New Washington State Laws Benefit Homeowners Doing Short Sales

The last week in March, the governor signed into law some significant changes that benefit homeowners involved in a short sale or facing foreclosure. If you have a client in either of these situations, you will want to let them know how they might benefit from these changes.

▪ Time Limitation for Collecting on Deficiency

A lender agreeing to the short sale of an owner-occupied property must now provide written notice of whether it intends to either waive or reserve its right to collect on the deficiency. Also, the time period to start legal proceedings to collect on a deficiency has been reduced from six years to three years. Again, these changes only apply to short sales of owner-occupied properties. They do not apply to foreclosures. In the case of foreclosures, a lender has up to six years to collect on a deficiency.

▪ Referral to Mediation

Homeowners that qualify for mediation under the Foreclosure Fairness Act may now be referred to mediation up to 20 days after a notice of trustee sale has been recorded. Prior to the change in the law, once a notice of trustee sale was recorded, a referral to mediation was no longer available.

▪ Time Period for Trustee's Sale

The time period between recording the notice of trustee sale and holding the trustee sale has been extended from 90 days to 120 days. This change applies to owners of owner-occupied residential properties who are entitled under the law to receive a letter from their lender notifying them of pre-foreclosure options.

The above is just a basic summary of several new changes. We always advise homeowners to consult an attorney regarding how these changes will affect their own situation.

Foreclosure Fairness Act Success Story

The Washington State Foreclosure Fairness Act that went into effect in August requires lenders to discuss potential mediation options with homeowners before initiating foreclosure procedures. And it's working.

We recently listed a home with a seller who was attempting to do a short sale. We got a solid offer from a buyer that met all the bank's criteria and submitted all the paperwork. However, the home was on the verge of foreclosure, with an auction already scheduled. We advocated on the client's behalf with the lender, but were told they would not postpone the auction to consider the offer. We counseled the seller to call the FFA Hotline and outlined all the information they would need to present. Now for the good news: As a result, the auction was postponed and the original offer is currently in the lender's system awaiting approval.

You can access the Foreclosure Fairness Act Hotline at 1-877-894-HOME (4663). Here are details about how the Foreclosure Fairness Act works.