“Our homes are sacred spaces where we retreat from the stresses of the world. Our homes are places where we make new memories – we experience the highest highs and lowest lows in and around our homes.” Many of our homeowner clients worked incredibly hard for years and years to be in a position to buy their home.

During a divorce, the difficult questions seem endless, with no clear answers in sight. Will we have to move? How am I going to afford the house payment on just my income? Where will my kids go to school? Will my kids have to leave their friends?

In the two decades I’ve practiced real estate law, I’ve learned about the tremendous feelings associated with our homes that can make it challenging to think clearly or to make rational decisions, especially when notices start showing up in the mail. What are the options commonly used to avoid losing a home to foreclosure? First, let’s talk about what foreclosure is to try and demystify the process.

Two Types of Foreclosure

Judicial foreclosure

There are 2 different types of foreclosure in Washington State, judicial and nonjudicial. What does that mean? Judicial foreclosure means the bank or lender files a lawsuit asking a judge to enforce its rights to foreclose when your payments are behind. Nonjudicial foreclosure is far more common in Washington state. (I will use the word “mortgage” for simplicity here although most home loans in Washington are technically a “deed of trust”). A judicial foreclosure is advantageous for a homeowner in some ways, including having direct access to a judge to resolve disputes. The sheriff’s office acts as the public sale officer, instead of a private company with a profit motive and a confusing website. A judicial foreclosure also has a “redemption period” after the foreclosure sale, or in other words, a period when a homeowner can “redeem” their home and reinstate the foreclosed loan by paying past-due amounts, charges, fees, and costs of sale.

Nonjudicial Foreclosure

In contrast, in a “nonjudicial foreclosure,” the court is not involved in the foreclosure process. A 3rd party company named the “trustee” is appointed to handle the foreclosure, ending in a “trustee’s sale.” Nonjudicial foreclosures are supposed to reduce the burden on courts and make the foreclosure process less expensive. Unfortunately, many homeowners don’t understand the snowstorm of paperwork, or worse yet they don’t open their mail and ignore the notices. The notices are often supposed to be written in plain English, but they are full of legalese. Foreclosure companies have been successfully sued for acting as the “hired gun” for banks, even though they are supposed to be independent and also owe duties to the homeowner being foreclosed.

Default on Mortgage

What Does It Mean to “Default” on a Mortgage Loan?

Default is simply a fancy word that means you’re behind on your mortgage payments, or have broken some other promise that you made when you bought (or refinanced) your house.

Will foreclosure begin after the first missed payment?

No. But for most lenders and servicers, after 60 days late, your loan is considered in default. Missing a payment is the first step down the path to foreclosure, but the lender has to take the steps set out in the law to foreclose.

Divorce and Mortgage Default

If you are in the midst of a divorce and your spouse isn’t paying, or if you’ve gotten divorced and you’re having difficulty, you should do everything you can to keep the payments current. Now is the time to ask family for help, if that’s an option. Search the internet for information about payment assistance programs offered by nonprofits. Talk to your pastor – churches sometimes will be able to help, or to put you on a prayer list. Most importantly, CALL your lender/loan servicer and be sure the call center representative notes your file about what is going on. Ask your lender/loan servicer what your options are. At the end of the day, though, if you absolutely can’t get caught up, you will get more notices, each one moving closer to a home foreclosure. You should be opening all of your mail, as stressful as it is, and keeping ALL envelopes in case you need to prove later on when notices and letters were sent to you.

Keep in mind that once you get behind, your lender/servicer will stop accepting payments, or if you send in a partial payment, it will be rejected. This is a surefire way to tell your lender/servicer has begun the foreclosure process. Do not panic – keep reading and contact us to find out what stage of the foreclosure process you are at.

Housing Counseling

Housing counseling is an option, and counseling is available free of charge to those who qualify. Call the Washington Homeownership Resource Center at 877-894-4663 to be screened and referred to a housing counselor. Housing counselors are not lawyers and you may want to consider an initial consultation with a lawyer. I often refer clients to housing counselors when their needs would be well served by a non-lawyer.

NOPFO (Pre-Foreclosure Notice)

A NOPFO? What is that? Sorry, we legal people (usually) love our acronyms. NOPFO is short for Notice of Pre-Foreclosure Options. Banks and lenders are required by law to send out a NOPFO before the formal foreclosure process begins. If you receive a NOPFO, look for words like “IMPORTANT RIGHTS FOR HOMEOWNERS” or “you must respond within 30 days of this letter.” The NOPFO law was created to encourage banks and servicers to engage in informal discussions with homeowners to help homeowners understand what options they have through an informal “meet and confer.” However, because the meet and confer is directly with the bank representative, the bank wants to have the “meet and confer” as quickly as possible. If you need more time to figure things out, the bank’s desire to speed the process along as much as possible is not helpful for you.

If you receive a NOPFO, you must respond in writing within thirty (30) days. If you do not respond within the allotted time frame, or if your response is not in writing, then the lender/servicer can go ahead and start the formal foreclosure process. If you respond in writing within 30 days of receiving the NOPFO (be very careful about this 30-day deadline), then your lender must set a meeting with you, and cannot move forward with the formal foreclosure process until that meeting is held. You have the right to insist the meeting be held in person in the county where you live. The meeting must be held within sixty (60) days of the NOPFO being issued.

Notice of Default

The first step in the formal foreclosure process is for your lender or servicer to issue a “Notice of Default.” Yes, you read above that default just means missed payments. But this is the formal notice to you that you are in default on your mortgage loan payments. If you didn’t respond to the NOPFO, the Notice of Default can be issued 30 days later. This is not the notice of a foreclosure sale or auction date.

Notice of Trustee’s Sale

If you do not respond or do anything after the Notice of Default, a Notice of Trustee’s Sale is sent to you and filed in county records. The foreclosure sale date will be set out 120 days AFTER the date the NOTS is filed with the county (for most homeowners). Contact an attorney immediately once you receive the NOTS, or if you think there is a NOTS but are too nervous and stressed to find out for sure.

Foreclosure Mediation

Washington State has a foreclosure mediation program, designed to bring both the homeowner and the lender to the table to see whether there is any way foreclosure and its harsh consequences can be avoided or mitigated. Only a lawyer or housing counselor can refer the homeowner to mediation, as soon as the Notice of Default is issued. A mediator is appointed by the state and then a mediation session (or multiple sessions) are scheduled. The homeowner and lender must exchange a great deal of information and documentation before the session. At the session, the parties try to come up with a workable solution if possible. While in foreclosure mediation, no foreclosure sale can be held. Some lenders are “exempt” from mediation, or in other words they have a special exception and do not have to participate in mediation.

Mortgage Modification and Loss Mitigation

All lenders have a “loss mitigation” department to work with homeowners who are having difficulty making their mortgage payments. The loss mitigation employees are required to acknowledge when a loss mitigation application has been submitted, whether the application is complete, and then evaluate a complete application to determine whether the homeowner qualifies for any type of workout agreement or other program, including a loan modification. A loan modification changes the original terms of the loan in a way that addresses the missed payments, fees, and charges. Many homeowners have difficulty with navigating endless phone trees just to get basic information about their loan or their options, such as how to submit a loss mitigation application, what information to provide, and more. Once a loss mitigation application is submitted, the lender may not have any idea of how quickly they will review it. I don’t recommend submitting a loss mitigation application without help from a housing counselor or a lawyer, because this is not just any application form. Banks and servicers are large institutions, they communicate in very specific ways, and having an expert to advocate and make sure your application does not fall through the cracks is incredibly important. The specific details of modification options are very loan-specific and are too detailed to post here.

HAF (Foreclosure Rescue Grants)

Federal COVID legislation created the Homeowner Assistance Fund (HAF), a foreclosure relief fund available in most states including Washington. HAF can pay missed mortgage payments, property taxes, and even HOA assessments. HAF is a grant, not a loan, so the HAF grant does not have to be paid back. Income limits apply, and HAF funds will not last forever. The HAF program is relatively flexible and the application process is usually not as involved or complicated as submitting a loss mitigation application to the lender. Under a new law, there is a “HAF pause” and any pending foreclosure must be put on hold for at least 30 days once the application is submitted.

Bankruptcy

If none of the other options are available or ideal, then a Chapter 7 or 13 bankruptcy may be an option. A bankruptcy filing stops the foreclosure as of the moment the bankruptcy case is filed. A Chapter 13 bankruptcy gives a homeowner 36-60 months to “cure” the missed payments, costs, fees, and other charges. Bankruptcy is also a legal process with many traps for the unwary, so contact our law firm to talk to an expert bankruptcy lawyer.

Final Thoughts

This post is only a very brief, “30,000 foot view” of some of the various options I have successfully used with clients to help them avoid foreclosure, with the goal of helping you understand more about the foreclosure process and letting you know there are options to prevent foreclosure. Which option is right for you will vary wildly depending on things like the divorce court rulings, how much equity you have in the house, the type of loan, your loan servicer, individual income situations, and much more. For more information, please contact our law firm and we would be happy to assist you.

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Dainen N. Penta

Dainen N. Penta

Senior Attorney

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Disclaimer

Every legal issue is very unique. Accordingly, the information in this blog is intended as general education material and not as legal advice. If you think you may have a legal issue, you should consult an attorney.