Foreclosure Fairness Program 2022 legislative report
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- 2022 Commercereport Foreclosure Fairness Program Report 59Beb495 E1D5 44B1
Summary
The Foreclosure Fairness Program 2022 legislative report, issued in December 2022 by the Washington State Department of Commerce as the annual report on program performance required by RCW 61.24.163. It covers state fiscal year 2022 (July 1, 2021, to June 30, 2022) and states that federal foreclosure moratoria and mortgage forbearance kept the foreclosure rate historically low, while referrals to foreclosure mediation trended upward each quarter. The report describes the program's funding through a $250 fee paid by beneficiaries for each notice of default, the roles of partner agencies, and the mediation process. Commerce recommends replacing the legislative report with web-based reporting and states it has requested $10 million for the program. It reports 131 referrals for foreclosure mediation in the first quarter of fiscal year 2023, a 46% increase from the previous quarter.
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Foreclosure Fairness Program
2022 legislative report
Annual report on program performance per RCW 61.24.163
DECEMBER 2022
HOMEOWNERSHIP UNIT
FORECLOSURE FAIRNESS
PROGRAM Report to the Legislature
Lisa Brown, Director
V3.0
Acknowledgments
Washington State Department of Commerce
Corina Grigoras, assistant director, Housing Division
Ann Campbell, managing director, Homeownership Unit
Kay Murano, program manager, Foreclosure Fairness Program
Kyle Jung, commerce specialist, Foreclosure Fairness Program
Zoë Myers, program coordinator, Foreclosure Fairness Program
Washington State Housing Finance Commission Washington State Department of Commerce
Steve Walker, executive director Kay Murano
Washington State Office of the Attorney General Kay.Murano@commerce.wa.gov
Bob Ferguson, attorney general
FORECLOSURE FAIRNESS PROGRAM
Office of Civil Legal Aid
James Bamberger, director 1011 Plum St. SE
P.O. Box 42525
Special thanks to the Dispute Resolution Centers, Olympia, WA 98504-2525
Northwest Justice Project, mediators, attorneys
and housing counselors who collaborate with the www.commerce.wa.gov
Department of Commerce to implement and deliver
For people with disabilities, this report is available
the Foreclosure Fairness Program.
on request in other formats. To submit a request,
please call 360-725-4000 (TTY 360-586-0772)
FORECLOSURE FAIRNESS PROGRAM REPORT 2022
Table of Contents
Executive summary...................................................................................................................................... 2
Introduction ................................................................................................................................................. 4
Program outcomes ...................................................................................................................................... 8
Recommendations ..................................................................................................................................... 18
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 1
Executive summary
This report provides Foreclosure Fairness Program (FFP) data for state fiscal year 2022 (July 1, 2021, to June
30, 2022) to satisfy the annual reporting requirements in RCW 61.24.163(18) and additional programmatic
context and background. Table 1 maps the location of the required reporting elements in this report.
Table 1: Locations of annual reporting requirements in this report
Subsection Statutory language Location
"The performance of the program, including the numbers of borrowers who are
(a) Table 2
referred to mediation by a housing counselor or attorney."
"The results of the mediation program, including the number of mediations
(b) Tables 4, 5 and 6
requested by housing counselors and attorneys."
"The number of certifications of good faith issued, the number of borrowers and
(b) beneficiaries who failed to mediate in good faith, and the reasons for the failure to Table 7
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
(b) Table 4
number of principal write-downs and interest rate reductions."1
Commerce conducted a survey in 2014,
"To the extent practical, the number of borrowers who report a default within a
(b) which determined that this information
year of restructuring or modification."
is unavailable.
"The information received by housing counselors regarding outcomes of
(c) Table 3
foreclosures."
"Any recommendations for changes to the statutes regarding the mediation
(d) Recommendations
program."
Key findings
The continued impacts of the COVID-19 pandemic emergency were felt in the Washington foreclosure
environment throughout state fiscal year 2022: Due to the implementation of federal foreclosure
moratoria and opportunities for mortgage forbearances, many Washington homeowners were able to
avoid foreclosure. The foreclosure rate in Washington continued to be historically low throughout the
fiscal year, similar to state fiscal year 2021. However, referrals to foreclosure mediation trended upward
each quarter through state fiscal year 2022.
The Homeowner Assistance Fund will strengthen Washington's foreclosure support network: The
Homeowner Assistance Fund (HAF) program, overseen by the Washington State Housing Finance
Commission (WSHFC), provides direct assistance of federal funds to Washington homeowners
struggling with foreclosure as the state transitions out of the pandemic. Please see the section titled
'Homeowners Assistance Fund' for more information.
1 RCW 61.24.163(18)(b) requires Commerce 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 is therefore not included in this report.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 2
Summary of issues and recommendations
Commerce identified and briefly summarized two primary issues with two recommendations: demand
increase and ineffective reporting structure.
Issues recognized by Commerce:
Current reporting structure: The current statutory reporting requirements for the FFP are outdated and
require an unnecessary allocation of resources. The current reporting structure does not allow
stakeholders and legislators to access the most current program data quickly.
The expected increase of referrals due to borrowers exiting forbearance: The program is preparing for
an increase in referrals due to the sizeable number of borrowers exiting COVID-19-related mortgage
forbearance programs. We expect an increase in referrals beginning in state fiscal year 2023.
Commerce recommendations:
Revise or eliminate the legislative report requirements for the program: Commerce recommends that
the program's legislative reporting requirements be eliminated or changed to a web-based dashboard
that provides a more timely reflection of program performance. This will ensure that legislators and
stakeholders have the most current information available. Commerce will begin providing web-based
reporting in state fiscal year 2024.
Request additional funding to meet the increased need: Commerce has requested $10 million for the
FFP as part of the decision package to combat homeownership disparities. This funding will ensure the
program can meet the needs of the increasing number of homeowners seeking foreclosure assistance.
Funding will also be used to create a web-based training for mediators, housing counselors, and
attorneys to utilize the mediation database and onboard new mediators to meet the increasing need.
Conclusions
The Foreclosure Fairness Program continues to be an important resource for households facing foreclosure
and uncertainty as the economy transitions away from the COVID-19 pandemic protections. The upward trend
of mediation referrals and borrowers seeking assistance will continue to rise, most likely arriving back to pre-
pandemic levels in the early quarters of state fiscal year 2023. However, with the investments made by the
state and federal government in financial and foreclosure assistance and our network of skilled housing
counselors, legal aid attorneys, and mediators, the Washington foreclosure assistance network will be strong
enough to handle the increase.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 3
Introduction
Background
The Legislature created the Foreclosure Fairness Program (FFP) in 2011 in response to the significant number
of foreclosures resulting from the Great Recession. The program allows borrowers facing foreclosure to find
alternatives by demanding mediation with their lenders (beneficiaries) to look for alternatives to foreclosure. In
2013, the second full year of the program's operation, there were more than 37,0002 foreclosures statewide,
and the mediation program received more than 2,500 referrals.3 As the state recovered from the Great
Recession, foreclosures and referrals declined steadily.
The success of the FFP is directly related to the relationships established with all stakeholders involved. The
main stakeholders include homeowner advocates, the banking industry, trustees, mediators, housing
counselors, attorneys and the state program partners identified in this report.
Overall, the act intended to:
Reshape the non-judicial foreclosure4 process in Washington to help protect homeowners from avoidable
foreclosures; and
Even when foreclosure is unavoidable, ensure that the process is fair and transparent and allows both
borrower and beneficiary to meet and make well-informed decisions.
Overview of foreclosure and mediation
Foreclosure process
The Foreclosure Fairness Act (FFA) and the corresponding FFP enable borrowers to access no-cost
foreclosure prevention assistance. Through the Washington 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.
Negative effects of foreclosure
Losing a home has many negative effects, primarily financial. For many middle and low-income people, 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.5
The assets a family loses due to foreclosure can reverberate across several generations through lost
inheritances.6 A foreclosure will result in a significant loss of points on a borrower's credit report.7 That effect
2 From unpublished data provided by Zillow.
3 From Commerce Foreclosure Fairness Program database.
4 Washington is a "non-judicial foreclosure", meaning that a lender can foreclose on a property through a third party, the trustee, and not
through the court system. https://www.commerce.wa.gov/building-infrastructure/housing/foreclosure-
fairness/#:~:text=Washington%20is%20a%20%E2%80%9Cnon%2Djudicial,the%20lender%20and%20the%20homeowner.
5 Federal Reserve Bank of New York, "SCE Housing Survey," (2019). https://www.newyorkfed.org/microeconomics/sce/housing#/main
6 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://www.ncbi.nlm.nih.gov/pmc/articles/PMC3126937/
7 Experian, "Understanding Foreclosure," (2020), https://www.experian.com/blogs/ask-experian/what-is-a-foreclosure/
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 4
lasts up to seven years, during which the borrower has limited access to credit at affordable rates. Tax
implications can also occur if the Internal Revenue Service (IRS) 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 their terms. Non-retention agreements can also help preserve or improve a
borrower's financial stability.
Overview of the Foreclosure Fairness Program
Program funding
FFP is funded by the fees mortgage lenders (beneficiaries) pay. As of Jan. 1, 2022, each beneficiary must pay
a $250 fee into the Foreclosure Fairness Fund, an account established by RCW 61.24.172, for each residential
real property issued a notice of default in Washington during a given quarter.8 The statutory language of this
fee can be found in RCW 61.24.190. For more information regarding the new FFP fee structure and
exemptions, please see the Effects of Chapter 151, Laws of 2021 (ESHB 1108) section.
The fund pays for the following:
Free-to-homeowners foreclosure counseling
Consumer protection and enforcement of the Foreclosure Fairness Act
Development and oversight of the mediation process9
Foreclosure prevention outreach and education
Legal assistance for low- and moderate-income homeowners
Agency partner roles and responsibilities
The FFA assigns the primary responsibility for developing and managing the FFP to the Department of
Commerce (Commerce). The agency collaborates 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 FFP also partners with the following:
Dispute Resolution Centers10
8 Beneficiaries who issue fewer than 250 notices of default in a calendar year are exempt from this fee beginning January 1, 2023 per
RCW 61.24.190(6).
9 A separate fee split between homeowner and beneficiary pays mediators.
10 Dispute Resolution Centers provide affordable mediation to resolve several types of disputes, including parenting plans, divorces,
landlord-tenant issues and foreclosures.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 5
Mediators
Attorneys (private and civil legal aid)
Housing counselors
Washington State Department of Commerce
Commerce manages the program and administers the Foreclosure Fairness Fund. Commerce 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 FFA identifies the following groups as eligible to become foreclosure mediators:
Attorneys
Retired judges
U.S. Department of Housing and Urban Development-approved 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.11 Currently, 59 active mediators are on Commerce's approved
list.12 Mediators have full discretion in conducting the sessions and determining outcomes.
Washington State Housing Finance Commission
The WSHFC administers a homeowner-counseling program. The commission also oversees the toll-free
Washington Homeownership Resource Hotline (1-877-894-HOME (4663)), which provides homeowners with
free foreclosure prevention counseling. The WHRC administers the Homeownership Hotline; Washington state
law requires banks and loan servicers to supply the hotline phone number to all homeowners who are late on a
payment or facing default on their mortgage. 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
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 (chapter 61.24 RCW). The Foreclosure Compliance Program
investigates complaints related to foreclosure.
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 currently grants all of the Foreclosure Fairness Act funds it
receives to Northwest Justice Project (NJP), which provides statewide support for this work.13
11 Washington State Department of Commerce, "Interested in Becoming a Mediator?," (2013), http://www.commerce.wa.gov/wp-
content/uploads/2015/11/ffp-interested-in-becoming-mediator-2013.pdf
12 Washington State Department of Commerce
13 Data representing NJP's housing counselor services is included in data provided by the WSHFC.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 6
Northwest Justice Project
NJP provides housing counseling services and no-cost legal services to low- and moderate-income
homeowners facing foreclosure. 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 issues in addition to
foreclosure. In certain instances, NJP’s advocates address other consumer needs 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. The advocates refer homeowners to other resources
or community partners in instances beyond their expertise.
Path to mediation
The following section provides an overview of the foreclosure mediation process for context related to the
data displayed throughout the remainder of the report.
Meet and confer period
The "meet and confer," established in the Deed of Trust Act (chapter 61.24 RCW), identifies clear steps of
notification before foreclosure:
Beneficiaries must issue a Notice of Pre-Foreclosure Options letter at least 30 days before issuing a
Notice of Default. The Notice of Pre-Foreclosure Options letter explains to the borrower that they are in
danger of losing their home, that free housing counseling is available to help them understand their
options, and that they may have an option for mediation. The letter also informs the borrower of the
opportunity to meet with the beneficiary to try to resolve the issue, known as the "meet and confer"
meeting.
If the borrower responds to the Notice of Pre-Foreclosure Options and requests a "meet and confer," a
Notice of Default cannot be issued for an additional 60 days.
After the Notice of Default is issued, beneficiaries must wait at least 30 days before recording a Notice
of Trustee Sale.
Referral to mediation
Following the "meet and confer" period, beneficiaries and borrowers may meet for mediation:
Borrowers become eligible for mediation once a Notice of Default is issued and remain eligible until 20
days after the Notice of Trustee's Sale recording if their beneficiary is not exempt from mediation.
Borrowers must be referred to Commerce for mediation by an attorney or a housing counselor. The
services of the housing counselor are free to borrowers.
Upon receipt of a complete referral, Commerce has 10 days to assign a mediator and notify all parties
that mediation was requested.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 7
The assigned mediator has 70 days to complete the mediation, with the possibility of extending beyond 70
days if both parties agree to an extension. The participants in the mediation must address the issues of
foreclosure that may enable the parties to come to an agreed resolution. To do this, the mediator will ask the
participants to consider the borrower's economic position, the net present value for the beneficiary of receiving
payments from a modified mortgage compared to the recovered costs following foreclosure, affordable
modifications and any applicable loss mitigation guidelines for loans insured by the Federal Housing
Administration, the Veterans Administration, or the Rural Housing Service.
Mediation certification
Within seven business days of the completion of the mediation, the mediator must certify the outcome of
the mediation to Commerce and send copies to all parties involved.
The certification must indicate whether a resolution was reached, include a description of the resolution,
and indicate whether the parties participated in good faith.
If no agreement was reached, the mediator must also include a description of the Net Present Value
analysis used and its results.
A finding that the beneficiary did not act in good faith constitutes a defense to the non-judicial
foreclosure action. A borrower may use this finding in court to stop foreclosure.
Commerce receives all certifications from mediators and sends copies of the certification showing
"Beneficiary Not in Good Faith" to the AGO and the Department of Financial Institutions for review.
A finding that the borrower failed to mediate in good faith authorizes the beneficiary to proceed with the
foreclosure.
Program outcomes
Program data is collected and presented in two ways:
1. Cumulative program data over the life of the program, from state fiscal year 2012 through 2022
2. Data from state fiscal year 2022
Special note on program data and performance
Please note state fiscal year 2022 is the second full fiscal year affected by the COVID-19 pandemic. Due to
this, the overall data specific to state fiscal year 2022 reflects abnormally low activity compared to previous
years, excluding state fiscal year 2021. Overall referrals to mediation, as seen in Table 2, were the second
lowest in program history (state fiscal year 2021 being the lowest) due to the continued federal protections
provided by the CARES Act14 and other mortgage relief assistance. On the other hand, the number of clients
served by housing counselors and referrals housing counselors made to other service agencies reflected in
Table 3 were much higher compared to other years. The WHFC believes this is due to homeowners' financial
uncertainty during the COVID-19 pandemic over the last two years.
14 Public Law 116–136—March 27, 2020
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 8
Program data
Tables 2-7 show data as required in statute. Table 2 below reflects an overview of mediation referrals the FFP
has received overall and separately in state fiscal year 2022.
Table 2: Mediation referrals since the program started and state fiscal year 2022
Cases SFY Cases
Mediation referrals 2012-2022 SFY 2022
Total mediation referrals received 12,173 238*
Referred by housing counselors 5,347 148
Referred by attorneys (private and civil legal aid) 6,826 90
Cases assigned to mediators (includes cases that have been mediated, closed or
11,002 217
currently pending an outcome)
Cases completed/closed 10,552 147
Cases ineligible for mediation (typically because the beneficiary was exempt or the
1,229 18
referral missed the statutory eligibility window)
Source: Washington State Department of Commerce
* uncharacteristically low due to the protections provided to homeowners in the CARES Act
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 9
Table 3: Housing counseling agencies' overall outcomes15
Category description Cases SFY 2022
Outputs
Clients 7,645
Number of meet and confer sessions attended 1,034
Referrals to other services 18,886
Outcomes
Pending outcomes (still in counseling) 1,380
Withdrawals from counseling 299
Home retention agreements 725
Non-retention agreements 27
No agreements 178
Foreclosures 1
Source: Washington State Housing Finance Commission
Tables 4, 5 and 6 reflect the outcomes of cases certified since the program's inception, with state fiscal year
2022 results broken out. These tables contain data from the FFP database and include referrals from housing
counselors, legal aid attorneys and private attorneys.
15 The number of "Clients" and "Referrals to other services" is significantly higher than previous years due to increased outreach by
homeowners facing uncertainty throughout the aftermath of the COVID-19 pandemic.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 10
Table 4: Mediation session outcomes where agreements were reached
Cases Cases
Outcomes SFY 2022 SFY 2012-22
Mediation session(s) occurred — agreement reached 65 3,150
Borrower stayed in home (subcategories not mutually exclusive) 48 2,429
Reinstatements 12 227
Repayments 2 81
Extension 4 208
Adjusted rate to fixed rate 0 230
Amortization extensions 5 526
Interest rate reductions 12 985
Principal reductions 1 119
Monthly principal payment reductions 4 390
Monthly interest payment reductions 1 274
Refinances 2 70
Other loan structures/modifications 17 936
Principal forbearances 0 178
Interest forbearances/write-offs 0 47
Fees and penalties forbearances/write-offs 1 37
Other forbearances16 0 74
Source: Washington State Department of Commerce
16 Because of the way the certification is structured, Commerce is not able to identify unique restrictions and modifications.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 11
Table 5: Outcomes in which no mediation occurred
Cases Cases
Outcomes in which no mediation occurred SFY 2012-2022 SFY 2022
Number of mediations in which no mediation occurred 4,342 61
Home-retention agreement reached before session 2,309 35
Non-retention agreement reached before session 308 5
Borrower withdrawal from mediation (not included in other categories) 684 3
Source: Washington State Department of Commerce
Table 6: Mediation session outcomes — borrower did not stay in home
Non-Retention(categories are not mutually exclusive) Cases SFY 2012-22 Cases SFY 2022
Deeds in lieu 55 0
Short sales 237 0
Voluntary surrenders 49 1
Cash for keys 30 0
Other non-retention agreements 455 6
Source: Washington State Department of Commerce
Table 7: Mediation session outcomes — findings of not in good faith
Findings of not in good faith Cases SFY 2012-22 Cases SFY 2022
Borrower not in good faith17 1,073 6
Beneficiary not in good faith 349 2
Both borrower and beneficiary not in good faith18 15 0
Source: Washington State Department of Commerce
17 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 or 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 authorized to make binding decisions.
18 Even though the certification specifically tracks parties "not in good faith," multiple outcomes are not explicitly tracked as being in
"good faith."
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 12
Challenges and programmatic opportunities
During state fiscal year 2021, the number of foreclosures and referrals to mediation decreased significantly
due to protections provided to homeowners in the CARES Act. In state fiscal year 2019, the most recent full
year before COVID-19, there were 140 quarterly mediation referrals on average. During state fiscal year 2022,
the average was 60. While the number of referrals for mediation dropped significantly, the legal aid and
housing counselor organizations have experienced an increase in the number of calls from homeowners
seeking to understand their options. With many pandemic-related homeowner protections expiring by the end
of state fiscal year 2022, foreclosures and referrals for mediation are increasing.
Homeowner Assistance Fund overview
During the end of fiscal year 2022, distressed homeowners in Washington could seek and obtain much-needed
financial help through the HAF. The HAF program is a federal program created by the American Rescue Plan,19
signed into law by President Joe Biden in March 2021 as a $1.9 trillion investment into the U.S. economy
embattled by the pandemic. The American Rescue Plan allocated $9.3 billion to the HAF program, $173.1
million of which was awarded to Washington.20 The HAF program addresses current and future homeowner
needs. The program is designed to mitigate the impacts of the pandemic on homeowners.
The Department of the Treasury, the entity overseeing the funding distribution of the HAF program, outlined its
purpose as being,
"…to prevent mortgage delinquencies and defaults, foreclosures, loss of utilities or home energy services, and
displacement of homeowners experiencing financial hardship after January 21, 2020. …The law prioritizes funds for
homeowners who have experienced the greatest hardships, leveraging local and national income indicators to
maximize impact."21
The first step of developing the full HAF program was deploying a pilot program utilizing 10% of the overall
funding. The HAF Pilot program was launched in January 2022 and offered support to homeowners facing
imminent housing loss due to an active foreclosure action filed before Dec. 31, 2021. During the deployment of
the pilot program, the WSHFC worked on developing the full HAF program to submit to the Treasury to access
the remaining 90% of funds. The full HAF program development was informed with public comment periods.
Input from non-profits and government agencies was considered throughout the process.
Originally, Commerce administered this program. Through an interagency agreement with the WSHFC, the
program has since been transferred from Commerce to the WSHFC as of Dec. 27, 2021. The Washington HAF
plan was formally approved by the commissioners of the WSHFC on March 24, 2022. The HAF plan was
subsequently approved by the Department of the Treasury on April 21, 2022.22
19 U.S. Congress, "H.R. 1319, American Rescue Plan Act of 2021," https://www.congress.gov/bill/117th-congress/house-bill/1319/all-
actions?overview=closed#tabs
20 U.S. Department of the Treasury, "Homeowner Assistance Fund: Data and Methodology for State and Territory Allocations,"
https://home.treasury.gov/system/files/136/HAF-state-territory-data-and-allocations.pdf
21 U.S. Department of the Treasury, "Homeowner Assistance Fund," https://home.treasury.gov/policy-issues/coronavirus/assistance-
for-state-local-and-tribal-governments/homeowner-assistance-fund
22 Washington State Housing Finance Commission, "Commission Board Meeting Additional Materials Packet - 4/28/2022,"
https://www.wshfc.org/admin/Packets/20220428MeetingPacket.pdf
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 13
Currently, the program offers the following:23
A maximum grant amount of up to $15,000 for homeowners that choose not to access the services of a
housing counselor. Individuals can directly access the program's online portal and apply without the
assistance of a housing counselor.
A maximum grant amount of up to $60,000 for homeowners that work with a housing counselor or legal
aid attorney to evaluate all options and determine the best use of the program funds in addressing the
needs of the homeowner.
Financial assistance for payment of delinquent property taxes to cure the default and for homeowner's
association fees or liens, condominium association fees, common charges, and similar costs payable
under a unit occupancy agreement by a resident member in a cooperative housing development.24
Outlined requirements of program applicants:
The property must be located in Washington.
Applicant household must have a household income of 100%, or less, of the Area Median Income (AMI) for
the county of residence.
Has a demonstrable hardship caused by COVID-19 that began on Jan. 20, 2020, or after.
Is the owner of the dwelling, up to four units, and it is the primary residence (owner-occupied) of the
applicant. Please note that this can include a manufactured/mobile home in a rented space.
Reasonable expectation that the homeowner will be able to continue to make mortgage payments in the
future.25
Washington HAF funds can cover the following:
Reinstatement of a mortgage
Reduction of the amount owed on a mortgage
Reduction of the mortgage interest rate
Funds are also available for the following:
Home-related insurance
Homeowner's association fees or liens
Delinquent property taxes
Information on additional benefits can be found in the WSHFC packet.26
Washington HAF funds do not cover the following:
Utilities
Internet service
Mortgage payment assistance for future mortgage payments
Home repairs
Reimbursement of funds previously expended by state or local governments.27
This program will be available until the funds are exhausted or through June 30, 2024.
For more information regarding the HAF program, please visit the WSHFC's Homeowner Assistance Fund
website at www.washingtonhaf.org.
23 The guidelines of the HAF program can be modified and are subject to change.
24 WSHFC Board Meeting Information Packet - 3/24/2022
25 Ibid.
26 Ibid.
27 Ibid.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 14
Effects of Chapter 151, Laws of 2021 (ESHB 1108)
The 2021 Legislature passed Chapter 151, Laws of 2021 (ESHB 1108), making several changes to the FFP in
response to the pandemic.
Funding structure revision
Since the FFP is primarily funded by financial institutions accessing the foreclosure process, the dramatic
decline in foreclosure activity due to the COVID-19 foreclosure moratoria significantly impacted available
funds. Chapter 151, Laws of 2021 changed the fee financial institutions pay from a $325 quarterly fee per
original Notice of Trustee's Sale (NOTS) recorded to a $250 quarterly fee per residential real property issued a
Notice of Default (NOD). The new $250 fee took effect on Jan. 1, 2022. However, due to the continued low
foreclosure rate through the second half of the state fiscal year 2022, it is still unknown if the change in the fee
structure will increase funding to the program. The fee continues to be a lump payment to the FFA quarterly.
The new program fee structure is housed in RCW 61.24.190. In addition, a timing issue was produced due to
the transition from the NOTS fee to the NOD, enabling some foreclosure activity to escape a fee. For example,
if a financial institution issued a fee before the establishment of RCW 61.24.190 and then subsequently
recorded a NOTS after the establishment of RCW 61.24.190, a fee would not be collected, and this was a
detriment to the program. Chapter 151, Laws of 2021, resolved this issue with the inclusion of RCW
61.24.173(8), which states that if a fee was not collected on the NOD, then the $325 NOTS fee will apply to the
NOTS when it is recorded. RCW 61.24.173 expires on June 30, 2023, which should allow the program to negate
the issue of missing applicable fees on foreclosure activity.
Beneficiary exemption revisions
Similarly, Chapter 151, Laws of 2021, revised the FFP beneficiary exemption structure in response to the
pandemic. During the last two calendar years, 2021 and 2022, exemptions have been based on foreclosure
activity from 2019, the last calendar year unaffected by the pandemic. This change safeguarded the program's
funding by not allowing financial institutions to utilize the exemption process due to the extremely low
foreclosure activity in Washington.
As of Jan. 1, 2023, eligibility for fee and mediation exemptions for each calendar year will once again be based
on foreclosure activity initiated during the immediate past calendar year. The fee exemption for 2023 will be
for institutions that issued fewer than 250 notices of default in 2022, as outlined in RCW 61.24.190(6). The
mediation exemption for 2023 will be for institutions that were not the beneficiary of deeds of trust in more
than 250 trustee sales of residential real property of up to four units in Washington during 2022, as outlined in
RCW 61.24.166. This will negatively impact the program's funding, as the moratorium on foreclosures ensured
that the number of trustee sales was drastically reduced for all lending institutions.
Removal of owner-occupied requirement
Chapter 151, Laws of 2021 removed the owner-occupied requirement from the eligibility criteria for a
mediation referral, except if the borrower is a successor-in-interest. This change was included in the bill's
emergency clause and took effect immediately upon signing in May 2021. The definition of residential real
property, in terms of the FFP, includes properties of up to four units, whether or not the property is occupied.
Due to this change, the referral form was updated to clarify the change in eligibility criteria. Program staff also
alerted referrers, borrower representatives, and mediators of the expanded referral eligibility criteria. In light of
the decrease in overall referrals for reasons cited earlier, it is unclear at this point what percentage of referrals
stem from the expanded eligibility criteria.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 15
New program database implementation
Commerce developed a new mediation database during state fiscal year 2022. The new database will help
process referrals and certifications more efficiently and streamline the process by incorporating a self-service
component for external users. External users will be able to enter referral information directly into the database
themselves. This will increase efficiency as Commerce staff will no longer be required to transcribe
information from a digital referral form into the database. This new system is a direct investment in the overall
program and will be a much-needed tool as foreclosure mediation referrals continue to increase.
Improvements in the new database
Through an approved SecureAccess Washington (SAW) account, the following can be submitted directly into
the database:
Mediation referrals - submitted by attorneys and housing counselors
Mediation certifications - submitted by mediators
Quarterly fee reports- submitted by beneficiaries
Fee and mediation exemption requests - submitted by beneficiaries
Commerce staff is currently using the new FFP database internally. External database testing was performed
with the help of several mediators to test the mediation certification function. Testing and development are
ongoing. Once the testing phase concludes, the official external launch of the database is planned for the
beginning of the 2023 calendar year. The initial release is planned for mediators only, and then referrers and
beneficiaries will have access to the database through a secondary release planned for April 2023. Please note
the external launch timeline of the database is subject to change based on the findings made during the
external testing and development period.
The future of mediation continues to be virtual
The pandemic drastically changed how the world operates in various ways. One of these major changes is the
use of virtual and remote business tools. Since the inception of the FFP in 2011 and the ultimate beginning of
the program in 2012, mediators were assigned eligible cases based on their specified county-based service
areas. However, this structure created logistical challenges for Washington's rural counties due to the lack of
mediators in or near those areas. Therefore, if all parties agree, Commerce interprets the current statutes to
allow virtual mediation. Virtual mediation allows borrowers with mobility or transportation challenges to
access the program.
The FFP aims to maintain a virtual option for all mediation cases if all parties agree. Accordingly, Commerce is
implementing changes that allow virtual mediation in any county if the mediator and all parties have agreed to
the virtual option. However, as stated in the FFA statute, the borrower has the right to demand an in-person
mediation session in the county where they reside.
Throughout the pandemic, Commerce provided regular guidance to all FFA mediators on conducting
mediations in compliance with the governor's safety guidelines. As a result, since the pandemic began, almost
all mediations were virtual, with parties participating by phone or a video conference platform. The pandemic
forced full integration of virtual environments, resulting in previously underserved smaller and rural counties
gaining greater access to mediation through virtual sessions.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 16
New mediator onboarding and training
Currently, the program's mediators have sufficient capacity to meet program needs as the state returns to pre-
pandemic activity levels. However, with the significant rise in referrals due to the state and federal foreclosure
moratoria being lifted and the rising attrition rate as mediators retire, the program is preparing to bring on new
mediators as needed. Having consulted with Dispute Resolution Centers and independent mediators already
serving with the program, we plan to develop a new web-based on-demand training to orient new mediators
and provide current mediators an opportunity to update their knowledge base. The program intends to recruit
and train mediators to increase capacity, especially in underserved and multilingual communities and rural
counties, as referrals rise beyond the capacity of current mediators.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 17
Recommendations
Eliminate or revise document reporting requirement
By statute, Commerce is required to provide an annual report to the Legislature. However, since the beginning
of the FFP, these reports have been static narrative documents out of sync with the FFP's fluid environment.
Decision-making for the FFP is driven by an active and engaged stakeholder group, including:
Members of the Legislature
Commerce staff
Borrowers' advocates (housing counselors and attorneys)
Beneficiaries' advocates (attorneys and trustees)
Representatives from the financial institutions (lenders, mortgage bankers and credit unions).
The key meetings where legislative decisions are often held after the report is published. Once the report is
published and available internally and externally, it often contains information at least six months out of date.
As technology and direct access to information continue to evolve, the methods of reporting data and activity
for the FFP should be addressed. The structure and requirements of the annual legislative report are not
currently meeting the program's or stakeholders' needs. Current technology allows Commerce to present FFP
data and performance in a timely format on our website. With this technology, the static annual report can be
replaced with a streamlined and accessible data sheet with current and accurate data.
Starting in state fiscal year 2024, Commerce will provide the required data quarterly on the program's website
instead of providing an annual report in the form of a narrative document. The required data is better suited for
a web-based format. This will also ensure stakeholders have up-to-date information on the program's
outcomes readily available. Commerce recommends the Legislature eliminate the existing reporting
requirements or revise them to only include web-based reporting.
Provide for the funding shortfall
Commerce requested $10 million for the FFP as part of the decision package to combat homeownership
disparities. Funding is at a historic low as the pandemic moratorium on foreclosures meant that the fees that
fund the program were not generated. Additionally, due to the low number of foreclosures in the past year,
most lending financial institutions will be able to claim an exemption for the current year, continuing to limit
program funding.
If granted, this funding will ensure the program can meet the needs of the increasing number of homeowners
seeking foreclosure assistance. This funding will also be used to create a web-based training for mediators,
housing counselors, and attorneys to utilize the mediation database and to onboard new mediators to meet
the increasing need.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 18
Current foreclosure climate and trends
At the time of writing this report, the first quarter of fiscal year 2023 has concluded. Between July 1, 2022, and
Sept. 30, 2022, the program experienced a dramatic increase in referrals for foreclosure mediation. During the
first quarter of fiscal year 2023, Commerce received 131 referrals for foreclosure mediation from housing
counselors and attorneys, a 46% increase from the previous quarter. One-hundred-thirty-one referrals are the
most referrals received for foreclosure mediation since the third quarter of 2020, Jan. 1, 2020, to March 31,
2020, which was just prior to the official COVID-19 emergency, receiving 132 total referrals. At this pace of
increase, mediation referrals will reach official pre-COVID-19 levels during the second quarter of state fiscal
year 2023. However, effective use of local, state and federal funding will allow for Washington's
homeownership and foreclosure network to remain prepared and available to assist homeowners.
FORECLOSURE FAIRNESS PROGRAM ANNUAL REPORT 19
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