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Monday
Apr182011

Saving DC Homes from Foreclosure, or Making it Impossible to Get a Mortgage

The RealtyTrac Forclosure report for the first quarter of 2011 says that there were 63 foreclosures in the District of Columbia, an 84% decrease from the previous quarter and an 87% decrease from the same quarter the prior year. Some of you are thinking, wow, that is interesting.  Most are thinking, why do I care?  And almost all of you are thinking, isn't that good news?  It is interesting, it isn't good news, and if you are a homeowner, renter, landlord, or desire to take out a mortgage in DC, you do care.  

The Saving DC Homes from Foreclosure Emergency Amendment Act of 2010, stopped DC foreclosures when it became effective on November 17, 2010.  Unfortunately, almost no one had read or understood what this 41 page bill said or did.  The comment period for the rules created by the bill ended today and we are all about to find out what it means.  We do know that the new law requires that lenders send out a notice to borrowers they wish to foreclose upon letting them know they have the opportunity to mediate their dispute.  

The law requires the notice give disclosures that will rival the paperwork borrowers received when they purchased their home, so it seems unlikely anyone will read or understand much of it, but somewhere in there it gives them the opportunity to mediate.  Plus a self addressed stamped envelope they can return saying they want to mediate. They return this to the DC Government, who then schedules the mediation and tells the lender, a process that seems likley to be full of missed notices and scheduling errors, but I could be wrong.  In a perfect world then everyone sits down and mediates "in good faith."   Actually, the law requires that the lender mediate in good faith.  

The borrower then needs to get a cerificate showing that they mediated in good faith and failed to come to an agreement and they must sign an affidavit that says, among other things, that they would not be financially better off making an agreement.  Given that many of these are very new thirty year mortgages in default and unless you have a crystal ball telling you if the housing market or the job market or both will come back in the next couple of years I am not sure how anyone can say for sure they would be or would not be better off making an agreement, but that is the law.  

 

This is not everything the law requires, not even close.  If you are a lender or a borrower about to try to navigate the new DC foreclosure system, please don't try this at home.  Get help.  Lenders will not successfully get their property back without the assistance of counsel that knows every detail of this new law, because one mistake and you will be in DC Court for a very long time.  Borrowers may have an opportunity with this law but you are unlikely to be successful taking advantage of the provisions without counsel.  No one knows what any of this really means, except that it almost certainly means it will be harder and more expensive to get a mortgage in DC and all the foreclosures that have been bottled up in DC are about to come crashing down.  And any of us who works or lives in this system is in for a bumpy ride.   

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