District of Columbia Regulatory Update

District of Columbia Regulatory Update

The District of Columbia Department of Insurance, Securities and Banking (“Department”) adopted emergency amendments to its rules governing foreclosure mediation effective March 4, 2014.  The emergency regulations expire on July 2, 2014, unless superseded by the final rules.

District of Columbia Rules Chapter 27

 

 

“Community Bank” means a depository institution with aggregate assets of less than $1 billion.

 

 

“Loss Mitigation Application” means Form FM-1LM, which is available on the website of the Commissioner of the Department (“Commissioner”) at http://disb.dc.gov, or a functionally equivalent loss mitigation application form that has been approved by the Commissioner.

 

 

“Mediation services” include, but are not limited to, the selection and employment of a mediator, foreclosure mediation training, and supplies and material relating to the foreclosure mediation program.

 

 

“Residential mortgage” means a loan secured by a deed of trust or mortgage used to acquire or refinance real property which is improved by 4 or fewer units, including condominium or cooperative units, but does not include debts incurred and currently obligating a business entity exclusively.  This term includes a security interest established in connection with the financing of a housing cooperative unit.

 

 

“Mediation Certificate” has been replaced by a “Final Mediation Certificate” or “Preliminary Mediation Certificate,” whichever is applicable.  The Application for Final Mediation Certificate Due to Breach has replaced the Application for Mediation Certificate Due to Breach.

 

The following documents must be recorded with the District of Columbia Office of the Recorder of Deeds within 10 (previously 2) business days of the date of mailing of the Notice of Default on Residential Mortgage, unless the Mediation Administrator concludes that there was good cause for failing to record these documents within the required time period:

·        The Notice of Default on Residential Mortgage, and any supplement to the Notice of Default on Residential Mortgage; and

·        The Mediation Election Form (Form FM-2).

 

 

The lender must send to the Mediation Administrator by regular first class mail a copy of the Notice of Default on Residential Mortgage that has been submitted to the Mediation Administrator, accompanied by a $600 (previously $300) money order, check (or now cashier’s check) payable to the District of Columbia Treasurer.

 

 

The following, which must accompany the Notice of Default on Residential Mortgage that is submitted to the Mediation Administrator, must be available to the borrower(s) upon request:

·        A recorded copy of the mortgage or deed of trust;

·        A true copy of the note secured by the mortgage showing a proper chain of endorsements, or an Affidavit of Acknowledgement of Note Ownership or similar document signed by the foreclosing lender or its agent stating that the foreclosing lender is the holder of the note;

·        A true copy of every recorded assignment of the mortgage vesting of record the beneficial interest of the foreclosing lender;

·        The name of the holder of the note;

·        The location of the note; and

·        A true copy of all pooling and servicing or other similar agreements affecting the residential mortgage that pertain to the loss mitigation programs offered and loss mitigation analysis (previously regarding the residential mortgage).

The Affidavit of Mailing of Notice of Default, which is included with the Notice of Default on Residential Mortgage, must have the same mailing date as the Notice of Default on Residential Mortgage unless the Mediation Administrator determines that good cause is shown for different mailing dates.

Upon the timely delivery of the Mediation Election Form (Form FM-2) by the borrower(s), the Mediation Administrator must schedule mediation between the borrower(s) and the lender to begin no later than 90 (previously 45) days after the date of mailing of the Notice of Default on Residential Mortgage.

Mediation must be completed within 180 (previously 90) days of the date of mailing of the Notice of Default on Residential Mortgage, unless extended.

The Mediation Administrator, or the Mediator with the consent of the Mediation Administrator, may reschedule a scheduled mediation upon no less than 2 (previously 5) business days’ notice to each mediation party if the Mediation Administrator or Mediator determines that it is in the public’s interest to reschedule the mediation.

The mediation parties may agree to extend mediation for an additional 30 days beyond the 180 (previously 90) day period by mutual consent by executing a Mediation Extension Form.

A borrower who fails to bring all applicable documentation and information is not entitled to continue to participate in the mediation unless the Mediation Administrator determines that good cause has been shown for the failure.

A mediation session may last up to a maximum of 3 hours.

At any time during the mediation process, the mediator may refer a borrower to a legal service provider for mortgage assistance, provided that the mediation resumes not later than 15 days after the referral.

In addition to current requirements, in considering a loan modification, a good faith effort to mediate requires the lender to:

·        Evaluate the eligibility of the borrower(s) for each loan modification program applicable to the residential mortgage in default and include an analysis according to the Home Affordable Modification Program (“HAMP”);

·        If the lender is a community bank it must:

o       Evaluate all eligible loan modification programs and include an analysis according to HAMP, the Federal Deposit Insurance Corporation’s Loan Modification Program, or any loan modification program that is based on accepted principles and the safety and soundness of the institution and approved by the Commissioner; and

o       Offer the borrower(s) a loan modification at the best terms available if the net present value (“NPV”) of receiving payments according to a modified mortgage loan is greater  than the anticipated net recovery following foreclosure based on any NPV model that a community bank uses that is based on accepted principles and the safety and soundness of the institution and approved by the Commissioner;

·        If the lender is a credit union, it must:

o       Evaluate all eligible loan modification programs and include an analysis according to HAMP, the FDIC’s Loan Modification Program, or any modification program that is based on accepted principles and the safety and soundness of the institution and is recognized by the National Credit Union Administration (“NCUA”); and

o       Offer the borrower(s) a loan modification at the best terms available if the NPV of receiving payments according to a modified mortgage loan is greater than the anticipated net recovery following foreclosure based on any NPV model that a credit union uses that is based on accepted principles and the safety and soundness of the institution and is recognized by the NCUA;

·        Offer the borrower(s) a loan modification at the best terms available for a loan modification if the NPV of receiving payments according to a modified mortgage loan is greater than the anticipated net recovery following foreclosure based on a calculation (now using the HAMP Base NPV Model) or the FDIC’s Loan Modification Program; and

·        If the loan has been sold to a third party investor and the loan servicing agreement permits, offer the borrower(s) a loan modification at the best terms available for a loan modification if the NPV of receiving payments according to a modified mortgage loan is greater than the anticipated net recovery following foreclosure based on a calculation using the HAMP Base NPV Model or the FDIC’s Loan Modification Program.

In the event a lender rejects a settlement involving an alternative to foreclosure that has a lower cost than foreclosure, the lender must provide a written explanation for rejecting the settlement.  The explanation must include an analysis and supporting documentation and, now, where applicable, the inputs and outputs of the approved NPV model identified above.

The lender (previously or its representative) must, at least 5 business days before the first mediation session scheduled by the Mediation Administrator or mediator, provide an electronic copy of the currently required materials to DISB.mediation@dc.gov to the Mediation Administrator.

Prior to mediation, a borrower must attach to the Loss Mitigation Application documents that demonstrate the residential mortgage borrower’s household income.  If the requested documents are not applicable to the borrower, the borrower must provide a letter explaining why the documents are inapplicable.

The borrower must bring hard copies of required documents to the scheduled mediation.

In addition to current requirements, in the event a party to the mediation does not cooperate with the mediator, the Mediation Administrator may issue a Preliminary Determination of Bad Faith or issue a Preliminary Mediation Certificate (previously Mediation Certificate).  The provision allowing the Mediation Administrator to cancel the Notice of Default on Residential Mortgage filed by a lender has been deleted.

Any settlement agreement reached as a result of mediation must be reduced to writing and executed by the mediation parties within 10 (previously 5) business days of the date of the mediation parties’ agreement.

Within 10 (previously 5) days after the completion of mediation, the mediator must file a Mediation Report with the Mediation Administrator and deliver a copy to the mediation parties.

In addition to current requirements, unless a settlement agreement is executed between the mediation parties, within 10 (previously 5) business days after receiving the Mediation Report and after reviewing and considering a Mediation Report, the Mediation Administrator must assess any applicable penalty against the lender, and issue a Preliminary Determination of Bad Faith if the lender did not participate in the mediation in good faith (previously and terminate the mediation and Notice of Default on Residential Mortgage (Form FM-1) without issuing a Mediation Certificate).

Once the mediation has concluded, upon determining that the lender acted in good faith, the Mediation Administrator must issue and send to all parties a Preliminary Mediation Certificate.

The borrower(s) may appeal a Preliminary Mediation Certificate in the District of Columbia Superior Court in accordance with the appeal process.  If the borrower does not appeal within 30 days and the lender documents this fact, the lender may request a Final Mediation Certificate.

The lender may request a Final Mediation Certificate and must affirm that the borrower has not filed a timely appeal.

The lender may not request a Final Mediation Certificate until 30 days after the Mediation Administrator issues the Preliminary Mediation Certificate.

A Final Mediation Certificate (previously Mediation Certificate) expires 1 year from the date of issuance, unless extended for an additional year (previously 6 months).

Within 30 days of issuance of the Preliminary Mediation Certificate, a borrower may file in the District of Columbia Superior Court an appeal of the Preliminary Mediation Certificate.

Within 30 days of issuance of the Preliminary Determination of Bad Faith, a lender may file in the District of Columbia Superior Court an appeal of the Mediation Administrator’s Preliminary Determination of Bad Faith.

A copy of the filing of the appeal must be sent to the Mediation Administrator no later than 30 days after issuance of the Preliminary Mediation Certificate or the Preliminary Determination of Bad Faith.

A lender who receives an Application for Order to Perform Due to Breach alleging that the lender is in breach of a settlement agreement may challenge the allegation of the borrower that the lender breached the settlement agreement by filing an objection to the Application for Order to Perform Due to Breach with the Mediation Administrator within 10 (previously 5) days of the date of the mailing of such application to the borrower.

A borrower who received an Application for Final Mediation Certificate Due to Breach may file an objection to the Application for Final Mediation Certificate Due to Breach within 10 (previously 5) days of mailing of such application to the borrower.

The Mediation Administrator may extend deadlines upon determining that there is good cause to do so.

The Notice of Default on Residential Mortgage (Form FM-1) and Notice of Intention to Foreclose a Residential Mortgage (Form FM-5) are available on the Commissioner’s website.

The following provisions have been deleted:

The Mediation Administrator is authorized to receive on behalf of the lender a Notice of Default on Residential Mortgage (Form FM-1), the Mediation Election Form (Form FM-2), and Loss Mitigation Application (Form FM-1LM).

A copy of a Loss Mitigation Application (Form FM-1LM) delivered to the Mediation Administrator is considered to be service upon the lender of such form.

A foreclosure sale of a property secured by a residential mortgage is void if a lender files a Notice of Intention to Foreclose on a Residential Mortgage (Form FM-5) without a Mediation Certificate.

A borrower may assert claims as the law provides for a defective Notice of Foreclosure Sale of Real Property or Condominium Unit (Form ROD-14) and Notice of Intention to Foreclose on a Residential Mortgage (Form FM-5).