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State Legislature approves foreclosure mediation for Washington

Post by Katie Schmidt on April 1, 2011 at 12:39 pm |
April 1, 2011 4:12 pm

Washington is poised to become the third non-judicial foreclosure state in the nation to offer a third-party mediation process for struggling homeowners thanks to a bill that passed out of the state Legislature today.

In a 78-15 vote, the state House of Representatives passed House Bill 1362, a proposal meant to slow foreclosures in Washington, sending the measure on to the governor.

“Really what this means for Washington is that homeowners are going to have a chance to sit down with their lenders before they lose their homes,” said Marcy Bowers, interim director of the Statewide Poverty Action Network. “We hope this will cut down on the confusion and the frustration and, ultimately on foreclosures.”

The bill would charge banks a $250 fee for every property they foreclose on and use the money to add housing counselors in Washington.

Counselors would also be able to refer people to a mediation process where a third-party mediator could determine whether the lender and borrower had followed the rules and “acted in good faith” during mediation. Failing to do so would be a violation of the Consumer Protection Act.

At first the measure faced opposition from Washington Bankers, but after it went through negotiations and some revisions, Denny Eliason of the Washington Bankers Association said the financial industry is pleased with the bill.

“We think the biggest benefit of the bill for us is many, many more homeowners facing foreclosure will be able to meet with housing counselors,” Eliason said.

He said it makes the banks’ job easier when indebted homeowners understand the foreclosure process, their financial situation and their options, all things housing counselors can explain.

If the governor signs the measure, Washington will join Nevada and Maryland, the other two “non-judicial” foreclosure states, or states where foreclosures don’t have to go through the courts, that have passed a foreclosure mediation law, said Bruce Neas, the chief negotiator for homeowners on the bill.

Neas said it was particularly important for non-judicial states to have some sort of mediation because otherwise homeowners can go through the entire foreclosure process without having their case looked at by an impartial third party.

All together, 23 other state and local jurisdiction have some kind of mediation, and, according to numbers from the Poverty Action Network, about 60 percent of people who go through the mediation process are able to stay in their homes.

Rep. Tina Orwall, the bill’s sponsor, said it includes an emergency clause that will make it go into effect more quickly, so people who are already in the foreclosure process should be able to take advantage of it.

So far this year, there have been 9,366 foreclosures in Washington, according to Realty Trac, a Web site that tracks foreclosed properties by state.

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