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New Foreclosure Prevention Law Takes Effect

Amy Radil
07/22/2011

The state's new Foreclosure Fairness Act takes effect today (Friday). It requires that distressed homeowners be given the chance to seek mediation before banks can foreclose. Housing counselors say their phones are ringing off the hook as homeowners seize this new opportunity.

TRANSCRIPT

Nicole Baker's Seattle home is currently scheduled for a foreclosure sale on August 26, her birthday. She and her husband bought the house in 2008 with a loan from Countrywide, now owned by Bank of America. After buying the house, Baker says she lost her job and the home lost almost 40 percent of its value. Baker was granted a trial loan modification and got a new job at a hair salon, but when the bank claimed it never received a payment, she couldn't seem to clear up the problem.

Baker: "The right hand never knew what the left hand was doing. You dealt with so many different departments."

Baker says Bank of America started foreclosure proceedings. Bank of America representatives weren't available for comment.

Baker: "I felt so angry and peeved, I wanted to actually give up on the house. I just got to the point where I said, you know what, take it, go. And then all of a sudden my housing counselor fell out of the sky like an angel."

Baker says her housing counselor will try to postpone the sale and seek mediation, as allowed under a new state law. The law gives Baker and other homeowners the chance to meet with their lenders and a neutral mediator to try and find a solution.

The Washington Department of Commerce oversees implementation of the new law. The department's Rick Torrance says at these mediation sessions, lenders have to send someone with the authority to sign off.

Torrance: "The legislation actually requires that a decision maker, someone who can agree to a deal and sign off on it, either be at the mediation in person or be available by phone."

The law is mostly intended to notify homeowners early in the foreclosure process that they have the right to mediation and should contact an attorney or housing counselor for help. But the bill's sponsor, State Representative Tina Orwall, says homeowners facing imminent foreclosure are grandfathered in as well.

Orwall: "For people who have a sale date that's after the startup of this bill which is July 22, they'll have a 60–day window to get a counselor or an attorney to access the mediation. And then after that we have timelines in our bill for homeowners who will get notices."

Under the new law, larger banks will also pay a $250 fee every time they start a foreclosure. That money will be used to hire more housing counselors and do other forms of foreclosure prevention. Washington had about 32,000 foreclosure filings last year and is on track this year to meet or exceed that number. But advocates for the new law — including the Washington Bankers Association — say they hope the additional housing counselors will help more borrowers find solutions early on.

I'm Amy Radil, KUOW News.

© Copyright 2011, KUOW

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