With the help of the Bellevue Neighborhood Mediation Program, Bellevue homeowners facing foreclosure can negotiate with their lenders for changes to their loans that allow them to keep their homes.
Under a recent state law, lenders are required to mediate with homeowners prior to foreclosing. To be eligible for the state Department of Commerce programs, homeowners must be referred by a housing counselor or attorney.
Community dispute resolution centers such as Bellevue's Neighborhood Mediation team provide many of the actual mediations. With several certified foreclosure mediators on its staff, Neighborhood Mediation has mediated 10 cases between lenders and homeowners since the program began. The Foreclosure Fairness Act was adopted in 2011 to prevent a surge of foreclosures.
A significant percentage of these cases result in agreements to modify the loan -- Bellevue mediators just helped a Lake Hills family stay in its home with new mortgage terms. In other cases, families are able to avoid the stigma of foreclosure through "graceful exits," such as short sales or deeds in lieu. Foreclosure not only affects a family's credit, it also reduces property values in the surrounding neighborhood.
"These mediations provide a crucial opportunity to meet face- to-face with a responsible representative from the banks," Program Manager Andrew Kidde said, "and they help homeowners understand and evaluate their options."
Early implementation of the program was challenging. Many lenders found the law's documentation requirements onerous and had concerns with the legal ramifications of participation. In most cases, there were long delays in the scheduling of mediations.
Kidde invited attorneys for the lenders and housing advocates to City Hall to discuss problems with the law. Several issues were identified, but it was clear after a couple of hours that a lot more work was needed to make foreclosure mediations run smoothly.
Kidde and Maralise Hood, director of the Pierce County Dispute Resolution Center, ended up facilitating a series of meetings in Olympia that resulted in a revised, "clean-up" bill passed by the Legislature this spring. Jim Pishue, president of the Washington Bankers Association, called the revised law a "balanced solution."
"The bill passed in 2012 provides important new protections for homeowners, but does so in a way that will ensure that mortgage capital will continue to flow into the state, and the market can continue to meet the needs of Washington homeowners," Pishue said.
With changes in the timeline and documentation required, scheduling problems are expected to improve considerably.
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