Mediation allows homeowners to sit down directly with their lender and their lender’s attorney to discuss their individual mortgage situation and any possible alternatives to foreclosure. Homeowners are able to engage their lender to get questions answered.
Mediation is governed by the Department of Commerce.
Who is eligible?
Homeowners become eligible for mediation when they receive a Notice of Default (NOD), a formal notice sent by your lender (or the assigned Trustee) telling you that the lender has decided to move forward with foreclosure because you’re behind on your mortgage.
NODs must have “Notice of Default” at the top. You may receive multiple copies. The NOD will state that you are in default and will tell you how much you must send to make up the default and reinstate the loan.
Important: The NOD should have a paragraph on the first or second page letting you know that you are now eligible to apply for mediation. As soon as you receive an NOD, you are eligible to file for mediation.
To qualify for mediation, the home must be your primary residence and the party who files for mediation must be listed on the NOD.Are any lenders exempt from offering mediation?
If your lender is listed on the “Financial Institutions Currently Exempt from Mediation (2016),” they do not have to participate in mediation.How does a Notice of Trustee’s Sale affect your right to file mediation?
The Notice of Trustee’s Sale (NOTS) is the final notice you will receive before the bank takes your home to foreclosure. It will be issued by a Trustee and will list the actual date of your foreclosure sale within the document. This comes after you’ve received your NOD.
If you receive this document, you have 20 days to file for mediation from the date of recording. Flip to the last page of your NOTS. There should be a stamp at the end of your NOTS with a date. Starting on that date, count forward 20 days. If you are within that 20-day period, you can still file for mediation. If you are past the 20-day deadline, you do not qualify for mediation (but you still have other options).Who can file?
You cannot file for your own mediation. You must have a Certified Housing Counselor or an Attorney file on your behalf. Some housing counselors or attorneys will agree to file for you without participating in the mediation itself, so you can attend mediation on your own.
We strongly discourage attending mediation without a representative familiar with the process.What does it cost?
There is a $200 mediation fee paid directly to the mediator, as required by statute, to hold the mediation. You also have to pay whatever your representative is charging you for their representation.
Some attorneys bill at an hourly rate for mediation. Mediations can cost homeowners upwards of $2,000 for the attorney’s time. We recognize that people going through financial hardship often don’t have money to pay an attorney hourly. We offer a low-cost option for homeowners going through financial hardship.What alternatives to foreclosure are reviewed in mediation?
The most common request is loan modification review, but mediation can be used to explore options for a short sale, relocation incentives, loan modification appeals, Deed in Lieu of Foreclosure, Cash for Keys and other tailored options.Who is part of the mediation process?
Once you file for mediation, multiple parties get involved.
The Trustee is the legal entity in Washington responsible for executing a legal foreclosure of your home. They were hired by the lender to conduct the foreclosure on the lender’s behalf. Common Trustees in Washington are:
- Northwest Trustee Services
- Quality Loan Services
- Trustee Corps
- North Cascade Trustee
- Seaside Trustee
The Trustee will reach out to the lender (or beneficiary - these words mean the same thing for purposes of mediation). The lender will assign an attorney to represent them and the Department of Commerce will assign a mediator.
The mediator will then contact the borrower, borrower’s representative, and lender’s attorney to schedule a mediation date and facilitate document collection.
At the actual mediation, a representative from the lender will attend by phone and the lender’s attorney will attend in person.What are the steps in the mediation process?
- Your representative files for mediation.
- The mediator schedules a mediation session.
- You submit a document package: Within 20 days of filing for mediation, the borrower must submit a document package required by the statute. It includes a comprehensive financial worksheet and supporting financial documents.
- Lender submits “Beneficiary Documents:” Within 20 days of receiving the borrower’s document package, the lender is required to provide their “Beneficiary Documents.” They must prove they own the mortgage and provide their Net Present Value (NPV) inputs.
- Lender runs their review: The lender will then run a review of the desired option to see if the borrower can be approved for an alternative to foreclosure prior to the mediation session.
- Mediation: All parties meet once a decision has been reached to discuss the outcome.
- Mediation is certified: The mediation is closed/certified and a report is filed with the Department of Commerce.
Once the mediation is filed, the lender is forced to place the foreclosure on hold. This is the biggest benefit to filing for mediation. Borrowers are protected from foreclosure as long as there is an open mediation, meaning the lender cannot foreclose until the mediation is formally closed (certified).
Mediation eliminates dual tracking. Dual tracking happens to borrowers who are not in the mediation process. The lender reviews them for their requested alternative while they continue to move forward with foreclosure.
With mediation, instead of allowing the lender to both review you for a modification and move forward with foreclosure, the lender must issue a decision, the decision must be discussed and the mediation must be closed before the lender is allowed to move forward with foreclosure activity.
Since mediation extends the foreclosure timeline, if you are waiting to reinstate your loan or trying to make it to a major life event that will allow you to get current, mediation may be able to help you buy time.How long does the mediation process take?
This depends on a wide variety of factors. Typically, it depends on how long it takes the borrower to complete all the lender’s document requests and how long it takes the lender to run their review.
The first mediation date is usually set 30 to 45 days after the date you filed. With that said, it is not guaranteed that the mediation will happen this quickly. If the lender hasn’t reached a decision by the first mediation date, it is best to postpone the session until there is a decision. If you meet without having a decision, the mediation will just be rescheduled and everyone will have attended for no reason. Unless there is something else specific to discuss, most mediations don’t occur unless the lender has reached a decision.
As long as lenders remain responsive, mediators don’t push them to issue a decision within a certain timeframe. It’s possible you won’t meet for 60 days or more while the lender is running their review.
Remember, foreclosure stays on hold during this period so the wait isn’t always a bad thing.
Depending on your goals, there are things your representative can do to influence your mediation timeline.Tips to get your mediation done quickly
- Send your document package within two days of filing. This will speed up the lender’s ability to review the documents and respond accordingly. The lender almost always has additional requests. By sending the documents earlier, the hope is that the lender will look at them earlier.
- Encourage your representative to ask for updates on the review. Lenders aren’t motivated or even fully capable of doing anything quickly. Requesting constant status updates will force them to actually look at your file.
- Encourage the mediator to set deadlines for the lender’s response. If your representative has received two or more updates that are non-substantive in nature, you can ask the mediator to set deadlines for the lender to respond with an actual update.
- Request to meet even if the lender asks for it to be postponed. If you can make the lender spend money paying their attorney, they may expedite their review.
- Don’t follow-up with anyone.
- Let the lender work at their own pace.
- Send your document package at the end of the required 20-day period.
- Agree to all lender postponement requests.
Yes. It is very common for a mediation to have multiple in-person sessions. Reasons for multiple sessions include:Lender questions
The lender may have questions they need answered in person before they can move forward with their review.Denial, plus a second review
If you receive a denial on your first option, your representative should be prepared to request that the mediation stay open so you can pursue your back-up option. For example, if you originally were reviewed and denied for a loan modification, you can then apply for a short sale. Most mediators will agree to keep the mediation open if you are seriously pursuing a back-up choice. Don’t let your representative request to close the mediation until you have tried all your options.Service release
Most lenders are allowed to sell the servicing rights of your loan to another lender. This is called a service release. If your lender sells the servicing rights to another lender during your mediation, the new lender will likely have to appoint a new attorney. Whatever review you’re currently undergoing will start over from the beginning. Lenders often claim they can take a file over in the middle of mediation, but in reality, that is never the case. New lenders need everything submitted again so they can start their review from the beginning.Attorney change
Lenders are known for switching their attorneys in the middle of a mediation. If a new attorney is assigned, they will likely request time to get caught up on the file.Changed circumstances
If something happens to your income situation after you’ve submitted your financial documents, it may affect your review and you may need to update your information. Updating financial information can be a good thing but it may cause the mediation to require additional sessions.Do additional sessions cost more?
Yes. Mediators charge additional fees for additional sessions. The fees typically don’t exceed $100 per party.Are you ever eligible to file for another mediation after your first one is fully closed?
This can happen only if you receive a new Notice of Default (NOD). If you attend mediation, go through the process and have your mediation closed, the only way you can get back into mediation is if the lender issues a brand new Notice of Default.
The general rule is one mediation filing per NOD.What is Voluntary Mediation?
The Foreclosure Fairness Act was recently updated to include the option for voluntary mediation. If you are not eligible for mediation, you can ask your lender if they would agree to voluntarily attend and then file for mediation as a Voluntary Mediation.
Note: Asking your lender to attend has to be done in the right way. You have to show a genuine issue that the lender wants to resolve in order to give them a reason to show up. If you simply ask, they will probably say no. You have to prove that it’s in their interest to come to mediation. We can help you figure out why your lender would want mediation and help you make the request in the most persuasive way possible.Is mediation a good option?
Generally, yes. Mediation stops the foreclosure of your home until you have a direct answer from your lender about the alternative to foreclosure that you want. Despite the issues described below, it is the only legal option you have to halt your foreclosure.
Working directly with lenders without mediation is a frustrating experience. It can be intimidating when they’re moving forward with foreclosure while you’re trying to get a different option reviewed and approved.
Mediation halts the foreclosure timeline so you can get answers.Where did the Department of Commerce fail borrowers?
The intention behind the Foreclosure Fairness Act was to open the lines of communication between borrowers and lenders as a way to reduce foreclosure.
Unfortunately, the Department of Commerce didn’t seem to consult with enough practitioners when making the law. The Department of Commerce doesn’t truly understand what working with lenders is like and what type of regulations are needed if the ultimate goal is resolution.
The Department of Commerce doesn’t understand that lenders dodge responsibility and are either incentivized to do nothing or are truly incapable of performing simple tasks.
The lawmakers thought it was good enough to create a law that outlined requirements for lenders without providing any real remedies for failures. Everyone knows that a rule without a consequence is unenforceable. Lenders always enter mediation as the more powerful party and aren’t subject to any meaningful regulations. They can leave mediation without making any real concessions.
Lenders know that they have to fill a seat in the mediation room with a warm body and that they have to say certain things to indicate that they’re doing something, but the Department of Commerce didn’t really think it necessary to hold them to a standard of compliance or create any incentive for them to actually do work.Certifying the mediation: Can “bad faith” really help you?
At the end of the mediation, the mediator will certify the mediation, meaning they will complete a report about the outcome of the mediation that will be filed with the Department of Commerce.
The mediator has the option to certify the parties in good faith or bad faith, meaning the mediator is required to document how the parties performed during the mediation.
Homeowners can be certified in bad faith if they fail to provide requested documents or fail to pay the mediation fee.
Lenders can be certified in bad faith for a variety of things, including failing to respond by deadlines, failure to perform adequate reviews, being unprepared, being uninformed, etc. Things we have seen lenders do that get a bad faith finding:
- Having no representative from the lender available to speak on the phone during the mediation.
- Failing to abide by agreed-upon deadlines.
- Claiming they ran a HAMP review but being unable to provide NPV inputs used.
- General unresponsiveness.
- Long delays with no explanation.
- Multiple changes in representation.
A bad faith certificate sounds like it would be a great thing for homeowners. It sounds like it would be beneficial because it would document lender mistreatment. You would think that getting a bad faith certificate would get the borrower something; however, the statute failed to include a realistic remedy.
The only thing a borrower can do if their mediation is certified in bad faith is sue the lender to stop their foreclosure. For most homeowners experiencing financial hardship, litigation is too expensive to undertake. The bad faith certificate ends up being an empty threat and lenders know this.
Until the law is changed, we recommend staying in mediation and continuing to push the lender to move forward, unless litigation is a real option for you.Issues you may encounter during mediation
- The mediators aren’t informed: The Department of Commerce has no informational requirements for their mediators. Unlike judges who are familiar with laws, anyone can be a mediator as long as they participate in a simple, basic training in conflict resolution. Mediators aren’t familiar with lender procedures, investor guidelines, varying types of loans and available borrower support programs. Mediators can facilitate a conversation but they aren’t capable of contributing knowledge to a situation, as they are uninformed about the process. When the Department of Commerce created the Foreclosure Fairness Act, they didn’t see any benefit to having the facilitators trained in the intricacies of mortgage debt. This is why it is imperative that your representative be both informed and able to provide all relevant information at mediation.
- The basic document package required by the Foreclosure Fairness Act is not comprehensive: Because the borrower package the FFA requires isn’t comprehensive, it doesn’t allow lenders to run their reviews. Most lenders need additional documents and additional clarifications to actually run their review. Each process varies per lender and mediators allow lenders to request as many additional items as they’d like, giving them unlimited time to continue to request documents. The FFA says it regulates borrower documents but in reality, lenders can ask for whatever they want and the borrowers have to provide everything they need.
- Opposing counsels don’t care: The attorneys representing the banks rarely push their clients to do anything and, in fact, they rarely have any knowledge of foreclosure alternative programs and processes. They don’t take it upon themselves to follow up with the lender. The most they can do is facilitate email communication back and forth. We receive copy-and-pasted document requests that are completely unclear. The attorneys don’t review the lender’s information for clarification, they just forward it on. We’ve encountered several attorneys completely new to the NPV process and HAMP program. They show up when they’re supposed to and repeat what the lender tells them, but they aren’t truly informed about the process.
- There is no requirement for the same lender rep to attend all mediation sessions: Lenders are required to appear at mediation via phone. The FFA has no requirement that the representative from the lender be the same throughout the process or even that the lender representative be the person responsible for conducting the review. Oftentimes, people from the lender appear on the phone who have never seen or touched the file before. They are often catching up to the borrower’s situation in the meeting and are unable to answer specific questions during the mediation process. Between sessions, lender representatives change and there is no regulation around what they’re supposed to be doing.
- Have a representative familiar with mediation, mortgage guidelines, your lender and your investor: You can’t control the lack of knowledge of the other parties at mediation. You can control how much knowledge your representative has. Seek out the most informed attorney you can to set yourself up with the best shot for a favorable decision. Your representative should know:
- When it’s appropriate to ask the lender to pay your mediation fee.
- How to audit the beneficiary’s documents for missing items.
- All required deadlines for compliance.
- Whether your goal is to push the mediation forward quickly or whether you’re aiming for as much time in the home as possible
- What programs you should be reviewed for based on your goal.
- What questions to ask the lender to learn whether they’re following the law.
- How to recognize the difference between a substantive update from the lender and a general update from the lender.
- How to review your RMA form to see whether you’re reporting your financials in the way that sets you up for the best chance at success.
- When to pull you out of the mediation session to have a private conversation.
- Note on Housing Counselors: Housing Counselor competency varies dramatically. Some are informed about the process and others are not. If you have concerns about your Housing Counselor, run their statements by us to see if they’re correct.
- Be patient with a less than perfect process: Mediation can be frustrating and time-consuming. At times, it can feel that you and your attorney are the only ones who know what’s going on or even care what’s going on. Unfortunately, that is often the case. It is part of your representative's job to push all parties to understand and care about the intricacies of your review. With that said, many homeowners eventually come out of the process with a favorable decision or answers to questions. At minimum, mediation gives you time to get your thoughts straight and understand what’s happening to you so you can move forward with clarity.
- Be prepared for all outcomes: Work with your representative to have back-up plans and alternative options decided on before you attend your first mediation session in the event they deny in you in-person.
Keep in mind that this isn’t tailored legal advice. We would love to help you with your specific situation. Please call 1-800-603-3525 right now, or fill out this form for a free consultation with one of our attorneys.