District of Columbia Foreclosure

District
of Columbia
Foreclosure
& Mediation

Resources

APPLY FOR MD HOMEOWNER ASSISTANCE FUNDS! Visit haf.dc.gov today!

JUST SAY NO TO FORENSIC LOAN AUDITS

The FTC cracks down on forensic loan audits, finding that the audits were unlikely to help homeowners in default. Click here for full text of the article.

DC FORECLOSURE INFORMATION

www.preventloanscams.org

MORTGAGE LOAN ASSISTANCE OPTIONS

As soon as you determine that you will have problems making your mortgage payment, contact your loan servicer to see what your loan assistance options are.

Home Affordable Modification Program ("HAMP") expired December 31, 2016 and it no longer available.

***NOTE: IF YOU ARE NOT YOUR MAKING MORTGAGE PAYMENTS BECAUSE YOUR SERVICER IS REJECTING YOUR PAYMENTS OR BECAUSE THERE IS A DISCREPANCY IN WHAT YOU BELIEVE YOU OWE, YOU MUST SAVE THOSE MORTGAGE PAYMENTS (IN YOUR BANK ACCOUNT, ETC.) AND HAVE THEM AVAILABLE TO PAY ONCE THE ISSUE HAS BEEN RESOLVED. THE FACT THAT YOU ARE IN A DISPUTE WITH YOUR SERVICER DOES NOT MEAN THAT YOU ARE NOT LEGALLY OBLIGATED TO MAKE THOSE PAYMENTS AT SOME POINT IN THE FUTURE. DO NOT SPEND THE MONEY OR USE IT PAY OTHER BILLS. THE DISPUTE WILL NOT SUFFICE AS A DEFENSE FOR NOT OWING THE MONEY. ***

FORECLOSURE TERMS

One of the most important things to remember is that there is a difference between being in "foreclosure status" with your mortgage servicer and being in legal foreclosure. Once you are served with the Order to Docket, your case is now in legal foreclosure and you are a party to a lawsuit. At this point, you are responsible for timely participating in your modification/workout situation with your servicer AND timely participating in your foreclosure case in court. (NOTE: the lender has an attorney...you should too!)

Servicer - This is the entity that sends you your monthly mortgage statements and it is who you send your payments to. The servicer is not necessarily the entity that owns your loan.
Investor / Secured Party - This is the entity that owns your loan. The investor/secured party is not necessarily the entity that services your loan.
Substitute Trustee - These are the individuals that are acting as the foreclosing attorneys on behalf of the investor for your loan. The Substitute Trustees will be the named Plaintiffs on the Order to Docket.
Complaint for Residential Foreclosure - This is the pleading filed by the Plaintiff that initiates the legal foreclose case. You should be served with a summons along with the Complaint. Note: this is a lawsuit so you should be consulting with a foreclosure defense attorney.
Answer - This is the pleading filed by each defendant in response to the Complaint. The Answer should respond to each numbered paragraph of the Complaint by admitting each statement, denying each statement or stating that you don't have enough information to form a belief as to the statement. You should also assert any defenses you have in the Answer.
Case track - All cases in the District of Columbia will follow a "track" or a timeline of events leading to trial. In foreclosure, you will start on the early mediation track. When all loss mitigation options have been exhausted, the judge will assign the case to either: 1) the litigation track so that asserted claims and defenses can be litigated at trial; or 2) the judgment calendar so that judgment can be requested by Plaintiff in anticipation of scheduling the foreclosure sale.
Loss mitigation - This is the umbrella term that is used to reference all workout options that can be requested in order to cure the default and avoid foreclosure. A loan modification is the most familiar option.
Reinstatement - This is the amount of money (for arrears, late fees, attorney's fees and costs) that you can pay to immediately bring the loan current. Note: it will take the substitute trustee and/or the bank a few days to obtain this figure so do not wait until the day before the foreclosure sale to request it. By law, you are permitted to reinstate the loan up to one (1) business day prior to the foreclosure sale.
Modification - This loss mitigation option changes or "modifies" the terms of your mortgage loan. Changes can include interest rate reduction, term extension, capitalization of the arrears (when the arrears are added to the back of the loan) and/or principal reduction or deferment. A modification does not remove any named borrowers from the loan nor does it extinguish a named borrower's responsibility for repaying the loan (even if that borrower has executed a quit claim deed and no longer owns the property).
Forbearance - This loss mitigation option allows you to make a reduced mortgage payment for a short period of time. Once the period expires, you will be required to resume making the regular monthly payment and possibly more. You will still owe the remainder of the monthly payment that is actually due during the forbearance period, so be sure to confirm when and how you will pay that back. A forbearance does not change any term of your loan.
Repayment plan - This loss mitigation option allows you to pay off the arrears over a set period of time (typically six (6) months to one (1) year). The servicer may or may not require an upfront contribution. You will still make your regular mortgage payment during the repayment period so the total amount that you will pay monthly will be higher than what you normally pay. A repayment plan does not change any term of your loan.
Assumption - This option allows someone to "assume" or step into the shoes of the named borrower and take complete responsibility for repaying the loan. Not many investors offer assumptions because it is less risky for them to have more than one (1) person responsible for paying the loan. Assumption is the only option that removes a named borrower from the loan. NOTE: If you are the heir of the deceased borrower, you may have the right to assume the loan pursuant to the Consumer Financial Protection Bureau regulations. Please click here.
Short sale - This liquidation option requires the borrower to list the property for at least 90 days in an attempt to procure a buyer. The property will be listed at an amount that is less than fair market value and/or less than what is owed on the loan so there may be a deficiency issue. Be sure that you are working with a realtor that is a short sale specialist. You will still be required to apply for short sale consideration with your servicer by submitting your listing agreement and your financials. Be sure to have an attorney review the short sale agreement and ask for a deficiency waiver. Your investor will have to approve the purchase price for the property (after a sales contract is executed) in order for the short sale to go through. Note: there is no legal authority requiring an investor to accept any short sale offer. There is no guarantee that the short sale offer will be accepted by your investor. Your property will not be eligible for a short sale if there are other liens on the property.
Deed-in-lieu - This liquidation option permits you to "give the property to the bank". You will be required to attempt to short sale the property prior to being considered for a deed-in-lieu. You will also be required to apply for deed-in-lieu consideration by submitting your financials to the servicer. Note: this option is not automatic and is subject to a review process. Be sure to have an attorney review the deed-in-lieu agreement and ask for a deficiency waiver. Your property will not be eligible for short sale if there are other liens on the property.
Deficiency - This is the amount of money that represents the difference between the purchase price for the property and what is still owed on the loan. You are still legally responsible for repaying this amount but you can ask that the investor waive the deficiency. Note: do not let anyone tell you that a deficiency waiver is automatic because it is not! If the deficiency is waived, there may be tax consequences so consult with a tax professional. The servicer will issue you a 1099 form if the deficiency is waived. NOTE: the federal Mortgage Debt Forgiveness Relief Act expired and has not yet been renewed. Consult a CPA or tax attorney to determine whether you will have to pay income tax on a deficiency balance that has been waived.
Cash for Keys / Relocation expenses - This post-liquidation option refers to the amount of money that the purchaser (at the foreclosure sale) will offer you as consideration for agreeing to leave the property by a certain date and without destroying the property (it must be left in broom-swept condition). Not every purchaser will offer cash for keys but be sure to ask about it both before and after the foreclosure sale. The more time that is required to move out typically means a reduction in the amount of money offered.

IMPORTANT: IF YOU ARE NOT WORKING WITH A HOUSING COUNSELOR, GET A HOUSING COUNSELOR! Please see below for information on finding an approved non-profit housing counselor in your area.

SERVICER SPEAK AND IMPORTANT TIPS

It is very important to understand how servicers/investors view your default and your financial hardship.

In order to demonstrate "hardship", some unanticipated or uncontrollable event must have happened to you that caused your default and prevents you from paying your current mortgage payment. There are many borrowers that have rebounded from their hardship and are now able to make their mortgage payments despite having a temporary hardship. For most servicers/investors, in order to qualify for loss mitigation assistance, you must be unable to make your current monthly mortgage payment. Please note that this is an objective determination, meaning the financial worksheet listing your income and expenses will demonstrate whether or not you have the income to pay your monthly mortgage payment (principal, interest, taxes, insurance, HOA fee). If you have surplus income every month, chances are the servicer will conclude that you are able to make your monthly mortgage payment and do not need assistance. Income surplus / deficit = total net monthly income - total expenses. Servicers do not consider the amount that you owe in arrears in determining whether you have a hardship...they only consider your current monthly income and current monthly expenses. If there is no "hardship", then you will not receive loss mitigation assistance regardless of the fact that you still owe for the arrears.

Everything must be documented! If you do not have a document to substantiate your position, then draft a letter of explanation to explain the situation. Remember to sign and date the letter.

Review your bank statements. When estimating your average expenses, make sure that what you say that you spend is actually what you are spending. The servicer is going to review your bank statements and calculate the total for each expense type listed on your financial worksheet! Only include monthly, not annual, amounts for HOA fees and homeowner's insurance. Do not include expenses that do not actually exist like car repairs and maintenance. Make sure that all pages are present and that you haven't overlooked any double-sided print outs (the back side of the statement will not come through on the fax). If you receive Social Security income, pension income, rental income, etc., be sure to circle these deposits on each bank statement.

Gather your federal tax returns. If you haven't filed your taxes, the servicer will not review you for any work out options. Exception: for the current tax year, you can provide a Form 4868 tax extension form. The filing extension will expire in October and you will be required to provide a tax return for the current tax year after that point.

Pull your credit report...the servicer will. You need to how your creditors are reporting information about their respective trade lines. If something is incorrect, contact the credit bureau and dispute it. Any accounts that show as delinquent are a big red flag to the servicer that you could be sued and have your wages garnished in the near future. You are entitled to one free credit report from each of the three major credit bureaus per year from the Annual Credit Report website. Click here for a sample dispute letter.

Confirm that you do not have any other lawsuits against you. Run your name through the online judiciary case search. Do you have any judgments or liens against you? If so, be prepared to provide written documentation that despite the judgment/lien, you have worked out a payment plan with that creditor and that you are current on that payment plan. Note: In Maryland, a circuit court judgment is automatically a lien against any real property owned by you in the county where that judgment was entered even if that judgment was not indexed separately as a lien.

Confirm that there are no liens filed against your property. Review the land records for the county where your property is located. If there are homeowners association liens, be prepared to provide written documentation to show that you have worked out a payment plan with the homeowners association and that you are current on the payment plan as well as your current assessments. If you have satisfied the lien, be prepared to show proof of payment. If you have satisfied the lien but a release has not yet been filed, contact the homeowners association attorney noted at the bottom of the lien.

Know the approximate fair market value of your property. Locate your property on Zillow and note the value. Note: this will not be a value that is as accurate as what is listed in MLS or if your property had been appraised but it will serve its purpose!

Confirm what your plan rules are if you have retirement accounts. In the event that you wish to withdraw some of your retirement funds to satisfy the default or reinstate the loan, you need to know what your retirement plan rules are. Most plans will allow for a loan or a hardship withdrawal but there typically will be an application process involved. You need to know how much you can access, how quickly you can get the funds in hand and what the consequences of early withdrawal will be. Check with your plan administrator or with your Human Resources Department. Note: if your servicer is pushing you to withdraw funds from retirement and you know that you cannot withdraw any funds, get a letter from your plan administrator or Human Resources Department stating that you cannot withdraw any funds.

Consult with a bankruptcy attorney. If you feel that bankruptcy may be the best (or only) option for you, don't wait until the last minute to locate and consult with a bankruptcy attorney to know what chapter you might qualify for. Prior to filing, you will need to take an a credit counseling course from an approved counseling agency and obtain the certificate of completion.

FREE RESOURCES

Visit Housing Counseling Services, Inc., a nonprofit housing counseling agency that can assist you with submitting your loss mitigation package to your servicer.

Visit District of Columbia HomeSaver Phase I(for mortgage assistance) and Phase II Restore Program (for property tax arrears) to determine if you qualify for financial assistance from the District.

Visit Neighborhood Works, a nonprofit organization that provides legal services to families fighting to save their homes from foreclosure. Neighborhood Works provides comprehensive information about emergency loan assistance, how to locate aHUD approved housing counselor near you, scam alerts and information about modification programs.

Visit Hope Now for additional homeowner resources, listings of events in your area, HOPE hotline information and housing counselor information.

For a list approved non-profit housing counselors, visit the Department of Housing and Urban Development.

Visit Bread for the City for a information regarding how to meet with an attorney in their free legal clinic.

SELLING YOUR PROPERTY

Realtors are notorious for giving incorrect legal advice. Realtors should not be giving legal advice beyond the logistics of actually effectuating the sale of the property. Always consult with an attorney for issues related to sales contracts, closing documentation, waiver of deficiency, filing bankruptcy or other legal issues.

Always consult with a tax professional for issues related to loan forgiveness or waiver of deficiency.
If you are considering short selling your property, make sure that you are working with a realtor that is a "short sale specialist".

FINDING NEW HOUSING

There are online search vehicles that may assist you in locating new housing. As with any business arrangement, be sure to do your homework and make sure that your prospective landlord is reputable and has a valid rental license.

Beware of scams! Confirm that the property actually exists and is owned by the purported landlord. Confirm that the landlord's agent and/or property manager is validly licensed with the state. Do no sign a lease or transfer funds for deposit or rent until you have visited the property and met with the landlord, agent or property manager in person.

SCAMS / FRAUD

Rule of thumb....if it sounds to good to be true it usually is! No person, not even an attorney can guarantee that you will receive a loan modification.

Housing counselors are the best resource to assist you in applying for a loan modification (see "Free Resources" section above).

Do NOT stop paying your mortgage or redirect mortgage payments through any other person or entity. If your servicer stops accepting your mortgage payments because you are in default, deposit the funds that you would have applied toward your mortgage payment into a separate savings account.

If you paid a company to obtain a loan modification for you, or you have been a victim of foreclosure rescue scam, visit the Department of Insurance, Banking and Securities to file a complaint.

DISB Foreclosure v. Judicial Foreclosure

Effective November 5, 2013, the new Saving DC Homes From Foreclosure Clarification and Title Insurance Clarification Amendment Act of 2013 changed the scope of foreclosure in the District of Columbia yet again. A lender may now elect to either participate in foreclosure mediation through the Department of Insurance, Banking and Securities (DISB) or file a Complaint to Foreclose in the Superior Court. The processes are very different and place different obligations on the lender and borrower.

FORECLOSURE THROUGH DISB

Please visit the DISB website for more information and forms.

One of the most important things to note about the mediation law is that once offered by the lender, the borrower must CHOOSE to participate in mediation. It is not automatic!

The Substitute trustee or agent must send the borrower and record owner of the property a Notice of Default by regular mail. The Notice of Default must include: (a) contact information through which the borrower can reach an agent or representative of the lender that can explain the mediation process; (b) a recommendation that the borrower seeks housing counseling services: (c) contact information for at least one (1) local HUD-approved housing counseling agency; (d) a description of all loss mitigation options that the lender offers and the eligibility requirements for those programs; (e) a loss mitigation application and instruction for completing the application; (f) a Mediation Election Form; and (g) envelopes addressed to the lender and Mediation Administrator.

Within two (2) business days of sending the Notice of Default to the borrower, the lender must send the Notice of Default and Mediation Election Form to the Mediation Administrator and must record both forms with the Recorder of Deeds of the District of Columbia.

The lender cannot proceed with foreclosure prior to obtaining a final mediation certificate from the Mediation Administrator. If a borrower does not elect to participate in mediation, a final mediation certificate will be issued permitting the trustee to move forward with scheduling the foreclosure sale.

After obtaining a mediation certificate, the Substitute trustee or agent must send the borrower and record owner a Notice of Intent to Foreclose by certified and regular mail at least thirty (30) days prior to the foreclosure sale. This notice will also be filed with the Recorder of Deeds.

For more information, visit the Department of Insurance, Securities and Banking.

If the borrower does provide notice that he/she wants to participate in foreclosure mediation by timely returning the Mediation Election Form and Loss Mitigation Application (and non-refundable $50 fee), mediation will be scheduled.

What to expect at DISB mediation

The mediation session will be conducted by a mediator at a location provided to you by DISB. The mediator is there to help build understanding about the dispute, think about solutions, and reach an agreement. The mediator is a neutral party and therefore cannot make any decisions about the dispute. Think of the mediator as more of a referee or counselor.

Mediation is not a court hearing or official proceeding despite the fact that the actual mediation session may be held inside of a courthouse.
All discussions that occur during mediation are confidential and cannot be used in any subsequent court proceedings. Additionally, the mediator cannot be called as a witness in any subsequent court proceedings.

If the lender sends a representative to mediation, that representative must have the authority to negotiate and/or modify the terms of the loan.

Strategy for medication

Think of mediation as a business meeting. You need to prepare (in advance) to demonstrate how you will - objectively - be able to save your home. Please understand that there are no emotional considerations in this process so the fact that you don't want to lose your home or that the home has been in your family for years is NOT a defense to foreclosure. You need to be able to explain how you have a sustainable financial solution, that you can afford to begin making mortgage payments again and that you are able to demonstrate that on paper! The lender will not give you the benefit of the doubt. If you can't substantiate your income, you will not receive loss mitigation assistance.

DOCUMENTS, DOCUMENTS, DOCUMENTS!

Document exchange for DISB mediation

The following documents must accompany the Mediation Election Form that is returned to the Mediation Administrator:

Most recent signed federal tax return (including schedules and attachments).
W-2.
Last two (2) pay stubs.
Any other documentation of household income including benefit statements, bank statements, alimony or child support documentation.
Non-refundable $50 fee.

The following documents must accompany the Mediation Election Form that is returned to the lender:

Completed loss mitigation application
Most recent signed federal tax return (including schedules and attachments).
W-2.
Last two (2) pay stubs.
Any other documentation of household income including benefit statements, bank statements, alimony or child support documentation.

The lender must provide documents including but not limited to NPV calculation, FDIC mod in a box calculation, proof of standing, and applicable portion of investor guidelines relative to loss mitigation options.

What to expect after DISB mediation

No later than ten (10) days after the final mediation, the mediator must submit a report to the Mediation Administrator stating that the matter should be deemed concluded.

No later than ten (10) days after receiving the mediator's report, the Mediation Administrator will either: (1) issue a Preliminary Mediation Certificate (if the lender participated in good faith); (2) issue a determination that the lender did not participate in good faith; or (3) refer the matter to another mediator. NOTE: Good faith is a term specifically defined by D.C. Code 42-815.02.

The parties have thirty (30) days to appeal the Mediation Administrator's decision to the Superior Court. All foreclosure activity is stayed during the appeal period.

If no appeal is taken by the borrower, the lender may request a Final Mediation Certificate. If no appeal is taken by the lender, the decision becomes final and the Notice of Default becomes null and void.

COMPLAINT TO FORECLOSE FILED IN SUPERIOR COURT

If the lender elects to proceed with judicial foreclosure, the Substitute Trustee will file the Complaint to Foreclosure in the Superior Court for the District of Columbia. NOTE: This is a lawsuit and you can view the case history and download pleadings here. Borrowers/record owners are strongly cautioned against not fully and timely participating in the court process. There will be multiple hearing dates, status hearing dates and mediation dates during the foreclosure case. Please visit the D.C. Bar website for a list of pro bono legal service providers that may be able to assist you.

What to expect in court

All borrowers and record owners of the property must be named as defendants and served. The service of process will include the date of the Initial Conference in the Superior Court. NOTE: If a defendant does not file an Answer to the Complaint within twenty (20) days of service, the clerk's office will issue a notice of default. Once the default is entered, the clerk will not accept your Answer. If you appear at the Initial Conference, you can ask the judge to vacate the default and allow you to proceed. All defendants must file an Answer regardless of whether they appear at all scheduled court events.

If a defendant does not appear at the Initial Conference (or any subsequently scheduled status hearing, motions hearing or mediation), default will be entered against that individual and the case will progress to the judgment calendar. Default essentially means that the defendant surrendering his/her position in the case and the case will move forward quickly. All defendants MUST attend all scheduled court events regardless of what is happening with the mortgage servicer or property.

At the Initial Conference, the defendant will notify the court regarding his/her desire to participate in loss mitigation and mediation. The Court will give the defendant an opportunity to submit a loss mitigation package to the servicer. Once a complete package is received by the serivcer, the Court will schedule mediation for the parties. Until a complete package is submitted to the servicer, the Court will just schedule further status hearing dates. The court may schedule a status hearing in order to address issues of compliance if not all documents were returned or received. NOTE: Always submit a .pdf of the loss mitigation package to the servicer AND the Plaintiff's counsel.

If mediation is requested, the court will issue an Early Mediation Scheduling Order. This order will provides date and location of mediation as well as the date of the post-mediation status hearing.

Mediation with Multi-Door Dispute Resolution Division

Two (2) weeks prior to mediation, a Confidential Mediation Statement (CMS) must be filed with Multi-Door Dispute Resolution Division. The CMS is confidential and serves only to provide the mediator with background on the defendant's situation and how the defendant wants to resolve the situation. The Plaintiff's attorney will never see the CMS.

Mediation is held in the MultiDoor Dispute Resolution building located at 410 E Street NW, not the main court house. The public entrance is located on E Street.

Strategy for mediation

Think of mediation as a business meeting. You need to prepared (in advance) to demonstrate how you will - objectively - be able to save your home. Please understand that there are no emotional considerations in this process so the fact that you don't want to lose your home or that the home has been in your family for years is NOT a defense to foreclosure. You need to be able to explain how you have a sustainable financial solution, that you can afford to begin making mortgage payments again and that you are able demonstrate that on paper! The lender will not give you the benefit of the doubt. If you can't substantiate your income, you will not receive loss mitigation assistance.

DOCUMENTS, DOCUMENTS, DOCUMENTS!

A typical loss mitigation application will include:

Proof of each borrower's paystub (or benefit statement) issued within the last thirty (30) days, covering one (1) month of pay.
Two (2) most recent paystubs (or benefit statements) issued within the last forty-five (45) days for any member of the borrower's household whose income is to be counted toward payment of the mortgage.
All pages of two (2) most recent bank statements issued within the preceding 60 days. Note: the lender will only accept original statements, not printouts from the internet.
Proof of income includes:

Employment income. Most recent pay stubs covering one month of pay issued with in the last 30 days and indicate year-to-date earnings.
Self-employment income. Most recent quarterly or year-to-date profit and loss statements for each self-employed borrower.
Other earned income. (Bonuses, commissions, fees, housing allowances, tips, overtime). Must be reliable third party documentation. No "do-it-yourself" documents.
Benefit income. (Social security, disability, death benefits, pension, public assistance, adoption assistance). Must evidence the amount and frequency of the benefits such as letters, exhibits, a disability policy or benefits statement from the provider, as well as receipt of payment (two most recent bank statements, etc.)
Unemployment benefits. Must evidence the amount, frequency and duration of the benefits (this information is contained on the initial monetary determination letter).
Rental income. This is documented on Schedule E - Supplemental Income and Loss for the most recent tax year. If Schedule E is not available, then provide a current lease agreement and bank statements or canceled checks evidencing payment made.
Alimony, separation maintenance and child support. Borrowers are not required to include this information to qualify for a loss mitigation program, however, if a borrower chooses to provide this income it must be documented. Must evidence by a divorce decree, separation agreement or other legal written agreement filed with the court, or a court decree that provides for the payment of alimony or child support and states the amount of the award and the period of time over which it will be received, evidence of payment (two most recent bank statements or payment history from Office of Child Support Enforcement).
Non-borrower household income. If a borrower wishes to include the financial information for any household member for purposes of qualifying for a loss mitigation program, the information must be documented. Two (2) most recent paystubs or benefit statements issued within the last 45 days.
Federal tax returns with all schedules and pages.
4506-T form.
Loss mitigation application.

If an agreement is reached at mediation, the mediator will draft the agreement during mediation. NOTE: As most cases at this stage will involve underwriting for a loan modification, do not expect an offer or agreement at mediation.

After mediation, if no agreement is reached, the court will schedule a status hearing to either allow the loss mitigation process to move forward or to assign a case track and Scheduling Order providing for relevant dates for the remainder of the case in preparation for trial.

What to expect after MultiDoor mediation

You should have already been assigned a post-mediation status hearing. All statements made in mediation are confidential so the judge will only ask if an agreement is reached. Again, in most cases the defendant will only be able to report that he/she is still under review for a loan modification. The judge will either schedule a further status hearing date, assign the case to a litigation track or judgment calendar.