Housing Justice - Foreclosure Reform
OUR VISION AND MISSION
FORECLOSURE REFORM - PROPOSED LEGISLATION & RESOURCES
Those named support the proposed changes below.
- Kerry French, 2020 Candidate for Washington House of Representatives District 33
- Marliza Melzer, 2020 Candidate for Washington House of Representatives District 33
- Dan Driscoll, 2020 Candidate for Pacific County Commissioner, District 19
- Michelle Darnell, CEO, Founder, Ignite Foundation LLC
- Patrick Johansen, Chairmen, HOA Reform Committee, RiseUp WA LLC, Ignite Foundation LLC
- Raelene Schifano, President, HOAFightClub
- Steven Hoag, Seattle Citizen
- Christopher King, Seattle Citizen
Suggestions for Changes to Foreclosure Laws
Summary of Changes
Put penalties in the foreclosure laws and HOA laws for those that break the law.
Strike non-judicial foreclosure from the law.
Limit foreclosure related attorney’s fees, late fines and interest.
Judicial discretion of foreclosure related temporary restraining orders.
To decrease document fraud, require statement certifications, recordation of assignment of deed of trust and require substantiation of beneficiary declaration with severe penalties if fraudulent.
Require licensing, training and bonding of property managers.
Require realistic payment plan options for Covid related debts and foreclosures.
Change Washington State Foreclosure Program to be an opt out vs. an opt in program.
Read below for details of the problems and solutions.
For years the problem of homelessness has been growing. We see more tent cities and more shelters and more people sleeping on the street. Some blame drugs and mental illness and certainly both of these are a big factor. Some want more welfare type support for homeless but giving these people financial support that does not lead to them eventually supporting themselves gets us nowhere.
Many homeless people though are just good hardworking people who lost their jobs and temporarily can not pay their mortgage. Giving them welfare type survival support after losing their job and their homes is unlikely to get them back to the financial situation they were in, especially if they have now they have turned to drugs or alcohol or fallen into depression or other mental illness, or become sick or injured due to living on the street.
These people, before losing their home, given the opportunity and reasonable time to get back to work, and maybe the opportunity to spread out the back payments, would likely be able to catch back up on their mortgage and keep their home. The easiest way to keep these people from being homeless is to keep them in their homes!
In the State of Washington, we have a non judicial foreclosure system. This means that a mortgage holder, or other person who is owed money by the homeowner, can foreclose on the homeowner’s property without giving the homeowner an opportunity to defend themselves in court.
How does a non-judicial foreclosure work, if there is no court hearing required? Trustees with a “duty of good faith” to homeowners, but hired by the banks, are the people who the execute foreclosures. Obviously, there is rampant abuse. Most homeowners lack funds to sue so they lose their homes and become homelessness.
People who lose jobs and homes frequently turn to drinking or drugs, others develop mental illnesses such as depression and anxiety and may become permanently homeless. How do we address the fraud in the non judicial foreclosure process?
Due to COVID, we have a much larger wave of foreclosures coming. It is time to address this issue if we are serious about addressing homelessness.
HOAs are even riskier!
There is a group of people who people who are even in more danger than the average homeowner. People in Home Owners Associations are likely to see a much higher rate of foreclosure than those not in homeowner associations.
In HOAs, foreclosure from non-payment of the mortgage is not the only way people are losing their homes, life savings or retirement income.
When I talk about HOAs, I include all forms of HOAs, including Condominium Associations, Property Associations, etc.
Have you seen the Geico commercial about HOAs? The HOA official named Nancy that goes around inspecting and damaging other homeowners’ properties? Rips down their hanging flower pots and cuts off their mailbox. Believe me, I lived in an HOA for a short time, this is not an exaggeration. This commercial proves that this is a well-known national problem. It is a funny commercial but not funny to those that a forced to pay large attorney’s bills, or lose their homes or life savings to unethical HOA Boards.
HOAs present special dangers to homeowners. An HOA board can falsely accuse a property owner of violating a covenant and fine them with no due process. The HOA does not have to enforce the same rules on everyone. They can enforce their interpretation of the rules on only one family if they want to. The fine can be a daily fine and no limit is placed by the law on the amount of the fine. If the homeowner does not pay this fine, the HOA may hire attorneys to collect and add the attorney’s fees to the homeowner’s bill.
Often the attorney’s fees can far outweigh the original fine. Late fees and other fees made up by the HOA can also be added. The HOA can then file a non-judicial foreclosure against the property for a fine that may have been because their grass was an inch too long. The first time that the homeowner hears about the foreclosure, could be when the Sheriff office notifies them that they must leave their home and their house will be going up for sale in a Sheriff’s sale.
I know, for those of you that have not seen this for yourselves, it seems impossible that this could happen in the United States, but several of us at Ignite Foundation have lived through situations like this and know many others that have also.
Remember, the Board of an HOA is not an impartial government agency, it is a group of HOA property owners that have taken power over other HOA property owners, and now have a very unequal right to make decisions benefit themselves, often at the peril of the other property owners.
The Board of an HOA has municipal powers but none of the oversight that city, state or federal governments have. There are currently NO PENALTIES in the law for HOA Board Members that violate the State of Washington HOA laws.
Many homeowners, especially elderly retired people, don’t have the funds to sue the HOA. Even if they are somewhat wealthy, the homeowner is using their own savings, maybe their own retirement funds to pay for their attorneys while the Board Members are either using the collective funds of the HOA or the HOA attorneys paid for by the HOA insurance. The actual Board Members themselves, who may be breaking the laws, are at no risk personally.
Once a group of members take over the HOA Board, that group of people now control what covenants are made, how, when and on whom they are enforce, on whom they are not enforced, who is fines and how much, and have control of all communication, including the weekly newsletter, the website, the Facebook page and more importantly, the email list, which they may refuse to give to the opposing side and the rest of the community. How can you have a fair election when only one side is allowed to communicate to the rest of the voting population?
They have control of the elections, how they are run, how and who counts the votes, and what information goes to the members. I think it was Stalin who said, “I don’t care who votes, I care who counts the votes.”
As the Board controls all the communication, most of the neighbors may never learn of the illegal or unethical actions of the board and may never know of the damage done to their neighbors. Until it happens to them. And then they are alone fighting the same corrupt Board by themselves.
We know there are some well-run HOAs, however every HOA is one Board election away from becoming a dictatorial nightmare for the property owners. But we are very concerned with the HOA Boards that participate in illegal and unethical actions, and use their power as a weapon against their neighbors.
According to NPR New (https://www.npr.org/templates/story/story.php?storyId=128078864) Capt. Mike Clauer was serving in Iraq last year as company commander of an Army National Guard unit assigned to escort convoys in Iraq. Clauer’s $300,000 home was completely paid for when his HOA foreclosed on it because his wife had missed two association payments. The 3,500-square-foot home was sold for $3,500 on the courthouse steps.
Association Board members and Committee Members, Mortgage Holders, Attorneys and Property Managers are held HARMLESS…The Homeowners lose their home! When the Association Board Members vote to violate the laws or covenants, the member-homeowners is in the position where they must risk their money on attorney’s and court costs to enforce the law or protect themselves. Conversely, the offending Board Member is either using the HOA insurance money or the collective HOA money for their attorney’s fees and court costs, thus have no risk. This is extreme unequal power between two neighbor groups. The Attorney General has indicated that he does not have the authority to enforce the laws unless there are penalties stated in the laws.
So how do we solve these problems?
Put Penalties in the law.
Penalties should be added to the law that fine and prescribe jail time for Mortgage Holders, Attorneys, Property Managers, and HOA Board Members and Committee Members who are empowered to make decisions by the Board, who violate the laws or mis-enforce or mis-represent the covenants.
Making laws without penalties are virtually worthless to the homeowner because the homeowners can not enforce the laws.
Strike non-judicial foreclosures from the laws.
All challenged HOA fines and all claims under $10000 must go through small claims court with NO Attorneys.
For dues and assessments, the total of attorney’s fees, late fees, fines and all other fees can not exceed twice the original funds owed with a max of $2000.
To start foreclosure the property owner must be 6 months behind on dues and/or assessments, not including fines, interest, HOA late fees, attorney’s fees or court costs.
For HOA fines and related interest, late fees, etc., the total of attorney’s fees, late fees, fines and all other fees can not exceed twice the original funds owed with a max of $500.
Interest on all amounts can not exceed prime plus 2%.
In the event that a TRO (Temporary Restraining Order) becomes necessary and a judge determines there is just cause, the bond requirement should be at the discretion of the judge. To require a bond, when there is sufficient cause to grant a TRO, is in effect a barrier to due process, as the homeowner must fund the lawsuit while paying the mortgage. 61.24.130 “The court shall require as a condition of granting a restraining order or injunction that the applicant pay to the clerk of the court the sums that would be due on the obligation secured by the deed of trust if the deed of trust was not being foreclosed.” Change “shall” to “may”.
Authenticity of Documents
Make the requirements for unsworn statements certification the same for mortgage related documents as required for all other documents. Amend RCW 61.24.030(7)(a) to require declarations to comply with RCW 9A.72.085 and RCW 5.45.020 [business records as evidence]
Add to the law and RCW 61.24.005 to define “Note Holder” consistent with the standard Freddie/Fannie Mortgage Note as: “The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note.”
To reduce the use of fraudulent documents, Banks should be required to provide the original blue ink note. If the banks don’t have the actual note, they can present a lost note declaration. This was raised by the Florida Bankers Association. See “Amendments to Rules of Civil Procedure and Forms for Use with Rules of Civil Procedure, Florida Supreme Court Case No. 09-1460”
Also to reduce the use of fraudulent documents, recordation of the Assignment of the Deed of Trust should be mandatory. If it was mandatory (vs. permissive) there would be a windfall of fees flowing to local and state government for police, schools, etc. That should interest legislators as they grapple with funding issues.
The beneficiary declaration should be substantiated and if it is proven false or fraudulent later the penalties should be severe. The homeowner should know who they owe and who to negotiate with, so they know what programs they may qualify for or what rules the bank has to follow.
Licensing of Property Managers
Property Managers should be licensed and bonded in the state of WA. They enter our properties, homes, have complete control and access to all financials and monies. They are not FDIC insured and some PMs take dues payments directly from homeowners. They should be licensed, bonded and educated as is required of other types of contractors.
Require payment plans for Covid relief for up to 12 months of equal payments for homeowners.
No attorney or other fees should be added for Covid Relief situations.
Association Owners should be added to the mediation of WA State. Funding could come from Resale Cert income that can be reduced since everything is online now. $275 could be reduce to $175 and $100 go to the WA state HOA/Condo mediation fund.
It is not reasonable to require any specific training for HOA Board Members. HOAs have access to attorneys and should check with them if they are unsure about what they are about to do.
The Washington State Foreclosure Fairness Program which provides foreclosure assistance by offering free housing counseling, civil legal aid, and foreclosure mediation should be an opt-out program, not an opt-in, putting the responsibility on the bank/lender/servicer to ensure that the homeowner is aware of their right to participate in WA FFA mediation before proceeding with non-judicial foreclosure. Judicial foreclosure would remain a remedy.
This amendment would ensure that homeowners actively elected to opt out, not just that they did not understand or missed the notice because of all of the documents they are overwhelmed with during the foreclosure process. This would also decrease the need for the state to spend funds on Public Service Announcements to alert homeowners of this right, which also seems to be less than effective. Funds could be used for the program itself.
Property Managers should have required training about the applicable laws and licensed and face prosecution and penalties by the State if they violate the laws.
Chairman of Housing Group
RiseUp WA, IgniteFoundation LLC
We are not attorneys. All communications are opinions and beliefs.
Nothing in our communications should be considered to be legal advice