Saving D.C. Homes from Foreclosure

Comments Before the D.C. Committee On Public Services And Consumer Affairs

SOURCE: AP/Manuel Balce Ceneta

Newly-built and rebuilt houses line U Street in northwest Washington, DC.

By Alon Cohen, Andrew Jakabovics | June 22, 2010

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The following is intended to summarize and supplement the oral testimony provided during last Monday’s hearing on Bill 18-0691, the Saving D.C. Homes from Foreclosure Act of 2010. Below the summary is a detailed discussion of these points followed by several additional suggestions. We thank the committee for its attention to this matter and for the opportunity to submit these comments.

There are three keys to the success of the foreclosure mediation program to be established in the Saving D.C. Homes from Foreclosure Act of 2010:

1. Participation
2. Productive discussions between lenders and homeowners
3. The ability to adapt and evolve

To achieve these goals, we recommend the following changes to Bill 18-0691:

1. Participation

• Automatically schedule mediation for both parties upon receiving the notice of sale from the trustee, as defined in Sec. 2(6), instead of placing the burden on homeowners to opt-in.
• Amend the fees imposed by the bill so that homeowners do not have to pay for mediation. This can be achieved by raising foreclosure filing fees or permitting servicers to recoup the cost of mediation as a fee from proceeds of the foreclosure sale if mediation is unsuccessful.

2. Productive discussions

• Permit the parties by mutual consent or decision of the mediator to continue mediation as long as the parties are in productive discussions.
• As a corollary, avoid setting a time to complete mediation. Simply prohibit the sale of the property until mediation is complete.
• Include a requirement that the trustee (or delegated representative) bring, in addition to proof of the mortgage and the note, documentation of all loss mitigation activities.

3. Adapt and evolve

• Leave operational discretion with the mediation administrator so that changes can be made without the delay of council action.
• Include a reporting requirement for all foreclosures describing the disposition of the case, including details of settlement terms (including but not limited to loan modification, forbearance, deed-in-lieu, short sale, etc.) as well as a record of instances where mediation did not take place and where the parties mediated but failed to reach agreement.

Read the full testimony (pdf)