Annual Report - 2020 Final Foreclosure Fairness Program Annual Report Combined 439800C3 Da6
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- 2020 Final Foreclosure Fairness Program Annual Report Combined 439800C3 Da6
Summary
The Washington State Department of Commerce's 2019 Foreclosure Fairness Program annual report to the Legislature under RCW 61.24.163, dated August 2020, with a cover letter dated August 4, 2020 to the Secretary of the Senate and the Chief Clerk of the House. The cover letter states that CARES Act moratorium and forbearance provisions affect the program's funding source, reporting that recordings of Notices of Trustee Sales in April 2020 were down approximately 71% from April 2019. The report finds declining funding and more challenging cases, and states that in fiscal year 2019 housing counselors served more than 2,400 homeowners, the program received 560 referrals and an estimated 6,000 NOTS were recorded. It describes the $325 fee per Notice of Trustee Sale, partner agency roles and the seven housing counseling agencies, and closes with accounts from housing counselors.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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STATE OF WASHINGTON
DEPARTMENT OF COMMERCE
1011 Plum Street SE PO Box 42525 Olympia, Washington 98504-2525 360-725-4000
www.commerce.wa.gov
August 4, 2020
Mr. Brad Hendrickson, Secretary of the Senate
Legislative Building 312
PO Box 40600
Olympia, WA 98504-0600
Mr. Bernard Dean, Chief Clerk of the House of Representatives
Legislative Building 338B
PO Box 40600
Olympia, WA 98504-0600
Re: 2019 Foreclosure Fairness Report
Dear Mr. Hendrickson and Mr. Dean:
Commerce’s 2019 legislative report on the Foreclosure Fairness Program reflects a still-robust
economy in which foreclosures were significantly reduced compared to the most recent housing
crisis levels. However, while some households still faced a difficult reality when negotiating
with financial institutions, especially in a very strong housing market.
The COVID-19 pandemic has and will continue to significantly alter the foreclosure landscape in
2020 and beyond.
The federal CARES Act brought some relief by establishing a moratorium on foreclosures on
properties with federally backed loans. The Department of Financial Institutions estimates
upwards of 90% of residential mortgages in Washington are covered by these moratorium and
forbearance provisions.
The CARES Act also requires servicers to give homeowners with federally backed mortgages up
to two 180-day forbearances. These forbearances, however, have an unintended consequence of
potentially bypassing the Notice of Trustee Sales, which is the funding source of the Foreclosure
Fairness Program. In April 2020, the recording of Notices of Trustee Sales statewide was down
approximately 71% compared to April 2019. In addition, forbearances exacerbate a steady
downward trend in program revenues in effect since FY 2013. This loss in revenue is particularly
important because the FPP is the only state or federal program that provides homeowners
Mr. Brad Hendrickson and Mr. Bernard Dean
August 4, 2020
Page 2
technical assistance, legal aid, and mediation as they navigate this economic crisis with their
financial institutions. Barring a vaccine or some other significant economic turnaround, a wave
of foreclosures equal to or exceeding the recent housing crisis is expected.
Commerce submitted a proposal to the Office of Financial Management to provide some short-
term relief to borrowers and will continue to work with interested legislators and foreclosure
stakeholders to identify an adjustment in the fee mechanism to address the growing shortfall in
revenue.
Please contact Nathan Peppin by phone at (360) 725-2868 or email at
Nathan.Peppin@commerce.wa.gov or myself by phone at (360) 725-4144 or email at
Cecil.Daniels@commerce.wa.gov if you have any questions regarding this report.
Sincerely,
Cecil Daniels
Managing Director
Community Economic Opportunities Unit
Community Services and Housing Division
Foreclosure Fairness
Program
ANNUAL REPORT ON PROGRAM PERFORMANCE PER RCW 61.24.163
August 2020
REPORT TO THE LEGISLATURE
Lisa Brown, Director
Acknowledgments
Washington State Department of Commerce
Diane Klontz, assistant director, Community Washington State Department of Commerce
Services and Housing Division Nathan Peppin
nathan.peppin@commerce.wa.gov
Cecil Daniels, managing director, Community
Economic Opportunities Unit Foreclosure Fairness Program
Nathan Peppin, program manager, Foreclosure 1011 Plum St. SE
Fairness Program P.O. Box 42525
Olympia, WA 98504-2525
Zoë Myers, program coordinator, Foreclosure
Fairness Program www.commerce.wa.gov
For people with disabilities, this report is available
Washington State Housing Finance
on request in other formats. To submit a request,
Commission please call 360.725.4000 (TTY 360.586.0772).
Steve Walker, executive director
Washington State Office of the Attorney
General
Bob Ferguson, attorney general
Office of Civil Legal Aid
James Bamberger, director
Special thanks to the Dispute Resolution
Centers, Northwest Justice Project, mediators,
attorneys and housing counselors who
collaborate with the Department of Commerce
to implement and deliver the Foreclosure
Fairness Program
Special thanks to Jayme Khoo, analysis and
visualization manager in the Housing
Assistance Unit, and Paul Currington,
communications specialist in the Energy
Division, for, respectively, the heat maps and
graphics contained in this report
FORECLOSURE FAIRNESS REPORT 2019
Table of Contents
Executive Summary........................................................................................................................... 2
Introduction ...................................................................................................................................... 5
Foreclosure Fairness Program Outcomes ........................................................................................ 13
Current Foreclosure Climate ............................................................................................................ 22
Stories Housing Counselors Shared................................................................................................. 24
FORECLOSURE FAIRNESS REPORT 2019 1
Executive Summary
Overview
This report provides Foreclosure Fairness Program data to satisfy RCW 61.24.163 as well as additional
programmatic context and background. The full text of the legislative reporting requirements are
below:
18) Beginning December 1, 2012, and every year thereafter, the department shall report annually to the
legislature on:
(a) The performance of the program, including the numbers of borrowers who are referred to mediation
by a housing counselor or attorney;
(b) The results of the mediation program, including the number of mediations requested by housing
counselors and attorneys, the number of certifications of good faith issued, the number of borrowers
and beneficiaries who failed to mediate in good faith, and the reasons for the failure to mediate in good
faith, if known, the numbers of loans restructured or modified, the change in the borrower's monthly
payment for principal and interest and the number of principal write-downs and interest rate reductions,
and, to the extent practical, the number of borrowers who report a default within a year of restructuring
or modification;
(c) The information received by housing counselors regarding outcomes of foreclosures; and
(d) Any recommendations for changes to the statutes regarding the mediation program.
Navigating the Report
To help readers navigate the report, Table 1 provides directions to the locations of the required report
data.
Table 1: Annual Reporting Requirements Under RCW 61.24.163(18)
Subsection Proviso Location
“The performance of the program, including the
(a) numbers of borrowers who are referred to mediation by Table 3
a housing counselor or attorney."
“The results of the mediation program, including the
(b) number of mediations requested by housing counselors Tables 5, 6, 7 and 8
and attorneys.”
“The number of certifications of good faith issued, the
number of borrowers and beneficiaries who failed to
(b) mediate in good faith, and the reasons for the failure to Tables 6 and 7
mediate in good faith, if known, the numbers of loans
restructured or modified.”
FORECLOSURE FAIRNESS REPORT 2019 2
Subsection Proviso Location
“The change in the borrower’s monthly payment for
(b) principal and interest, and the number of principal write- Table 6
downs and interest rate reductions.”1
The Department of Commerce
“To the extent practical, the number of borrowers who
conducted a survey in 2014 that
(b) report a default within a year of restructuring or
determined this information is not
modification.”
available.
“The information received by housing counselors
(c) Table 5
regarding outcomes of foreclosures.”
"Any recommendations for changes to the statutes
(d) No recommendations
regarding the mediation program."
Key Findings
The two key findings both relate to a decline in foreclosure activity in Washington. Even though the
declining number of foreclosures is positive overall, the trend creates new challenges.
1. Declining Funding
Foreclosure activity funds the Foreclosure Fairness Program through a fee beneficiaries pay per Notice
of Trustee Sale (NOTS). The decline in foreclosures is overall a positive trend. However, the current
revenue source cannot sustain the existing statewide infrastructure as defined in statute. See Figure 4
and Figure 5 for more details on funding and rates of foreclosures versus referrals.
2. Trends Show More Challenging Cases
In this robust economy with a strong housing market, people facing foreclosures are struggling to
obtain mediation agreements that include home retention. The program often receives anecdotal
reports from housing counselors that they are representing fewer overall borrowers in mediation but
that the cases have become more challenging. Data from the Washington State Homeownership
Resource Center confirms that the reasons for mortgage defaults have shifted over the past few years
(see Figure 8).
Recommendations
The Department of Commerce does not currently have any recommendations for changes to the
statute. The Legislature made statutory changes to the program in the previous two sessions, which
this report discusses in the "Background on Funding" section in the "Introduction."
1 Chapter 61.24.163 RCW requires the Department of Commerce to report on “the change in the borrower’s monthly payment
for principal and interest.” This data is contained in private documents that are not available to Commerce and, therefore, is
not included in this report.
FORECLOSURE FAIRNESS REPORT 2019 3
Conclusions
Washington is not currently experiencing a widespread foreclosure crisis. However, families and
individuals who might lose their homes are experiencing personal crises. The Foreclosure Fairness
Program is a vital resource to Washington homeowners that helps borrowers preserve homeownership
and maintain financial sustainability.
In fiscal year 2019:
Housing counselors served more than 2,400 homeowners.
The program received 560 referrals.
An estimated 6,000 NOTS were recorded.
If Washington were to experience a future economic decline, foreclosures could increase, and the
Foreclosure Fairness Program would be an important resource for households facing foreclosure.
FORECLOSURE FAIRNESS REPORT 2019 4
Introduction
Background
The Legislature passed the 2011 Foreclosure Fairness Act (Chapter 58, Laws of 2011) at the height of
the national foreclosure crisis. The act intended to do two things:
1. Reshape the non-judicial foreclosure process in Washington to help protect homeowners from
avoidable foreclosures; and
2. Ensure that, even when foreclosure is unavoidable, the process is fair, transparent, and allows both
borrower and beneficiary to meet and make well-informed decisions.
Overview
The Foreclosure Fairness Act assigns the primary responsibility for developing and managing the
Foreclosure Fairness Program (FFP) to the Department of Commerce. The agency partners with the
following entities to perform the work:
Washington State Housing Finance Commission (WSHFC)
Office of the Attorney General (AGO)
Office of Civil Legal Aid (OCLA)
The Foreclosure Fairness Program also collaborates with:
Dispute Resolution Centers2
Mediators
Attorneys (private and civil legal aid)
Housing professionals
Initially, the Department of Financial Institutions provided education and outreach on foreclosure
prevention. However, given the decrease in available funds, Commerce has assumed these
responsibilities on an as-needed basis.
Program Funding
Current Funding Structure
Fees mortgage lenders (“beneficiaries”) pay fund the FFP. As of the second quarter of state fiscal year
2018, each beneficiary must pay a $325 fee into the Foreclosure Fairness Fund for each original Notice
2 Dispute Resolution Centers provide affordable mediation to resolve several types of disputes, including parenting plans,
divorces, landlord-tenant issues and foreclosures. Learn more at http://resolutionwa.org/.
FORECLOSURE FAIRNESS REPORT 2019 5
of Trustee Sale recorded against owner-occupied residential real properties in the state.3 The fund pays
for:
Free-to-homeowners foreclosure counseling
Consumer protection and enforcement of the Foreclosure Fairness Act
Development and oversight of the mediation process4
Foreclosure prevention outreach and education
Legal assistance for low- and moderate-income homeowners
Figure 1: Foreclosure Fairness Program Funding Allocation
Office of Civil Legal Aid
6%
Attorney General's Office
8%
Housing Finance
Commission
Department of 69%
Commerce
17%
Source: Washington State Department of Commerce
Background on Funding
A $250 fee beneficiaries paid for every issued Notice of Default (NOD) issued originally funded the
program. However, a NOD is issued to a borrower and is not a public record. As a result, the program
could not determine whether the fee revenue collected fully represented the fee revenue due to the
program.
The 2016 Legislature (Chapter 196, Laws of 2016) shifted the source of funds to the recorded Notices
of Trustee Sale (NOTS) to reconcile fee revenue more effectively. Additionally, to better identify the fee
revenue due to the program, Chapter 306, Laws of 2018 changed the recording process to require
3 Beneficiaries who record fewer than 50 Notices of Trustee Sale in a calendar year are exempt from this fee.
4 A separate fee split between homeowner and beneficiary pays mediators.
FORECLOSURE FAIRNESS REPORT 2019 6
indexing of these notices. Chapter 306, Laws of 2018 also increased by 30%, to $325, the fee
beneficiaries pay per NOTS.
Lawmakers intended for this change to increase program funding. However, the continued decline in
foreclosure activity meant the increased fee offset only some of the declining revenue. The decline in
foreclosures is overall a positive trend. However, the current revenue source cannot sustain the existing
statewide infrastructure. See Figure 4 and Figure 5 for more details on funding and rates of
foreclosures versus referrals.
The passage of Chapter 196, Laws of 2016 modified RCW 61.24.172, which outlines the distribution of
funding to the agencies providing services under the Foreclosure Fairness Act. Beginning in state fiscal
year 2017, the Homeownership Resource Hotline has received $400,000 per biennium. The partner
agencies receive percentages of the remaining funds (see Figure 1).
Agency Partner Roles and Responsibilities
Overview
Washington State Office of the Attorney General
The Office of the Attorney General's Consumer Protection Division created the Foreclosure Compliance
Program to enforce the Deed of Trust Act. The Foreclosure Compliance Program investigates
complaints related to foreclosure.
Washington State Department of Commerce
Commerce is charged with the overall management of the program and the administration of the
Foreclosure Fairness Fund. Its FFP is responsible for recruiting, training and approving mediators.
Commerce also receives referrals and assigns mediators to eligible cases. Additionally, Commerce is
responsible for maintaining a list of approved foreclosure mediators. The act identifies the following
groups as eligible to become foreclosure mediators:
Attorneys
Retired judges
U.S. Department of Housing and Urban Development approved housing counselors
Employees and volunteers of Dispute Resolution Centers
Commerce requires participating mediators to take foreclosure mediation training and have additional
documented mediator training and experience.5 Currently, 67 active mediators are on Commerce's
approved list. Mediators have full discretion in conducting the sessions and in their determinations of
outcomes (see Figure 3 for possible mediation outcomes).
5 Washington State Department of Commerce, "Interested in Becoming a Mediator?," (2013),
https://www.commerce.wa.gov/wp-content/uploads/2015/11/ffp-interested-in-becoming-mediator-2013.pdf
FORECLOSURE FAIRNESS REPORT 2019 7
Washington State Housing Finance Commission
The WSHFC administers a homeowner-counseling program. The commission also oversees the toll-
free Homeownership Resource Hotline,6 which provides homeowners with no-cost foreclosure
prevention counseling. Much of the FFP funds directed to the WSHFC support free-to-consumers
foreclosure-related housing counseling services throughout the state, including:
Information and referrals
Preparation for and representation at meet-and-confer sessions
Preparation for and representation at mediation
Homeowner education and participation in community projects benefiting homeowners
The WSHFC reports that for state fiscal year 2019, the number of housing counseling agencies dropped
from nine to seven (down from 16 when the program started). In addition, the number of foreclosure-
prevention counselors dropped from 40 in July 2018 to 30 by June 2019. Table 2 names the seven
counseling agencies and the areas of the state they serve.
Table 2: Housing Counseling Agencies and Counties Served
Agency Service Area
Statewide, but primarily Kitsap, King, Pierce and
American Financial Solutions
Snohomish counties
Parkview Services Statewide
Statewide, but primarily King, Pierce and Snohomish
Urban League of Metropolitan Seattle
counties
Community Housing Resource Center Clark, Cowlitz, Lewis and Skamania counties
SNAP (Spokane Neighborhood Action Partners) Spokane County and most of Eastern Washington
Northwest Consumer Law Center Statewide
Northwest Justice Project Statewide
Source: Washington State Housing Finance Commission
Office of Civil Legal Aid
The Office of Civil Legal Aid (OCLA) contracts with qualified legal aid programs to provide no-cost legal
assistance to low- and moderate-income homeowners in matters related to foreclosure. Commerce
partners with OCLA to provide this assistance. OCLA grants all of the Foreclosure Fairness Act funds it
receives to the statewide Northwest Justice Project (NJP) for this work.7
6 1-877-894-HOME (4663)
7 Data representing NJP's housing counselor services is included in data provided by the WSHFC.
FORECLOSURE FAIRNESS REPORT 2019 8
NJP provides housing counseling services as well as no-cost legal services to low- and middle-income
homeowners facing foreclosure on their primary residences. These legal services include
representation in defense of all forms of foreclosure, including mortgage, property tax, utility lien, court-
ordered forced-sale and homeowner/community associations.
Borrowers in danger of losing their homes often need help to address civil legal needs in addition to
foreclosure. In certain instances, NJP’s advocates address other consumer needs as well to achieve
greater economic security. That might mean challenging or negotiating other debts and liabilities or
helping the homeowner apply for property tax relief to reduce monthly expenses. In instances beyond
their expertise, the advocates refer homeowners to other resources or community partners.
In response to reduced funding for foreclosure-related services, and to avoid overall staff reductions,
NJP has reorganized its approach to foreclosure prevention. Instead of focusing one temporary
specialized unit exclusively on foreclosure defense, beginning in January 2019, NJP spread its
foreclosure defense work throughout its field offices. Now nearly 30 advocates provide foreclosure
assistance at NJP. Spreading the Foreclosure Unit's expertise across the state has made foreclosure
prevention a permanent priority in all 18 offices.8
Foreclosure Process
The Foreclosure Fairness Act and FFP enable borrowers to access no-cost foreclosure prevention
assistance. Through the Washington State Homeownership Resource Center (WHRC), borrowers can
access services before, during and after beginning the foreclosure process. Homeowners can also
choose to pay for representation by a private attorney.
The meet-and-confer period, outlined in the Deed of Trust Act, identifies clear steps of notification
before foreclosure and requires the beneficiary to meet with the borrower if the borrower requests a
meet-and-confer session. Figure 2 maps the foreclosure process from past-due mortgage payments
through mediation. Figure 3 maps the foreclosure mediation process and possible outcomes.
8 Northwest Justice Project
FORECLOSURE FAIRNESS REPORT 2019 9
Figure 2: Foreclosure Process
Source: Washington State Department of Commerce
FORECLOSURE FAIRNESS REPORT 2019 10
Figure 3: Foreclosure Mediation Process and Possible Outcomes
Source: Washington State Department of Commerce
Negative Effects of Foreclosure
Losing a home has many negative effects, foremost financially. For many middle- and low-income
homeowners, their homes are their largest assets. Homeownership has long been viewed as a sound
investment opportunity to fund retirement, provide for a dependent's education and ensure general
financial stability.9
9 Federal Reserve Bank of New York, "SCE Housing Survey," (2019),
https://www.newyorkfed.org/microeconomics/sce/housing#main
FORECLOSURE FAIRNESS REPORT 2019 11
The assets a family loses due to foreclosure can reverberate across several generations through lost
inheritances, no matter how small.10 A foreclosure can result in a significant loss of points on a
borrower’s credit report.11 That effect can last up to seven years, during which the borrower has limited
access to credit at affordable rates. Tax implications can occur as well if the Internal Revenue Service
identifies any forgiven debt as income.
Benefits of Mediation
Mediation yields many overall benefits to beneficiaries and homeowners. Both parties benefit from a
structured and organized mediation process that provides the opportunity to engage in a facilitated
discussion about alternatives to foreclosure. For the borrower, a loan modification might result in the
reduction of their mortgage principal, an interest rate reduction, and lower, more affordable monthly
payments.
However, not all successful mediations result in the borrower keeping the home. When a family’s
income or other circumstances make it impossible to keep the home, a non-retention agreement can
give a borrower more time to leave or sell on his, her or their terms. Non-retention agreements can also
help preserve or improve a borrower's financial stability.
10 Saegert et al, “Mortgage Foreclosure and Health Disparities: Serial Displacement as Asset Extraction in African American
Populations,” Journal of Urban Health: Bulletin of the New York Academy of Medicine, Vol. 88, No. 3, (2011),
https://opencuny.org/alternativehousingresearch/files/2012/03/mortgage-foreclosure-and-health.saegertetal.pdf
11 Experian, "Understanding Foreclosure," (2020), https://www.experian.com/blogs/ask-experian/what-is-a-foreclosure/
FORECLOSURE FAIRNESS REPORT 2019 12
Foreclosure Fairness Program Outcomes
Background on Data
Data from Commerce reflects program performance for state fiscal years 2012 through 2019, the life of
the FFP so far. State fiscal year data gives a snapshot of certain functions within the Foreclosure
Fairness Program (FFP), but it does not always reflect the full impact on borrowers, neighborhoods and
communities as some mediations span several years. In some cases, the tables below compare data
from the life of the program to data from state fiscal year 2019 to provide a more complete context.
Program Outcomes
The following tables and figures show data as required in statute. See Table 1 for a crosswalk of
statutory reporting requirements as they relate to the tables and figures below.
Table 3 reflects an overview of mediation referrals the FFP received.
Table 3: Mediation Referrals – Foreclosure Fairness Program
Cases Since Program Cases State FY
Mediation Referrals Start, State FY 2012-19 2019
Total Mediation Referrals Received 11,389 560
Referred by Housing Counselors 4,876 (43%) 324 (58%)
Referred by Attorneys (Private and Civil Legal Aid) 6,513 (57%) 236 (42%)
Cases Assigned to Mediators
(Includes Cases That Have Been Mediated, Closed, or 10,271 523
Currently Pending an Outcome)
Cases Complete/Closed 9,665 599
Cases Ineligible for Mediation
(Typically Because the Beneficiary was Exempt or the 1,174 40
Referral Missed the Window of Eligibility in Statute)
Source: Washington State Housing Finance Commission
The number of foreclosures has been declining since 2013 because of favorable conditions in the real
estate market, increased alternatives to foreclosure and enhanced residential mortgage lending
standards.
Figure 4 shows the declining revenues and expenditures for the program from state fiscal year 2012
through 2019.
FORECLOSURE FAIRNESS REPORT 2019 13
Figure 4: Revenues and Expenditures, State Fiscal Years 2012-2019
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Revenue Expenditures
Source: Washington State Department of Commerce
Data in Table 4 reflect the services housing counselors provide to borrowers requesting meet-and-
confer sessions. In the foreclosure process, meet-and-confer sessions take place before mediation.
This table does not include information on such services provided by private attorneys, who are not
required to report their activities. The Foreclosure Fairness Program funds services provided by HUD-
certified housing counselors and legal aid attorneys who report their activities regularly to the WSHFC.
Table 4: Housing Counselors — Meet-and-Confer Outcomes
Category Description Cases in State FY 2019
Outputs
Total Number of Meet-and-Confer Sessions Attended 748
Outcomes
Number of Pending Outcomes 661
Number of Withdrawals from Counseling 4
Number of Home-Retention Agreements 56
Number of Non-retention Agreements 6
Number of No Agreements 21
Source: Washington State Housing Finance Commission
FORECLOSURE FAIRNESS REPORT 2019 14
Figure 5 shows that since the establishment of the FFP, the rate of referrals to mediation generally
coincides with the rate of foreclosures in Washington.
Figure 5: Rate of Foreclosures Versus Referrals, Calendar Years 2012-2019
3,000 40,000
35,000
2,500
Referrals Foreclosures 30,000
Referrals to Mediation
2,000
25,000
Foreclosures
1,500 20,000
15,000
1,000
10,000
500
5,000
0 0
2012 2013 2014 2015 2016 2017 2018 2019
Source: Zillow previously provided the unpublished data on foreclosures. However, that data is no longer available, so the foreclosure line
ends in 2017. The Washington State Department of Commerce provides the data on referrals.
Tables 5, 6 and 7 reflect the outcomes of all certified cases since the inception of the program with
numbers for fiscal year 2019 highlighted. These tables contain data from the FFP database and include
referrals received from both housing counselors and private attorneys.
Table 5: Housing Counseling Agencies' Overall Outcomes in SFY 2019
Category Description Cases in State FY 2019
Outputs
Clients 2453
Referrals to Other Services 454
Outcomes
Pending Outcomes (Still in Counseling) 1298
Withdrawals from Counseling 76
Home Retention Agreements 561
Non-Retention Agreements 71
No Agreements 429
Foreclosures 18
Source: Washington State Housing Finance Commission
FORECLOSURE FAIRNESS REPORT 2019 15
Table 6: Mediation Session Outcomes Where Agreement Was Reached
Cases in State FY Cases in State
Outcomes 2012-19 FY 2019
Mediation Session(s) Occurred – Agreement Reached 2,870 177
Borrower Stayed in Home
2,225 122
(Subcategories Below Are Not Mutually Exclusive)
Reinstatements 191 18
Repayments 63 9
Extensions 191 10
Adjusted Rate to Fixed Rate 222 5
Amortization Extensions 491 26
Interest Rate Reductions 936 17
Principal Reductions 117 1
Monthly Principal Payment Reductions 374 7
Monthly Interest Payment Reductions 266 3
Refinances 59 9
Other Loan Structures/Modifications 870 40
Principal Forbearances 173 2
Interest Forbearances/Write-offs 44 1
Fees and Penalties Forbearances/Write-offs 35 0
Other Forbearances12 64 3
Source: Washington State Department of Commerce
12 From the way the certification is structured, Commerce is not able to identify unique restructures and modifications.
FORECLOSURE FAIRNESS REPORT 2019 16
Table 7: Outcomes in Which No Mediation Occurred
Cases State FY 2012- Cases State FY
Outcomes in Which No Mediation Occurred 19 2019
Home-Retention Agreement Reached Prior to Session 2,040 146
Non-retention Agreement Reached Prior to Session 265 20
Borrower Withdrew from Mediation
646 18
(Not Included in Other Categories)
Borrower Not in Good Faith13 682 73
Beneficiary Not in Good Faith 71 10
Both Borrower and Beneficiary Not in Good Faith14 15 3
Source: Washington State Department of Commerce
Table 8: Mediation Session Outcomes — Borrower Did Not Stay in Home
Non-retention Cases State FY 2012- Cases State FY
(Categories Are Not Mutually Exclusive) 19 2019
Deeds in Lieu 55 1
Short Sales 231 6
Voluntary Surrenders 47 2
Cash for Keys 30 1
Other Non-retention Agreements 398 47
Source: Washington State Department of Commerce
The 2018 Legislature increased the indexing requirements of trustee sale notices that county auditors
record for residential properties. This change gave the FFP a more accurate count of residential
properties in foreclosure. However, the 39 county auditors use several different technologies.
Therefore, Commerce is working to get accurate and consistent data. Figures 6 and 7 provide a
13 Typically, reported reasons for lack of good faith for either or both the borrower and beneficiary include:
-- Lack of timely or accurate provisioning of documents to the mediator and other party
-- Failure to appear at or participate in mediation
-- Failure to pay the mandated share of the mediation fee
-- Beneficiary’s representative was not been authorized to make binding decisions
14 Even though the certification specifically tracks parties “not in good faith,” multiple outcomes are not explicitly tracked as
being in "good faith."
FORECLOSURE FAIRNESS REPORT 2019 17
comparison of the numbers of NOTS recorded in each county during fiscal year 2019 and the number
of FFP referrals each county received.
Figure 6: Notices of Trustee Sales Recorded by County in State Fiscal Year
2019
Source: Washington State County Auditors
FORECLOSURE FAIRNESS REPORT 2019 18
Figure 7: Mediation Referrals Received in State Fiscal Year 2019
Source: Washington State Department of Commerce
Program Administrative Accomplishments
Stakeholder Meetings
During state fiscal year 2019, all partners participated in stakeholder meetings that Rep. Tina Orwall
held concerning:
Funding levels for the Foreclosure Fairness Account (and, therefore, the availability of housing
counselors and legal aid attorneys as well as the administration of the mediation program)
Surfacing concerns related to the denial of modification requests due to investor/beneficiary
restrictions, underwriting or other guidelines
Functional Changes
During state fiscal year 2019, Commerce employees made internal changes to better meet the needs of
the program.
FORECLOSURE FAIRNESS REPORT 2019 19
Communications with Unrepresented Borrowers
Several mediators expressed concerns about borrowers who are referred to mediation not receiving
representation through the process. In response, Commerce instituted a new practice to reach out to all
borrowers newly referred to the program but unrepresented to:
Inform them of the availability of no-cost housing counselors
Connect them to the Washington Homeownership Resource Center
Cleanup of Pending Cases
Commerce instituted a semi-annual cleanup of any cases the agency had not received communication
about for at least six months. In spring 2019, the process resulted in the closing and certification of
more than 200 dormant cases. This regular check-in with mediators should help keep the status of
cases current.
Mediator Survey
In spring 2019, Commerce surveyed all mediators regarding any training or communication issues. In
response, beginning in December 2019, Commerce began sending occasional email updates to all
mediators. The updates provide the broader community of mediators with current information on
changes or trends in the program and address questions or issues raised in survey responses.
Enforcement of Foreclosure Fairness Act
The Consumer Protection Division of the Washington State Attorney General’s Office created the
Foreclosure Compliance Program (FCP) to enforce the Deed of Trust Act, as required by that act. See
Table 9 for a summary of enforcement activities for state fiscal year 2019.
Table 9: Foreclosure Compliance Program Activity in State Fiscal Year 2019
Number of
Type of Complaint Complaints Comments
Includes complaints and inquiries about mortgage loans,
Total Consumer Complaints 289
foreclosures and loan-servicing problems
About loan servicing, foreclosure mediation and other
Escalated Complaints 31
foreclosure matters
Complaints Received from About loan servicing, foreclosure mediation and other
23
Housing Counselors foreclosure matters
Complaints Received from
About loan servicing, foreclosure mediation and other
Attorneys and Real Estate 8
foreclosure matters
Professionals
Source: Washington State Office of the Attorney General
FORECLOSURE FAIRNESS REPORT 2019 20
In addition to these consumer complaints and other inquiries, since July 1, 2018, the FCP has focused
on protecting consumers in mortgage loan, foreclosure, loan servicing and related matters. To do so,
they engaged in affirmative advocacy and seven consumer-protection-enforcement actions.
Consumer-Protection-Enforcement Actions and Consumer Advocacy15
James et al. v. Safeguard Properties LLC
On March 25, 2019, the Attorney General's Office (AGO) submitted an amicus curiae brief to the U.S.
Ninth Circuit Court of Appeals in James et al. v. Safeguard Properties LLC in support of the consumer
protection claim advanced by the plaintiff-appellant homeowners in that case.
The central issue involves whether the defendant loan servicer, Safeguard, violated the Consumer
Protection Act by entering the homeowners’ properties to secure possession after default but before
foreclosure. This appeal remains pending before the Ninth Circuit Court of Appeals.
Lawsuit Against Real Estate Investment Network LLC (REIN)
On May 17, 2018, the AGO filed a lawsuit against REIN and three individuals. It alleges that the parties
engaged in unfair and deceptive acts or practices when they helped homeowners obtain excess funds
following judicial and non-judicial foreclosure sales. Those funds were composed of foreclosure sale
proceeds remaining after the foreclosed debt was satisfied and the costs of the sale were paid.
On May 29, 2018, the court entered a stipulated preliminary injunction restraining REIN and its
employees from engaging in the alleged activities. This case remains pending before the King County
Superior Court.
Consent Decree Obtained Against Miriam Lozano Doing Business as Primera Services
On Sept. 19, 2017, the AGO obtained a consent decree in a previously filed lawsuit against Miriam
Lozano (doing business as Primera Services) related to Ms. Lozano’s unlicensed and deceptive
practices as a mortgage broker. Ms. Lozano purported to help distressed homeowners obtain a
mortgage loan modification and avoid foreclosure. The consent decree provides for full restitution of
identified consumers and enjoins Ms. Lozano from engaging in similar violations in the future.
Between July 1, 2018, and June 30, 2019, the AGO continued its compliance supervision and
enforcement role concerning that consent decree by overseeing and distributing restitution payments
received from Ms. Lozano.
Ongoing Case-Specific Problem Solving
Finally, and more generally, the FCP regularly receives case-specific and issue-related input from
Commerce, including requests to respond to homeowners and counselors. The FCP and Commerce
work collaboratively in these matters to resolve common issues.
15 Provided by the Washington State Office of the Attorney General
FORECLOSURE FAIRNESS REPORT 2019 21
Current Foreclosure Climate
Effects of an Improved Economy
In this robust economy with a strong housing market, individuals facing foreclosures are struggling to
obtain mediation agreements that include home retention. Commerce often receives anecdotal reports
from housing counselors that they are representing fewer overall borrowers in mediation but that the
cases have become more challenging. In some cases, beneficiary underwriting guidelines are more
restrictive, making it increasingly difficult for borrowers to obtain a modification. Increased equity,
which can satisfy the debt, can also make finding a retention option difficult.
Data from the WHRC confirms that the reasons for mortgage defaults have shifted over the past few
years (see Figure 8). When borrowers default because they cannot afford their mortgage due to loss of
income or employment, the case is usually straightforward. In contrast, when borrowers default
because of divorce, death in the family or health issues, other complex legal issues are often involved.
These cases have increased as a percentage of overall foreclosures in the past few years.
Without the ability to retain their homes through a loan modification, some view a non-retention
strategy as a success because it avoids many of the negative effects of foreclosure. However, it is not
optimal, especially since it is becoming harder to find alternative affordable housing options in many
Washington communities.16
Trends Reported by Housing Counseling Agencies
The following anecdotes from housing counseling agencies are consistent with trends emerging
through the processing of mediation certifications. Commerce does not have firm data on these trends.
Parkview Services noticed an increase in defaults for Federal Housing Administration (FHA) loans
issued within the past three years. Of particular concern were defaults within the first year. Under
FHA guidelines, no workout option17 is provided to borrowers within the first year.
Several agencies expressed that their clients were experiencing increasing difficulty when seeking a
modification and that some beneficiary underwriting guidelines seem to preclude some clients
from involvement in the foreclosure fairness program. Guidelines for FHA, Fannie Mae and Freddie
Mac loans became stricter, and beneficiaries deny modifications if borrowers do not meet the
underwriting criteria.18
16 Washington State Department of Commerce, "2018 Affordable Housing Update," (2019),
https://www.commerce.wa.gov/wp-content/uploads/2019/01/COMMERCE-affordable-housing-update.pdf
17 Loan workout options are agreements between beneficiaries and borrowers to avoid foreclosures.
https://www.hud.gov/program_offices/housing/sfh/econ/loanworkoutsolutions
18 Two underwriting guidelines cause difficulties when a home has equity: 1) An interest rate cannot be lowered when equity is
present; 2) A modification is not available if it would result in an increased payment. Both criteria have common-sense
qualities, but when combined, it becomes more difficult to modify a loan. Due to the real estate market gains, many homes
now have equity, preventing a lower interest rate. However, in order for a modification to work the arrears are typically
capitalized (added into) with the principal balance. If the interest rate cannot be lowered and you have loan balances
increasing with the capitalized arrears, the math produces increased payments and when these guidelines are used, it does
not allow for a modification.
FORECLOSURE FAIRNESS REPORT 2019 22
Urban League of Metropolitan Seattle stated that with the change in rules for home equity
conversion mortgages (HECM), fewer seniors were qualifying for reverse mortgages. Reverse
mortgages have been used in some cases to avoid foreclosure.
Several agencies reported seeing an increase in tax-related and homeowner association-related
foreclosures, for which few home-retention options exist.
Many agencies expressed that the 2016 sunsetting of the Home Affordable Mortgage Programs
(HAMP) and HAMP's standard guidelines has made the process more difficult.
Even though housing counselors represented fewer clients their cases were more challenging.
Additional data (see Figure 8) from the WHRC showed that the reasons for default trended away
from job or financial loss and moved toward personal upheavals related to health, divorce or death.
Figure 8: Change in Reasons People Are in Default, 2016-2019
50%
45%
40%
35%
30%
2016 2017 2018 2019
Reduction/Loss of Income Divorce/Medical/Death
Source: Washington Homeowners Resource Center
FORECLOSURE FAIRNESS REPORT 2019 23
Stories Housing Counselors Shared
Housing counselors shared the following stories that reflect some of the obstacles borrowers face in
the current climate. The stories are shared here with express permission.
"[A married couple] experienced a medical hardship, which significantly reduced their income. They were
unable to refinance their loan due to underwriting restrictions. They attempted to obtain assistance
directly with the Servicer but were rejected as they had already obtained the maximum number of
modifications allowed. They came to American Financial Solutions (AFS) for housing counseling and
were referred for mediation. The mediation process ended with no agreement, as no modification was
available, and the Borrowers did not have sufficient funds to reinstate the loan. However, the mediation
process had suspended the foreclosure process for several months, and during this time, the
homeowners improved their circumstances greatly and saved $30,000 for a down payment toward the
delinquency. AFS sought an exception request from Fannie Mae directly for an extended repayment plan.
This was approved. The repayment plan is sustainable and canceled the foreclosure."
Angela C. Anderson, lead housing counselor
American Financial Solutions
"A Snohomish County resident living on Social Security fell into default when she traveled to California to
care for her dying mother. While gone, she failed to renew her property tax exemption. This resulted in an
increased monthly escrow payment of $400 per month and a new and higher mortgage payment, which
she could not afford. Northwest Justice Project referred her to the Foreclosure Fairness Program, and at
the first mediation session, a timeline for responses to the completed modification application was
agreed to. The borrower was informed that the only criteria for a modification would be her ability to
afford the new mortgage. Shortly after the mediation, the borrower learned her modification request had
been denied as she had too much equity in the house. As this contradicted the statements from the
beneficiary made earlier in the mediation, the denial was appealed. Unfortunately that appeal, and the
option to modify the loan was denied. However, at the next mediation session, the borrower learned that
the beneficiary's side had taken the extra step to review the underwriting criteria and find a path to offer
the modification. The loan modification decreased the borrower’s mortgage payment by $800 a month.
The modification allows her safe and decent housing on a low income and the ability to accrue wealth in
the home."
Joe Jordan, senior attorney
Northwest Justice Project
FORECLOSURE FAIRNESS REPORT 2019 24
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