Foreclosure Mediation Program.  The Foreclosure Mediation Program (program) provides Washington homeowners facing foreclosure the opportunity to be referred by a housing counselor or attorney to mediation with their lender to review available options to avoid foreclosure.  Mediation is a process where a neutral third party helps the homeowner, and the lender reach a voluntary and negotiated agreement.  The Department of Commerce (Commerce) oversees the implementation of this program.  

An attorney or housing counselor must refer the homeowner to foreclosure mediation by sending a referral form to Commerce stating mediation is appropriate.  Under the program, a borrower may be referred to mediation any time after a notice default has been issued but no later than 90 days prior to the date of sale listed in the notice of trustee's sale.   The housing counselor or referring attorney will send notice to the borrower and Commerce.  Within ten days of receiving the notice, Commerce shall send a notice to the beneficiary, housing counselor or attorney and trustee, and select a mediator.  Within 23 days of Commerce's notice, the borrower shall transmit to the mediator and beneficiary the initial homeowner financial information worksheet that must include: (1) borrower's current and future income, (2) debts and obligations, (3) assets, (4) expenses, (5) tax returns for the previous two years, (6) hardship information, and (7) other applicable information commonly required by any applicable federal mortgage relief program.

Within 20 days of the beneficiary's receipt of the borrower's documents the beneficiary shall transmit:

• an accurate statement containing the balance of the loan within 30 days of the date on which the beneficiary's documents are due to the parties;
• copies of the note and deed of trust;
• proof that the entity claiming to be the beneficiary is the owner of any promissory note or obligation secured by the deed of trust;
• the best estimate of any arrearage and an itemized statement of the arrearages;
• an itemized list of the best estimate of fees and charges outstanding;
• the payment history and schedule for the preceding 12 months, or since default, whichever is longer, including a breakdown of all fees and charges claimed;
• all borrower related and mortgage related input data used in any net present values analysis;
• an explanation regarding any denial for a loan modification, forbearance, or other alternative to foreclosure;
• appraisal or other broker price opinion most recently relied upon by the beneficiary not more than 90 days old at the time of the scheduled mediation; and
• the portion or excerpt of the pooling and servicing agreement or other investor restriction that prohibits the beneficiary from implementing a modification, if the beneficiary claims it cannot implement a modification due to limitations in a pooling and servicing agreement.

Within 70 days of receiving the referral from Commerce, the mediator shall convene a mediation session in the county where the property is located, unless the parties agree on another location.

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, modification of a delinquent assessment, modification of late fees or charges associated with a delinquent assessment, or some other workout plan.

If referred to mediation, the homeowner and lender split the mediation fees.

Commerce is required to prepare an annual report to the Legislature on the performance of the program. The report must include:

• performance of the program, including the number of borrowers referred to the program;
• the results of the program, including the number of mediations requested, 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;
• information received by housing counselors regarding outcomes of foreclosure; and
• any recommendations for changes to the statute regarding the program.

Foreclosure Fairness Account.  For each residential real property for which a notice of default has been issued, the mortgage beneficiary issuing the notice shall remit a $250 fee to Commerce to be deposited into the Foreclosure Fairness Account (FFA).  The FFA is subject to allotment procedures, but an appropriation is not required for expenditures.  Authorized expenditures from the FFA are $400,000 per biennium to fund the counselor referral hotline, and the remaining funds:

• 69 percent for housing counseling activities;
• 8 percent to the Attorney General's Office (AGO) to enforce Consumer Protection Act (CPA) violations related to deeds of trust;
• 6 percent to the Office of Civil Legal Aid (OCLA) for the representation of homeowners in matters related to foreclosure; and
• 17 percent to Commerce to implement and operate the program.

Notice of Delinquency.  Homeowner's associations, condo associations, and common interest communities (associations) are required to assess and collect against all unit owners the costs associated with the operation, maintenance, repair or replacement of common areas or elements.  After following the statutory process for collection of non-payment of assessments, including providing notice of delinquency to the unit owner, the association may when certain conditions are met, place a lien on the unit owner's property and pursue foreclosure or enforcement of the lien.

Foreclosure Mediation Program.  Beginning January 1, 2026, the program is expanded to allow unit owners within properties governed by associations who are delinquent or may become delinquent on their association assessments to contact a housing counselor within the program to reach a resolution with the association.  The bill requires the housing counselor or attorney to cause the unit owner and the association to meet and confer prior to referring the parties to mediation.  The bill provides separate procedures for deed of trust foreclosures and delinquent assessment foreclosures.

The association shall provide to the mediator and the unit owner the following documents: (1) an itemized ledger for the proceeding 12 months, (2) copy of all association liens placed against the property, and (3) copies of the current association declarations, bylaws, and any other governing documents for the association.

After receiving receipt of the association's documents, the unit owner shall provide to the mediator and the association the following documents: (1) evidence of any unit owner payments to the association that are not reflected in the association ledger, if any, (2) statement of hardship, if relevant, and (3) if the unit owner is interested in a payment plan, a proposed schedule of payments to resolve the arrears.

The bill allows the parties and the housing counselor or mediator to conduct the meet and confer and mediation processes by telephone or videoconference.   The parties are required to be responsible for their own attorney fees during the meet and confer and mediation processes.

Requires the notice delinquency for past due assessments to be mailed to the unit no later than 30 days after an assessment becomes past due. Revises the enforcement process related to delinquent assessments to require the association to wait 15 days after providing the notice before taking any other action to collect or charge any costs related to collection except costs of printing and mailing the notice, an administrative fee of no more than $10, and a single late fee of no more than $50 or 5 percent of the amount of the unpaid assessment whichever is less.

Beginning December 1, 2026, Commerce's report to the Legislature on the performance of the program must also include:

• the number of unit owners who are referred to mediation by a housing counselor or attorney;
• the number of unit owners and associations who failed to mediate in good faith, and the reasons for the failure to mediate in good faith;
• if known, the number of debts for delinquent assessments restructured or modified;
• the change in the unit owner's periodic assessment payments including any reductions in late charges or interest rates; and
• to the extent practical, the number of unit owners who report a delinquency within a year of restructuring or modification.

Commerce shall make information and resources regarding common interest community foreclosures and related foreclosure programs and resources publicly available online.

The bill adds to the statutory common interest communities notice of delinquency sample form information about the housing counselor meet and confer and referral to mediation processes, and requests that associations inform a delinquent owner of the opportunity to contact a housing counselor before the notice is mailed.

Foreclosure Fairness Account.  A foreclosure prevention fee of $80 shall be assessed for each residential mortgage loan originated within or outside the state of Washington and related to property located within the state of Washington, excepting only reverse mortgage loans issued to seniors over the age of 61, and remitted at the time of closing by the escrow agent or other settlement or closing agent processing the loan into the FFA.  This foreclosure prevention fee may be financed in the loan and paid from the loan proceeds or from any borrower cash contribution at the time of closing.

The funds must be distributed as follows:

• 50 percent for providing housing counseling activities;
• 8 percent to AGO to enforce CPA violations related to deeds of trust;
• 16.5 percent to OCLA for the representation of homeowners in matters related to foreclosure;
• 15 percent to fund the foreclosure prevention hotline;
• 0.5 precent to fund outreach; and
• 10 percent to Commerce to implement and operate the program.

Commerce is required by December 31, 2025, to report to the appropriate committees of the Legislature on the number and amounts received from the notice of default fee and the foreclosure prevention fee remitted to the foreclosure fairness account for revenue collected from July 1, 2025, through November 30, 2025, and then annually thereafter post the information on their department website.