2011-12 Legislative Activity: Foreclosure Fairness Act

The ADR Section was very active these last legislative sessions this year.  We reached some of our legislative goals and made good progress toward others. This article will describe the section's activity on the Foreclosure Fairness Act, RCW Chapter 61.24.
The Original 2011 Foreclosure Fairness Act
By late 2010 the increase in residential foreclosures had not yet reached its peak. It was already shaping-up to be an economic crisis of the decade. Billions in home equity and lost loan revenue disappeared seemingly overnight. Borrowers facing foreclosure faced difficulties communicating with their lenders to discuss what alternatives there may be to having their homes foreclosed.
The community of borrowers' advocates were successful in gaining legislative attention for their preferred solution during the 2011 Regular Legislative Session. The FFA bill established a program that, if the borrower received a referral through a housing counselor or attorney, required the beneficiary of the note secured by the deed of trust to participate in a mediation. The FFA also:
  • provides better access for borrowers to housing counselors and increases funding for more counselors;
  • modifies the timeline for notice of default, and requiring the beneficiary to provide information about alternatives to the borrower, to encourage early and effective communication between homeowners and beneficiaries;
  • the foreclosure mediator makes certain findings regarding the mediation and the parties, including whether the parties mediated in good faith;
  • that a failure to comply with certain requirements of the FFA, including a finding of violating the duty to mediate in good faith, may consistute violations of the Consumer Protection Act.
Representative Tina Orwall was the prime sponsor and motive force behind its enactment (SSHB 1362, 2011 Chap. 58). The FFA became effective in July 2011.
Implementing the FFA
The Commerce Department was tasked with administering the FFA and training and approving foreclosure mediators. The Department sought-out the WSBA ADR Section for input. The section is represented on the Department's Training and Policy Advisory Group and was instrumental in the Department's establishing an experience requirement for approved foreclosure mediators.
When passed by the legislature it was understood that, being a completely new and unprecendented program, changes would need to be made. Even before the program began in July discussions were starting on legislative action to make some technical fixes to the act. It was anticipated that there would be stakeholder discussions on a "technical fix" bill for the 2012 Regular Session.
The ADR Section Legislative Committee met with members of other WSBA sections interested in the FFA. The Creditor Debtor Rights section was interested, but had not taken official positions. The Real Property Probate & Trust Section's Real Property Council had taken official positions during the 2011 Regular Session, mostly regarding changes to the Deed of Trust Act, and were hopeful of having some of their concerns addressed. Kathryn Leathers, WSBA Legislative Liaison, ably coordinated those discussions among the WSBA sections. In sum we found that the various sections' interests were mostly in different areas of the act and were consistent with each other.
The ADR Section on the FFA
The ADR Section Legislative Committee raised concerns regarding protection of the mediator and for the integrity of the mediation process.
Early on representatives of beneficiaries and borrowers had indicated that they could be recommending to their clients to call foreclosure mediators as witnesses or even sue them, especially if there was a finding that a party violated the duty to mediate in good faith.
The Legislative Committee recommended that the ADR Section take official positions to support efforts to make improvements in the stakeholders discussions on the technical fix bill. These recommendations were adopted as the official position of the ADR Section by unanimous approval of the Executive Committee.
The ADR Section's official positions addressed these concerns by proposing amendments to the FFA that would:
  • Provide for immunity from liability for mediators
  • Provide testimonial privilege for mediators
  • Reincorporate the Uniform Mediation Act (Chapter 7.07 RCW)
The Legislative Committee was especially appreciative of the input from Professor Alan Kirtley on the draft provisions regarding privilege and the UMA.
Later the ADR Executive Committee also approved another position, in support of the Washington Mediation Association (WMA), to amend the FFA to allow for other experienced mediators, who are not lawyers, judges or volunteers or staff at dispute resolution centers, to serve as foreclosure mediators.
These positions further the ADR Section's mission "to promote the informed use and best practices of alternative dispute resolution processes."
The Stakeholder Meetings
Representative Tina Orwall convened a series of meetings involving representatives of all stakeholders with interests in the FFA. It quickly became a very large group, with upwards of 40 people at each meeting. It included representatives of:
  • "Borrowers caucus:" Borrowers' and housing advocates and counselors, including Columbia Legal Services and the Northwest Justice Project;
  • "Lenders caucus:" lenders, banks, beneficiaries, servicers and trustees, and the counsel who represent them in foreclosure mediations and litigation;
  • DRCs (dispute resolution centers) and the WMA
  • WSBA RPPT, CDR and ADR sections
  • Commerce Department
Between December 2011 and February 2012 this group meet several times, usually in day-long meetings, to hash-out the issues regarding what technical fixes could be made to the FFA. The group's understanding and marching orders from Rep. Orwall were to provide a draft bill that had the consensus of all concerned. Reaching that consensus was no small feat.
Most of the stakeholder discussions centered on the rights and obligations of the parties, from the time the notice of default through foreclosure. Eventually significant changes were agreed to be made to the sections of the FFA regarding the process preceding the foreclosure mediation.
There was also interest among the borrowers and lenders caucus to improve the information flow of the foreclosure mediation process itself. While not taking specific positions, but letting the parties lead, the representatives of the DRCs, WMA and the ADR Section were able to provide valuable input to improve the information process.
Immunity from Liability for Foreclosure Mediators
The ADR Section's first priority was to establish immunity for liability for all foreclosure mediators. Because foreclosure mediators are paid only a set statutory fee, below market rates, the legislature and Commerce Department had envisioned mediators offering to do this work as a public service. With the threat of being sued looming, Commerce was already finding that mediators who had been trained and approved were not accepting referrals of cases.
The whole stakeholder group quickly formed a consensus around the need to establish a statutory immunity for foreclosure mediators. The Commerce Department identified this as an emergency issue and the stakeholder group requested that it not wait for the 2012 Regular Session but be addressed in the 2011 Special Legislative Session convened to address budgetary issues.
Legislative leadership had advised its members that no non-budgetary policy bills would be addressed unless they had unanimous support. The stakeholder group believed that with it's consensus, it provided the support to show leadership that a bill amending the FFA to provide for mediator immunity would be passed without opposition. The bill, SSB 5988 (2011 S.SL Chap. 4) was introduced.
In the House Judiciary committee the bill was amended to limit the immunity only to those foreclosure mediators who were staff and volunteers at DRCs. Excluded were lawyers, judges and housing counselors acting as mediators. The whole stakeholder group opposed the change and representatives attempted to remove the amendment limiting the immunity, including Representative Orwall, and were unsuccessful. Facing the prospect of no immunity at all, it was agreed not to oppose the bill as amended. It was quickly agreed among all stakeholders involved that immunity for all foreclosure mediators would be sought in the technical fix bill targeted for the following 2012 Regular Legislative Session.
The bill passed in the 2012 session, ESHB 2614 (2012 Chap. 185), did provide for immunity for all foreclosure mediators.
Mediator Privilege, the Uniform Mediation Act and the 2013 Legislative Session
In the stakeholder discussions following the ADR Section was unfortunately unsuccessful in establishing a testimonial privilege for mediators by having the UMA reincorporated. Many of the other stakeholder groups were supportive of these amendments, but a representative from the borrowers caucus held strong reservations that were not able to be addressed given the severe time limits the group was working under. All interested in these issues have agreed to continue the discussion as we hold more stakeholder meetings heading toward another technical fix bill in 2013.
Get Involved
If you are interested in these issues, feel free to post a comment or question below, contact Paul McVicker, Legislative Committee Chair. Join the WSBA ADR Section Legislative Committee group page for more detailed information and to receive breaking news updates during the session. If you are interested in foreclosure mediations join the Foreclosure Mediation Discussion Group.

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