DC Approves Saving DC Homes from Foreclosure Act

November 24, 2010

On October 27, 2010, Washington, D.C. Attorney General Peter Nickles issued a Statement of Enforcement.

On November 17, 2010, the Mayor of the District of Columbia signed the Saving DC Homes from Foreclosure Emergency Act of 2010.

The Act states that a foreclosure sale under a power of sale provision contained in any deed of trust, mortgage or other security instrument, can not take place unless the holder of the note secured by the deed of trust, mortgage, or security instrument, or its agent, gives written notice of the intention to foreclose, by certified mail, postage prepaid, return receipt requested, and by first‐class mail, of the sale to the borrower and, if different from the borrower, to the person who holds the title of record, of the real property encumbered by the deed of trust, mortgage, or security instrument at his last known address. A copy of the notice must also be sent to the Mayor, at least 30 days in advance of the date of the sale.

Further, the Act requires the following actions BEFORE a foreclosure sale takes place:

  • After a notice of default of a residential mortgage has been given and a mediation election form is mailed to a borrower in default of a mortgage loan, the lender will be required to engage in mediation if the borrower elects to participate ;

Note: A notice of default from the lender must include: (a) contact information the borrower may use to reach an agent or representative of the lender with authority to explain the mediation process, (b) a statement recommending that the borrower seek housing counseling services (c) contact information for at least one local housing counseling agency approved by the Department of Housing and Urban Development (HUD), (d) information about loss mitigation programs available from the lender, and (e) a mediation election form, in a form prescribed by the Mediation Administrator, with one envelope addressed to the lender, and one envelope addressed to the Mediation Administrator. A copy of the notice of default would also be provided to the Department of Insurance, Securities, and Banking (DISB)

  • The lender is required to pay a fee of $300 for each notice of default issued on residential mortgage. If the power of sale a property is exercised, the lender is allowed to recover the $300 fee from the proceeds of sale if there is any amount remaining after the payment of all amounts due and owing by the borrower on the residential mortgage and the costs of the sale. The lender is not permitted to recover mediation fee paid if there is a deficiency upon the sale of the foreclosed property;
  • Within 7 days of mailing of the notice of default by the lender, the Mediation Administrator will mail the specified information to the borrower about the mediation process, a statement recommending the borrower seek housing counseling services and information about these services, and a request for the borrower to return the loss mitigation application to the lender and the mediation election form to the Mediation Administrator and lender in the envelopes provided no later than 30 days from the date of the mailing of the notice of default by the lender. The Mediation Administrator will also include a statement that the borrower will lose the right to participate in mediation if the mediation election form and the loss mitigation application are not returned within the specified 30 day timeframe, a statement that borrower has to pay a $50 fee to the District of Columbia to participate in mediation; otherwise, the borrower will be considered to have forfeited the right to mediation, and a statement that mediation will be held 45 days after the date of the mailing of the mediation election form;
  • Within 20 days of mailing of the mediation election form to the borrower by the lender, the Mediation Administrator will send a 2nd notice to the borrower with all the information specified above, including a statement that the borrower must take immediate action to avoid foreclosure;
  • The Mediation Administrator will assign a mediator and schedule a mediation session within 45 days of the mailing of the notice of default for each borrower electing to participate in mediation, and will issue a mediation certificate to the lender if a borrower chooses to waive the right to mediation. The power of sale under a mortgage will not be exercised until the Mediation Administrator has issued a Mediation Certificate;
  • If the lender or a representative fails to attend the mediation, fails to participate in the mediation in good faith, or does not bring to the mediation all required documents, the Mediation Administrator is authorized to impose a $500 penalty against the lender. Any lender who breaches the terms of the settlement agreement would pay a penalty of $1,000 and be required to perform the terms of a settlement agreement;
  • If the borrower breaches the terms of the settlement agreement entered into during mediation, the lender will be allowed to apply to the Mediation Administrator for a Mediation Certificate;
  • The mediation will conclude within 90 days of the mailing of the notice of default and mediation election form by the lender, unless extended for an additional 30 days by the mutual consent of both parties;
  • If the mediator determines that the parties, while acting in good faith, cannot agree to any loss mitigation options in lieu of foreclosure, the mediator will submit a form to the Mediation Administrator recommending the matter be terminated. Within 5 days of receiving the mediator’s report, the Mediation Administrator may issue a Mediation Certificate to the lender or refer the matter to another mediator;
  • Each foreclosure sale in violation of the Act is considered void;
  • All foreclosure sales occurring November 17, 2010 or after, a Mediation Certificate must be recorded among the DC Land Records PRIOR to the issuance and recordation of the Notice of Foreclosure.


  • Foreclosure sales which are completed PRIOR to the effective date of the Act should not be subject to the provisions of the Act.
  • The participation in mediation shall NOT waive any other legal claims the lender or borrower may have against each other
  • The Act expires February 15, 2011 unless extended

D.C. Attorney General Issues Statement of Enforcement to Combat Foreclosure

November 22, 2010

On October 27, 2010, Washington, D.C. Attorney General Peter Nickles issued a Statement of Enforcement regarding deceptive foreclosure sale notices.

Foreclosure sale notices, when sent to homeowners to commence foreclosures of their homes, violate the District’s Consumer Protection Procedures Act if they have a tendency to mislead homeowners either by misrepresenting a material fact or by failing to state a material fact. D.C. Official Code § 28-3904 (e) and (f).

The Attorney General is responsible for bringing enforcement actions in D.C. Superior Court against violations of the Consumer Protection Procedures Act and is authorized to seek injunctive relief, consumer restitution, and civil penalties. D.C. Official Code § 28-3909.

A foreclosure proceeding in D.C. begins when an owner of real property is sent a notice of foreclosure sale on a form prescribed by regulation and issued by the Recorder of Deeds. 9 DCMR §§ 3100.1 and 3100.2. The Notice of Foreclosure Sale form requires identification of, among other things, a “Security Instrument recorded in the land records of the District of Columbia,” a “Maker(s) of the Note secured by the instrument,” and a “Holder of the Note.” The “Holder of the Note” is the noteholder whose security interest in the real property is the basis for the foreclosure proceeding.

Under District law, a noteholder’s security interest in real property should be reflected in the property records maintained by the Recorder of Deeds, even if the noteholder was not the original maker of the note. In contrast to the laws of many states, District law imposes a recordation obligation on each transferee of a security interest in real property:

“Within 30 days after the execution of a deed or other document [by which] an economic interest [or] a security interest in the real property is conveyed, all transferees of, and all holders of the security interest in, real property shall record a fully acknowledged copy of the deed or other document . . . with the Recorder of Deeds for the District of Columbia.” D.C. Official Code § 47-1431(a).

While most assignments of security interests “from one lender to another, on the secondary market” are expressly exempted from the District’s recordation tax, D.C. Official Code § 42-1102.01, these assignments are not exempted from the District’s basic recordation requirement, which is presumed to apply to every transfer of an economic or security interest in real property. D.C. Official Code § 47-1432.

When a homeowner receives the notice of foreclosure sale on the form required by District law, the notice is representing to the homeowner, at least by implication, that (1) the identified “Holder of the Note” in fact has a security interest in the homeowner’s property and (2) the noteholder’s security interest is duly “recorded in the land records of the District of Columbia.” The homeowner who receives such a notice is entitled to presume that the recordation of the security interest complies with District law, and that each intermediate transfer of the security interest between the original maker of the note and the current holder of the note is documented in the public record.

If the land records of the District of Columbia don’t in fact demonstrate that the “Holder of the Note” identified in the foreclosure sale notice has the security interest identified in the notice, then use of the required notice form is misleading. The notice misrepresents to the homeowner that the noteholder has a recorded security interest and fails to disclose the material fact that the “recorded” security interest described in the notice is not that of the noteholder. Homeowners who receive such notices may fail to take prudent steps to protect their homes, such as seeking legal advice to determine whether there may be a basis for challenging the foreclosure proceedings in court. In the District, as in other jurisdictions with a non-judicial foreclosure process, the onus is on the homeowner to develop facts supporting judicial review.

Misrepresenting to homeowners that noteholders’ security interests are recorded in the District’s land records violates the Consumer Protection Procedures Act, even if the security interests are tracked in the Mortgage Electronic Registration Systems (MERS) registry. The MERS registry, which is privately maintained and fully accessible only to paying members and subscribers, does not allow users to research the intermediate transfers between the original maker of the note and the current holder of the note. Therefore, in contrast to the public recordation system prescribed by District law, the MERS registry does not allow users to confirm that reported noteholder interests are supported by a chain of conveyances originating with the maker of the note.

Prior to initiating a foreclosure involving a District of Columbia homeowner, a trustee or noteholder is obligated to confirm that the District’s land records demonstrate that the noteholder has the security interest that will be listed in the foreclosure sale notice. Each assignment of interest (or other document) by which the security interest was transferred to the noteholder, or to one of the noteholder’s predecessors in the chain of conveyances from the maker of the note, must be recorded with the Recorder of Deeds. A document that lists MERS as a nominee, but does not identify the actual holder of the security interest, will not suffice.

If homeowners or their advocates provide information to the Washington, D.C. Office of the Attorney General establishing that foreclosures continue to be commenced or pursued with deceptive foreclosure sale notices, the Attorney General may bring enforcement actions under the Consumer Protection Procedures Act to enjoin foreclosure proceedings, secure restitution for injured homeowners, and seek appropriate civil penalties.

To report the continued use of deceptive foreclosure sale notices, call the Attorney General’s Consumer Hotline at (202) 442-9828.

Fannie Mae Retires Payment Reduction Plan Program

November 1, 2010

On October 29, 2010, Fannie Mae issued Announcement SVC-2010-16 to servicers stating they are retiring the Payment Reduction Plan (PRP) program effective December 31, 2010.

The PRP program, introduced in 2009, was designed to provide borrowers ineligible for the Home Affordable Modification Program (HAMP) with temporary payment relief while the servicer and borrower worked together to find an appropriate permanent foreclosure prevention solution.

Under the program, a homeowner’s mortgage payments can be reduced up to 30% of the contractual monthly payments of principal and interest. The program covers owner occupied properties, as well as investment properties and second homes.

According to the Announcement, all PRPs must be initiated on or before that date and must end by July 1, 2011, or within 6 months of commencement, if earlier.

Servicers must continue to report PRP data on a monthly basis in the HomeSavers Solution® Network. Servicer incentives will continue to be paid on eligible PRPs upon the successful completion of a permanent foreclosure prevention alternative.

A spokesperson for Fannie said recent volumes in the program were relatively small, and borrowers experiencing hardships such unemployment and problematic drywall, can still be put into regular forbearance plans and extensions.

Servicers should continue to use other foreclosure prevention options available, as indicated in the Servicing Guide, Part VII, Chapter 6: Foreclosure Prevention Alternatives, and as updated by subsequent announcements.

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