BILL REQ. #: S-3360.2
State of Washington | 62nd Legislature | 2011 2nd Special Session |
Read first time 12/09/11. Referred to Committee on Financial Institutions, Housing & Insurance.
AN ACT Relating to making imperative changes to the foreclosure fairness act to ensure mediators' participation; amending RCW 61.24.163 and 61.24.169; and declaring an emergency.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1 RCW 61.24.163 and 2011 c 58 s 7 are each amended to read
as follows:
(1) The foreclosure mediation program established in this section
applies only to borrowers who have been referred to mediation by a
housing counselor or attorney. The mediation program under this
section is not governed by chapter 7.07 RCW and does not preclude
mediation required by a court or other provision of law.
(2) A housing counselor or attorney referring a borrower to
mediation shall send a notice to the borrower and the department,
stating that mediation is appropriate.
(3) Within ten days of receiving the notice, the department shall:
(a) Send a notice to the beneficiary, the borrower, the housing
counselor or attorney who referred the borrower, and the trustee
stating that the parties have been referred to mediation. The notice
must include the statements and list of documents and information
described in subsection (5)(b)(i) through (iv) of this section; and
(b) Select a mediator and notify the parties of the selection.
(4)(((a))) Within forty-five days of receiving the referral from
the department, the mediator shall convene a mediation session in the
county where the borrower resides, unless the parties agree on another
location. The parties may agree in writing to extend the time in which
to schedule the mediation session. If the parties agree to extend the
time, the beneficiary shall notify the trustee of the extension and the
date the mediator is expected to issue the mediator's certification.
(((b) Prior to scheduling a mediation session, the mediator shall
require that both parties sign a waiver stating that neither party may
call the mediator as a live witness in any litigation pertaining to a
foreclosure action between the parties. However, the mediator's
certification may be deemed admissible evidence, subject to court
rules, in any litigation pertaining to a foreclosure action between the
parties.))
(5)(a) The mediator may schedule phone conferences, consultations
with the parties individually, and other communications to ensure that
the parties have all the necessary information to engage in a
productive mediation.
(b) The mediator must send written notice of the time, date, and
location of the mediation session to the borrower, the beneficiary, and
the department at least fifteen days prior to the mediation session.
At a minimum, the notice must contain:
(i) A statement that the borrower may be represented in the
mediation session by an attorney or other advocate;
(ii) A statement that a person with authority to agree to a
resolution, including a proposed settlement, loan modification, or
dismissal or continuation of the foreclosure proceeding, must be
present either in person or on the telephone or video conference during
the mediation session;
(iii) A complete list of documents and information required by this
section that the parties must provide to the mediator and the deadlines
for providing the documents and information; and
(iv) A statement that the parties have a duty to mediate in good
faith and that failure to mediate in good faith may impair the
beneficiary's ability to foreclose on the property or the borrower's
ability to modify the loan or take advantage of other alternatives to
foreclosure.
(6) The borrower, the beneficiary or authorized agent, and the
mediator must meet in person for the mediation session. However, a
person with authority to agree to a resolution on behalf of the
beneficiary may be present over the telephone or video conference
during the mediation session.
(7) The participants in mediation must address the issues of
foreclosure that may enable the borrower and the beneficiary to reach
a resolution, including but not limited to reinstatement, modification
of the loan, restructuring of the debt, or some other workout plan. To
assist the parties in addressing issues of foreclosure, the mediator
must require the participants to consider the following:
(a) The borrower's current and future economic circumstances,
including the borrower's current and future income, debts, and
obligations for the previous sixty days or greater time period as
determined by the mediator;
(b) The net present value of receiving payments pursuant to a
modified mortgage loan as compared to the anticipated net recovery
following foreclosure;
(c) Any affordable loan modification calculation and net present
value calculation when required under any federal mortgage relief
program, including the home affordable modification program (HAMP) as
applicable to government-sponsored enterprise and nongovernment-sponsored enterprise loans and any HAMP-related modification program
applicable to loans insured by the federal housing administration, the
veterans administration, and the rural housing service. If such a
calculation is not required, then the beneficiary must use the current
calculations, assumptions, and forms that are established by the
federal deposit insurance corporation and published in the federal
deposit insurance corporation loan modification program guide; and
(d) Any other loss mitigation guidelines to loans insured by the
federal housing administration, the veterans administration, and the
rural housing service, if applicable.
(8) A violation of the duty to mediate in good faith as required
under this section may include:
(a) Failure to timely participate in mediation without good cause;
(b) Failure of the beneficiary to provide the following
documentation to the borrower and mediator at least ten days before the
mediation or pursuant to the mediator's instructions:
(i) An accurate statement containing the balance of the loan as of
the first day of the month in which the mediation occurs;
(ii) Copies of the note and deed of trust;
(iii) Proof that the entity claiming to be the beneficiary is the
owner of any promissory note or obligation secured by the deed of
trust. Sufficient proof may be a copy of the declaration described in
RCW 61.24.030(7)(a);
(iv) The best estimate of any arrearage and an itemized statement
of the arrearages;
(v) An itemized list of the best estimate of fees and charges
outstanding;
(vi) The payment history and schedule for the preceding twelve
months, or since default, whichever is longer, including a breakdown of
all fees and charges claimed;
(vii) All borrower-related and mortgage-related input data used in
any net present value analysis;
(viii) An explanation regarding any denial for a loan modification,
forbearance, or other alternative to foreclosure in sufficient detail
for a reasonable person to understand why the decision was made;
(ix) The most recently available appraisal or other broker price
opinion most recently relied upon by the beneficiary; and
(x) The portion or excerpt of the pooling and servicing agreement
that prohibits the beneficiary from implementing a modification, if the
beneficiary claims it cannot implement a modification due solely to
limitations in a pooling and servicing agreement, and documentation or
a statement detailing the efforts of the beneficiary to obtain a waiver
of the pooling and servicing agreement provisions;
(c) Failure of the borrower to provide documentation to the
beneficiary and mediator, at least ten days before the mediation or
pursuant to the mediator's instruction, showing the borrower's current
and future income, debts and obligations, and tax returns for the past
two years;
(d) Failure of either party to pay the respective portion of the
mediation fee in advance of the mediation as required under this
section;
(e) Failure of a party to designate representatives with adequate
authority to fully settle, compromise, or otherwise reach resolution
with the borrower in mediation; and
(f) A request by a beneficiary that the borrower waive future
claims he or she may have in connection with the deed of trust, as a
condition of agreeing to a modification, except for rescission claims
under the federal truth in lending act. Nothing in this section
precludes a beneficiary from requesting that a borrower dismiss with
prejudice any pending claims against the beneficiary, its agents, loan
servicer, or trustee, arising from the underlying deed of trust, as a
condition of modification.
(9) Within seven business days after the conclusion of the
mediation session, the mediator must send a written certification to
the department and the trustee and send copies to the parties of:
(a) The date, time, and location of the mediation session;
(b) The names of all persons attending in person and by telephone
or video conference, at the mediation session;
(c) Whether a resolution was reached by the parties, including
whether the default was cured by reinstatement, modification, or
restructuring of the debt, or some other alternative to foreclosure was
agreed upon by the parties;
(d) Whether the parties participated in the mediation in good
faith; and
(e) A description of the net present value test used, along with a
copy of the inputs, including the result of the net present value test
expressed in a dollar amount.
(10) If the parties are unable to reach any agreement and the
mediator certifies that the parties acted in good faith, the
beneficiary may proceed with the foreclosure.
(11)(a) The mediator's certification that the beneficiary failed to
act in good faith in mediation constitutes a defense to the nonjudicial
foreclosure action that was the basis for initiating the mediation. In
any action to enjoin the foreclosure, the beneficiary shall be entitled
to rebut the allegation that it failed to act in good faith.
(b) The mediator's certification that the beneficiary failed to act
in good faith during mediation does not constitute a defense to a
judicial foreclosure or a future nonjudicial foreclosure action if a
modification of the loan is agreed upon and the borrower subsequently
defaults.
(c) If an agreement was not reached and the mediator's
certification shows that the net present value of the modified loan
exceeds the anticipated net recovery at foreclosure, that showing in
the certification shall constitute a basis for the borrower to enjoin
the foreclosure.
(12) The mediator's certification that the borrower failed to act
in good faith in mediation authorizes the beneficiary to proceed with
the foreclosure.
(13)(a) A trustee may not record the notice of sale until the
trustee receives the mediator's certification stating that the
mediation has been completed.
(b) If the trustee does not receive the mediator's certification,
the trustee may record the notice of sale after ten days from the date
the certification to the trustee was due. If the notice of sale is
recorded under this subsection (13)(b) and the mediator subsequently
issues a certification alleging the beneficiary violated the duty of
good faith, the trustee may not proceed with the sale.
(14) A mediator may charge reasonable fees as authorized by this
subsection and by the department. Unless the fee is waived or the
parties agree otherwise, a foreclosure mediator's fee may not exceed
four hundred dollars for a mediation session lasting between one hour
and three hours. For a mediation session exceeding three hours, the
foreclosure mediator may charge a reasonable fee, as authorized by the
department. The mediator must provide an estimated fee before the
mediation, and payment of the mediator's fee must be divided equally
between the beneficiary and the borrower. The beneficiary and the
borrower must tender the loan mediator's fee seven calendar days before
the commencement of the mediation or pursuant to the mediator's
instructions.
(15) 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.
Sec. 2 RCW 61.24.169 and 2011 c 58 s 10 are each amended to read
as follows:
(1) For the purposes of RCW 61.24.163, the department must maintain
a list of approved foreclosure mediators. The department may approve
the following persons to serve as foreclosure mediators under this
section:
(a) Attorneys who are active members of the Washington state bar
association;
(b) Employees of United States department of housing and urban
development-approved housing counseling agencies or approved by the
Washington state housing finance commission;
(c) Employees or volunteers of dispute resolution centers under
chapter 7.75 RCW; and
(d) Retired judges of Washington courts.
(2) The department may establish a required training program for
foreclosure mediators and may require mediators to acquire training
before being approved. The mediators must be familiar with relevant
aspects of the law, have knowledge of community-based resources and
mortgage assistance programs, and refer borrowers to these programs
where appropriate.
(3) The department may remove any mediator from the approved list
of mediators.
(4)(a) A mediator under this section is immune from suit in any
civil action based on any proceedings or other official acts performed
in his or her capacity as a foreclosure mediator, except in cases of
willful or wanton misconduct.
(b) A mediator is not subject to discovery or compulsory process to
testify in any litigation pertaining to a foreclosure action between
the parties. However, the mediator's certification and all information
and material presented as part of the mediation process may be deemed
admissible evidence, subject to court rules, in any litigation
pertaining to a foreclosure action between the parties.
NEW SECTION. Sec. 3 This act is necessary for the immediate
preservation of the public peace, health, or safety, or support of the
state government and its existing public institutions, and takes effect
immediately.