on Friday, January 25th, 2013 at 3:19pm.
DC foreclosures have almost come to a halt due to the Saving DC Homes from Foreclosure provision passed by the DC City Council back in November 2010. The 41-page bill requires lenders to provide a four-month mediation period to homeowners at risk for foreclosure, as well as file copies of notices with the DC Department of Insurance, Securities and Banking. Before this law, some foreclosures happened in as little as 30 days.
Borrowers can elect to participate in the in-person mediation, but lenders are required to do so. The mediation period allows delinquent borrowers to discuss payment options in order to avoid foreclosure. These options could include renegotiation of the loan terms, loan modifications, refinancing, a short sale, deed in lieu of foreclosure, or other alternatives. The District also allocated over $4 million (their share of a national mortgage settlement with major US banks) to a Foreclosure Mediation Fund for mortgage counseling, legal assistance, mediation, and enforcement of consumer protection laws.
If a DC foreclosure were to occur without offering the mediation period, or even if a notice was mailed without the correct envelope color, the law can declare any future sale of the property null and void. This caused a chilling effect on title companies, who are now reluctant to insure titles on foreclosure sales. Thus, the number of new foreclosures and sales of foreclosed properties DC are negligible. Another effect of the legislation is that it’s more difficult and more expensive to get a mortgage in the District.
We don’t know when all the foreclosures in process will actually occur. But when they do, the flood of perhaps hundreds of foreclosures are likely to depress home prices in DC. That’s bad news for sellers who were able to pay their mortgages, but it could be great news for investors looking for bargains. At this point, it’s uncertain what the future holds for DC foreclosures.