The Foreclosure Fairness Act
- Issuer
- Congressional materials
- Document type
- 2020 05 28 A26875 D221228 Wa State Dept Of Commerce The Foreclosure Fairness Act
- Date
- 2020-05-28
- Case
- 2020 05 28 A26875 D221228 Wa State Dept Of Commerce The Foreclosure Fairness Act
Summary
A Washington State Department of Commerce presentation on the Foreclosure Fairness Act, given to the Financial Institutions, Economic Development, and Trade Committee on May 28, 2020 by the managing director of its Community Economic Opportunities Unit. It describes the program's components, including the hotline, housing counseling, mediation, legal assistance and enforcement, and its funding through a $325 fee per recorded Notice of Trustee's Sale distributed under RCW 61.24.172. Charts report homeowners assisted, mediation referrals and counseling capacity by year. The presentation discusses COVID-19 and CARES Act forbearance, states that Notice of Trustee Sale recordings in the six most populous counties were 71% lower in April 2020 than April 2019, and says Commerce is requesting $20M in CARES Act funding for foreclosure services.
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Full text
The Foreclosure
Fairness Act
Presentation to Financial Institutions, Economic
Development, and Trade Committee
Cecil Daniels
MANAGING DIRECTOR – COMMUNITY ECONOMIC OPPORTUNITIES UNIT
MAY 28, 2020
We strengthen communities
HOUSING INFRASTRUCTURE BUSINESS ENERGY
HOMELESSNESS ASSISTANCE
PLANNING COMMUNITY FACILITIES CRIME VICTIMS & COMMUNITY
PUBLIC SAFETY SERVICES
WASHINGTON STATE DEPARTMENT OF COMMERCE 2
Foreclosure Fairness
Program
History and Funding
Foreclosure Fairness Act Brief History
WASHINGTON STATE DEPARTMENT OF COMMERCE 4
Key Components of the FFA
Financial Institutions
• Fund the FFA through fees paid on Notices of Trustee Sales; willing participant in process
Washington Homeownership Resource Center – Hotline
• Free resource to borrowers, explains timelines, options and refers to housing counselors or legal aid
Housing Counseling
• Statewide network of counseling agencies, managed by Washington State Housing Finance Commission
Counselor works directly with homeowner & financial institution
• Can represent homeowner at mediation
Mediation
• Available at a homeowners request when initial negotiations do not result in an agreement
• Managed by Department of Commerce, who determines eligibility & assigns mediators
Legal Assistance
• Office of Civil Legal Aid oversees network of nonprofit providers
• Available for more difficult cases with underlying legal issues which may include representation in court
Enforcement of the FFA
• WA State Attorney General’s Office enforces the rules and requirements of the act
WASHINGTON STATE DEPARTMENT OF COMMERCE 5
Stakeholder Group
For nearly a decade the FFA Stakeholder Group, led by
Representative Orwall has brought together a diverse partnership:
• National and Local Banks • Legal Aid
• Credit Unions • Housing Counselors
• Foreclosure Trustees • Homeowner Associations
• Auditors • Consumer Advocates
• Cities • Other Interested Parties
• Counties
WASHINGTON STATE DEPARTMENT OF COMMERCE 6
FFP Funding
Fee income:
• Bank/loan servicer pays $325 per recorded Notice of Trustee’s Sale to
fund program; $25 million in revenue since 2011
• The fee revenue pays
• No charge to home owner for referral into mediation program through
a housing counseling agency; $600 mediation fee paid to mediator by
bank and borrower equally ($300 by each party)
National settlements and federal grants (expired by 2019):
• National Mortgage Settlement
• Other national settlements
• HUD/Federal grants
WASHINGTON STATE DEPARTMENT OF COMMERCE 7
Funding Distribution
Distribution of fees collected is set forth in RCW 61.24.172 as
follows:
• $400k per biennium for the “Hotline” – Washington Homeownership
Resource Center the remaining funds are distributed by the following
statutory allocation:
• 69% – WSHFC for Contracting for Free Counseling Services
• 17% – Commerce for Mediation and Program Administration
• 8% – Office of the Attorney General
• 6% – Office of Civil Legal Aid
WASHINGTON STATE DEPARTMENT OF COMMERCE 8
Homeowner Support
Housing Counseling, Legal Aid, and Mediation
Homeowner Support Process
WASHINGTON STATE DEPARTMENT OF COMMERCE 10
Homeowner Support Process Cont.
• Homeowners can also enter the program, specifically
mediation, via a private attorney
• Historically half of all mediation referrals are made by private attorneys
• Homeowners may have additional legal concerns for which they have
already procured a private attorney
• Some homeowners are not represented by their referring attorney, in
those instances Commerce takes additional steps to ensure
homeowners know free representation is available
WASHINGTON STATE DEPARTMENT OF COMMERCE 11
Over 24,000 Homeowners Assisted
7,000
6,198
6,000
5,465
5,000
3,998
4,000
3,174
2,919
3,000
2,453
2,000
1,000
0
13/14 14/15 15/16 16/17 17/18 18/19
WASHINGTON STATE DEPARTMENT OF COMMERCE 12
Over 11,000 Homeowners Referred to Mediation
3000
2,549
2500
2,037
2000
1,560 1,517
1500
1,135
1000 894
802
605
500
0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 Fy19
WASHINGTON STATE DEPARTMENT OF COMMERCE 13
Number of Counseling Agencies
20
18
18
16 16 16 16
16
14
12
10
8 7
6
4
2
0
13/14 14/15 15/16 16/17 17/18 18/19
WASHINGTON STATE DEPARTMENT OF COMMERCE 14
Number of Housing Counselors
90
80 77
70
64
60
52
50
42
40
40
30
30
20
10
0
13/14 14/15 15/16 16/17 17/18 18/19
WASHINGTON STATE DEPARTMENT OF COMMERCE 15
Challenges Facing the FFP
Funding and Effects of COVID-19
COVID – 19 Implications
• CARES Act - Federally backed mortgages holders (Fannie Mae,
Freddie Mac, FHA, VA, and USDA) directly or indirectly affected
by the pandemic are able to seek a 180-day forbearance and an
additional 180-day forbearance.
• The length of the forbearance can only be limited by the borrower.
• The Department of Financial Institutions estimates over 90% of WA
residential mortgages are covered by the CARES Act.
• The remaining 10% of residential mortgages have no mandated
protection mechanism. Borrowers are provided only voluntary
protections.
WASHINGTON STATE DEPARTMENT OF COMMERCE 17
COVID-19 Implications Cont.
• Forbearance is a misunderstood concept to many- if not most-
borrowers.
• Specifically, under a traditional forbearance, once the forbearance ends, all payments-
including the current payment- are due.
• As an example: if a borrower with a $1,500 mortgage payment entered forbearance
for the months of April, May and June, a payment of $6,000 would be due in July to
avoid default.
• On May 13 the Federal Housing Finance Agency announced payment deferral as an
option for borrowers exiting forbearance with a Fannie Mae or Freddie Mac loan.
• This option only applies to borrowers “who are able to return to making their normal
monthly mortgage payment.” If traditional underwriting standards are used it may be
nearly impossible for borrowers to qualify.
WASHINGTON STATE DEPARTMENT OF COMMERCE 18
COVID-19 Implications Cont.
• The CARES Act did not address how the forbearance would be
exited and provides no guidance for loan modification options.
• During a stakeholder call on May 5, 2020 a banking
representative indicated approximately 6% of mortgage clients
had contacted their financial institution clients about their
mortgage.
• For context, 6% of residential mortgages in WA state translates
to approximately 62,500 mortgages. This number is also likely
to rise.
WASHINGTON STATE DEPARTMENT OF COMMERCE 19
Funding Challenges
Revenue from fees and external sources have been drastically
reduced or have been exhausted.
• One unintended consequence of the CARES act is the reduction in
Notice of Trustee Sale recordings. This eliminates the sole fee source
for the program.
• In the six most populous counties, NOTS recordings were 71% lower in
April 2020 than April 2019 (dropped from 313 to 92 recordings).
• National Mortgage Settlement funds, grants and other federal funds all
ended by 2019
• Prior to COVID-19 the program already faced a funding deficit of $1.5M
to maintain a base level of statewide homeowner support.
WASHINGTON STATE DEPARTMENT OF COMMERCE 20
Annual Funding
$7,000,000
$6,377,825
$6,000,000
$5,000,000
$4,112,750
$4,000,000
$3,482,450
$3,000,000 $2,715,500
$2,561,500
$1,888,750
$2,000,000
$1,277,300 $1,295,200 $1,200,000
$1,000,000
$360,000
$0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 est. FY21 est.
WASHINGTON STATE DEPARTMENT OF COMMERCE 21
Funding cont.
• For perspective entering the height of the foreclosure crisis in
2013 there was approximately $50M in funding from program
and other sources to support foreclosure prevention services.
• Entering this crisis there is approximately $1M in funding to
support the estimated 60,000 borrowers who contacted their
financial institution in April alone, a one-month total that
surpasses all of 2013.
• The success of the program will prevent a “catching up” once
the forbearances have ended.
WASHINGTON STATE DEPARTMENT OF COMMERCE 22
Funding Options/Alternatives
• $607,000 was provided in the FY21 Supplemental Budget for
foreclosure prevention services. This will fund some services
for approximately 2-3 months.
• Commerce is requesting $20M in CARES Act funding to solidify
the infrastructure of the foreclosure services in the state.
• $20M could support over 11,000 households with foreclosure
counseling and legal assistance.
• 50 counselors carrying a caseload of 72 clients annually over 3 years = 10,800
households served
• 12 legal aid attorneys carrying a caseload of 40 clients annually over 3 years =
360 households served
WASHINGTON STATE DEPARTMENT OF COMMERCE 23
Legislative Improvements
Legislative Improvements
• Address funding mechanism to align fee with services
• Working with stakeholders to address the disconnect between a
homeowners need for the program and the revenue source
• Achieve better insight into default/foreclosure activity
• The program would benefit from more complete and earlier
identification of homeowners facing default action, while protecting
their identity from public disclosure and potential scams
WASHINGTON STATE DEPARTMENT OF COMMERCE 25
Conclusions
Conclusions
• The economic crisis related to COVID-19 will have lasting
effects on many WA residents.
• There are currently no programs outside of the FFP to help
borrowers navigate their financial situation
• Without outside financial intervention the FFP will have no
ability to meet the needs of WA citizens facing foreclosure.
WASHINGTON STATE DEPARTMENT OF COMMERCE 27
Thank you for
www.commerce.wa.gov
your time.
Cecil Daniels
COMMERCE – COMMUNITY ECONOMIC
OPPORTUNITIES UNIT – MANAGING DIRECTOR
Cecil.Daniels@commerce.wa.gov
360-725-4144
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