Well, the banks are at it again folks. Washington has passed new legislation that is designed to further assist homeowners in crisis, but as far as I can tell the investors holding our notes gain more than than the homeowner.
Starting June 7, 2012, all beneficiaries of a note secured by owner-occupied real property in Washington who intend to release a deed of trust (typically in a short sale or via deed-lieu of foreclosure) must state in writing to the borrower whether it reserves or waives the right to collect full payment of the secured debt. They must also state that the letter does not preclude the borrower from negotiating with the beneficiary for a full release of the outstanding debt. In other words, not much of a change from what is currently going on in short sale or deed-in-lieu transaction since most beneficiaries will not waive the right to collect full payment absent negotiations to obtain the waiver. This is why working with an experienced and skilled short sale negotiator is important when asking a beneficiary of a note to release its deed of trust or mortgage.
Under this new Act, real estate agents will be required to disclose in their Law of Real Estate Agency pamphlet that the decision of a beneficiary to release its secured interest in the property does not automatically relieve the seller of the obligation to pay any debt or costs remaining at closing, including real estate commissions. While I like the idea that homeowners are further informed that the remaining loan balance could survive closing, I will not be surprised to see more beneficiaries (and maybe some agents) seeking payment from sellers at closing to cover costs and commissions that up until now have for the most part been paid out of the sale proceeds. Having a strong short sale negotiator and not being afraid to let the beneficiary take the home in foreclosure will go a long way towards working out a full settlement of the debt with little or no cost to the struggling homeowner in a short sale.
Another change that I am not too happy about is that the beneficiaries will no longer be required to have an in-person meeting with the homeowner prior to sending out a Notice of Default, even if the homeowner requests the in-person meeting in writing. Starting June 7, 2012, beneficiaries can attend an in-person meeting either in person, over the telephone or by video conference. Because they are given a choice, I predict that most, if not all, beneficiaries will elect to hold the "in-person" meeting over the telephone. I think the next distressed property legislation should require all beneficiaries to send the homeowner a photograph of their decision-maker so the homeowner can tape the photo to their phone and at least get some semblance of the in-person meeting that is anything but that.
The only real benefit of this new legislation in my opinion is that
Washington homeowners will have more time to meet with a certified HUD
counselor or attorney to discuss how they can delay or stop foreclosure
of their primary residence through mediation. Previously, a homeowner
lost the right to be referred into a Foreclosure Fairness Act mediation
once a Notice of Trustee Sale was recorded. This new Act will give
homeowners up to 20 days AFTER a Notice of Trustee Sale is recorded to
have a counselor or attorney refer them and the beneficiary of their
note into mediation. While mediation is not a guarantee that a
homeowner will be able to keep their home, it is designed to
work out an alternative to foreclosure, such as a loan modification,
short sale or deed-in-lieu of foreclosure, and it requires the
beneficiary to negotiate in good faith.
If you are struggling to make a mortgage payment or want information on how you can improve your loan terms or how to gracefully exit ownership with as little damage as possible, talk to an experience real estate attorney who specializes in distressed properties. Unless you want to file for bankruptcy, do not meet with a bankruptcy attorney unless they also specialize in other foreclosure alternatives and have done so for at least 5 years or more. If they have never negotiated a loan modification or a short sale or do not work with another attorney who has done so for years, call someone else. I cannot tell you how frustrating it is to meet with homeowners who have received misinformation from bankruptcy attorneys who know very little about loan modification, short sales, deeds-in-lieu of foreclosure or even Washington laws affecting distressed properties, not to mention the credit and tax implications of debt forgiveness outside of bankruptcy. I would rather see a homeowner talk to an experienced short sale agent than a lawyer who is dabbling in distressed properties just to bring in bankruptcy clients.
Get educated. Get help. Do not let lenders or anyone else take advantage of your situation.
If you would like more information on House Bill 2614 and to read the full text, go to:
http://apps.leg.wa.gov/documents/billdocs/2011-12/Pdf/Bills/House Passed Legislature/2614-S.PL.pdf
