Mediation

District of Columbia Department

Posted on Monday, April 25, 2011

> Although this is not a joke in the traditional sense, it did make me laugh out loud.
> Regardless of bad things get, just be happy you're not a servicing manager in the
> District of Columbia trying to comply with the new "District of Columbia Department
> of Insurance, Securities, and Banking's 'Saving D.C. Homes from Foreclosure Congressional
> Review Emergency Amendment Act of 2011'." Even though it is exciting to have several
> new forms to use (like FM-1, or FM-2, like radio in England) you can deal with,
> "...before a residential mortgage lender may initiate foreclosure proceedings in
> the District, the regulations require lenders to provide notice to borrowers in
> the form specified on the newly released Form FM-1. The form provides borrowers
> with details of the amount owed on the loan, the amount required to be paid in
> order to bring the loan current, and a description of loan modification or other
> alternatives available from the District. Lenders must note that the issuance of
> this notice requires strict compliance. Indeed, the issuance of any notice that
> does not follow the prescribed form will be automatically voided. According to the
> Program, lenders are not only responsible for providing Form FM-1 notice, but the
> regulations also set forth several additional disclosure requirements. Among others,
> borrowers must receive (i) a Borrower Assistance and Resource Information Form (Form
> FM-1BA), providing resources where the borrower may obtain assistance with mortgage
> problems and other housing issues; (ii) a Mediation Election Form (Form FM-2), providing
> instruction on how to opt-in to the new mediation program; (iii) contact information
> for which the borrower may use to reach an agent or representative of the lender
> with the authority to explain the mediation process; and (iv) a description of
> all loss mitigation programs available from the lender and applicable to the residential
> mortgage for which the notice of default is being issued. If the borrower opts out
> of the mediation after the receipt of a Notice of Default, a Mediation Certificate
> is provided to the lender and the lender may then initiate a Notice of Foreclosure.
> If, however, the borrower, within 30 days after the receipt of a Notice of Default,
> elects to participate in mediation, then the lender is required to participate in
> "good faith" in the mediation with the borrower. Any lender that fails to mediate
> in good faith may be subject to penalties. Although the final determination of whether
> a lender has acted in good faith is left to the Mediation Administrator, generally
> the District requires the lender at mediation to (i) evaluate the borrower's eligibility
> for alternatives to foreclosure (including reinstatement, loan modification, forbearance,
> short sale, deed-in-lieu of foreclosure, etc.); (ii) offer the borrower a loan modification
> (if eligible); and (iii) if the lender does not reach a settlement with the borrower
> during mediation, the lender must be able to demonstrate that the net present value
> of receiving payments pursuant to a modified mortgage is less than the anticipated
> net recovery following foreclosure."


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