Washington Foreclosure Fairness Act: What is it and how does it benefit distressed homeowners?
If you have fallen behind on a couple of monthly mortgage installments in Washington or anywhere else for that matter, you must be waiting for the dreadful day when you will receive a notice of default from your lender. It informs you that a foreclosure is looming. There are three ways to deal with the situation, you can – (1) go incommunicado and let the lender take away your home (2) sell off your home before your lender does or (3) take advantages of many foreclosure alternatives.
While choosing the first option is always a mistake, your decision as to which one of the remaining two you should opt for depends on an array of factors including how much equity your home has built. Whatever your decision is, one thing must be very clear – you should never give up. You should instead try to explore the best possible option that suits your situation.
What must be good news for you is that there are laws to protect the rights of distressed homeowners in Washington. One such law is Foreclosure Fairness Act. Here are a few things you must be aware of:
What is the Foreclosure Fairness Act?
The law was introduced in 2011 in the aftermath of the 2007-08 housing crisis that left millions of homeowners underwater. As foreclosure properties flooded the market, the general sentiment was that homeowners were being victimized. Desperate to recover huge losses, financial institutions were accused of taking advantage of homeowners simply because they were not aware of their rights. The government stepped in and introduced Foreclosure Fairness Program to ensure that the information about these rights are duly communicated to homeowners.
This is basically a mediation program that makes it mandatory for lenders to sit with distressed homeowners and inform them of all the possible foreclosure alternatives at their disposal.
Under the program, homeowners are entitled to civil legal assistance, free counselling and mediation.
The program protects the interest of lenders as well. Foreclosures are not good for the economy because they cripple financial institutions. Banks are not in the business of real estate, so they want to keep their books clean and avoid foreclosures.
Lenders and borrowers can reach a common ground through the program and find a solution that protects the interests of both the parties.
Under the program, the lender has to notify borrower of “the availability of foreclosure counseling” before taking any steps towards initiating foreclosure process.
A third-party counsellor “helps the homeowner and the lender openly communicate and reach a fair, voluntary, and negotiated agreement whenever possible”. The homeowner and the lender each pay half of the mediation fee to prepare, schedule, and conduct a mediation session. If more than one session is necessary, additional fees may apply.
In conclusion
Taking part in this mediation program can really help. Keep in mind that a foreclosure can have long-term impact on your credit. It is always in your best interest to avoid it.