Last year, the legislature passed a bill requiring lenders on the verge of foreclosing to participate in mediation with homeowners. As sponsor Rep. Tina Orwall explained in a Real Change op-ed, the intent was to "help homeowners stay in their homes." Nine months after the Foreclosure Fairness Act took effect, state figures show that has not been the result for most participating homeowners.
Torrance nonetheless argues that the program is a success. "It's not just about saving people's homes," he tells Seattle Weekly. "It about making sure the process is fair."
A big complaint before the program started was that homeowners couldn't even get any of the decision makers on the phone. Now, Torrance says, "you get at a minimum the chance to sit down with the lender. Often times, even if you're not staying in the home, your situation will be improved."
Lenders might, for instance, agree to what's called a "deed in lieu of foreclosure," whereby people turn over their homes without going through the nasty and credit-wrecking process of foreclosure. Lenders might even throw some money at homeowners who are willing to leave in a timely fashion, and without wrecking the place. This is known as "cash for keys."
Torrance says he doesn't know the going rate. But one homeowner we talked to for our cover story this week, known by his online name "Izzle," said his bank gave him $3,000 to leave his Vancouver, Washington, house within 30 days. This was without mediation. As we reported in our story, Izzle--like many underwater homeowners these days--had no interest in talking his lenders into letting him keep the house. He wanted out.
Yet, as the story also noted, people in such a situation often end up continuing to live in their home long after they have stopped paying the mortgage. That's because they're waiting for the bank to foreclosure, a particularly slow process of late. And here's where the Foreclosure Fairness Act may be having a big effect.
By requiring mediation, the act has has helped slow the foreclosure process down. And that, in turn, may at least partially account for a dramatic gap between the state's record-breaking rate of defaults (ranking us fifth nationwide in terms of mortgage payments that are 90 days past due) and its rate of foreclosures initiated, which puts us in 50th place.
It probably won't last. The legislature passed a slew of reforms to the mediation program in the last session, many of which were designed to make the process more efficient. Torrance says that may result in more positive outcomes. But it also may mean that lenders, in some cases, can jump through the mediation hoop more quickly and get back to foreclosing.