those costs should be covered in less than 30 days. There were hours of discussion on this point over the three stakeholder meetings, but no decision was reached. For now, mediators will continue to set the timeframe for when fees are due with 30 days as the benchmark.
There were also discussions on the ability for the mediator to set meetings even if the negotiating parties had agreed to a postponement. Under current rules, a mediator can refuse to reschedule a negotiation even at the request of both parties. While the advocates for both the homeowners and financial institutions supported a guidance change on this point, the mediators resisted. Mediators want the ability to call the meeting even with an agreed-to postponement to gather other information from the parties and learn why there is a delay. Advocate attorneys and financial institution representatives pushed back arguing that the meetings are not productive and take away time for negotiations between the borrower and lender on a potential resolution between the parties internally.
As financial institutions continue to strengthen their internal systems for addressing foreclosure – equity sales, loan modifications, etc. – it may be well time to address the role of mediators and their ability to make determinations without a state or COM agency requirement for certification or training. There is an interest among stakeholders to set new standards for when mediators should have the authority to override discussions between homeowners and financial institutions.
Universally there is a sense that there needs to be some kind of training and certification process for mediators that includes sitting in on sessions before certification. Ongoing training was also recommended. Comments collected by the WA Department of Commerce had common themes about mediators – written certificates not being sent in a timely manner; notices being sent to borrowers but not their legal representatives; requiring mediation even when parties have agreed to a delay; lack of remedy or enforcement action against mediators not completing tasks. Mediator training is a welcome suggestion from UTA’s perspective. We have been asking for training for both new and continuing mediators for years. As laws are updated and recommendations come down from federal agencies, it is appropriate to expect regular training and guidance for mediators. This is especially important as mediators have the ability to issue findings of bad faith even as mediations provide successful resolution. It is unclear how the WA Department of Commerce would structure this training, but UTA will support efforts to include funding in the state budget to help pay for mediation training and ongoing guidance.
We likely will see legislation to update the statutes based on requests of advocates and mediators. Several changes they’ve requested in these discussions are statutory and cannot be made without changing the underlying law. One of the terms they’d like removed is the term “short sale” which they believe is not reflective of the current market. The term short sale appears in RCW 64.24.031(4) and cannot be changed without a law change. Additionally, they would like to remove the net present value/NPV language found in RCW 61.24.177. Ironically, the NPV language was a critical point of contention in the negotiations as we built the FFA. Homeowner advocates refused to accept any deal that did not include NPV language no matter the alternative offered. It gets to the issue of placing specific wording in statute instead of providing flexibility for future innovations. Over the years we’ve had to remove language related to HAMP and other, federal programs; at some point we’ll have to remove the statutory language around HAF as well. It’s unclear what the choice will be to replace NPV language in statute, but hopefully it will be language that is more concepts driven around home values and not specific to one program.
I anticipate several deliverables from these three open forums from July and August. I anticipate a redrafting of the WA Department of Commerce Foreclosure Fairness Program Guidelines. The redraft will include the recommended changes of the stakeholders, but likely will NOT include changes to payment schedules or authority of the mediators. Those changes will likely be offered as part of legislation for the 2025 session, and would focus on requirements for training, removing outdated terminology, and potentially adjusting timelines for payments for mediation. We have not heard from the advocates whether there is interest in making further changes to the statute. Most of the legislative focus has been on rental housing and tenant protections, especially coming out of the pandemic. With Washington’s housing market still relatively stable leaning hot, and interest rates lowering again, we may not see significant legislation in 2025. This would be the ideal time, then to discuss mediator training and further improvements to the basic structures of the FFA.