At our Consumer Rights Kick-Off event in October 2014, Attorney General Bob Ferguson praised NWCLC for its “short, but impressive” history. Below are some facts and figures about the work we do.
By the middle of 2014, the staff attorneys at NWCLC had a combined total of 639 cases for which they had provided substantial legal services. This figure includes cases that have been resolved and closed as well as those that are still open and being worked.
The range of services provided in these cases can be described as follows:
Representing clients in filing bankruptcy to stop foreclosures, help them get back onto solid financial ground, and/or work out reasonable payment plans for them to get caught up on their mortgage and other debts;
Assisting clients in applying for loan modifications to stop or avoid foreclosures and to make their mortgages affordable;
Filing lawsuits against mortgage companies who fail to follow through properly to modify clients’ loans according to the federal program “HAMP”;
Helping find the best solutions for clients who have already been foreclosed upon and are facing eviction from their homes;
Negotiating arrangements for clients who will accept a cash payment from the mortgage company in return for giving up their home and avoiding the damage to their credit caused by a foreclosure proceeding;
Filing lawsuits against mortgage companies which fail to follow legally required procedures when foreclosing on homeowners or which are foreclosing even though they do not have a legal right to do so.
Type of Legal Help We Provide for Our Clients
As of July 16, 2014, in Order of Frequency
Chapter 7 Bankruptcy
Chapter 13 Bankruptcy
Foreclosure Fairness Act Mediation
Loan Modifications (Including Enforcement of Loan Mod Agreements)
Other Foreclosure Matters (Including Brief Counsel and Advice)
As part of its mission to fight for the rights of Washington consumers, NWCLC is actively involved in impact litigation, meaning court cases where the outcome has the potential to affect consumer rights on a large scale. Well-known examples of impact litigation in other areas include Roe v. Wade, which affected women’s rights nationwide, or Brown v. Board of Education, which helped end racial segregation in public schools.
Several members of NWCLC’s board of directors recently took a case all the way up to the Washington State Supreme Court, which issued a decision that will result in increased protection for Washington homeowners in foreclosure. This is one of many victories for consumers that will come out of our hard work in this area.
This case involves the business of real estate investors who buy properties that are in foreclosure, also known as “distressed properties.” These activities are covered in the Washington State Distressed Property Conveyance Act. These are homes that cannot be saved and this law is in place to protect the interests of the homeowners and requires real estate investors to follow certain procedures. Because the owners of the distressed properties are often in distress themselves, they are more easily taken advantage of by unethical real estate investors. Such investors engage in “equity skimming” or “equity stripping,” a process that goes something like this:
Buy the house from the homeowner for cheap, which stops the foreclosure but leaves the homeowner with very little of the equity in their own pocket
Agree to let them live there as a tenant – but make their rent the same amount as the mortgage payment or even higher
When the “tenant” fails to pay rent, evict them
Sell the house at market value, make a nice profit, and move on to the next victim
Our client was the victim of equity stripping. We sued for violation of the Distressed Property Conveyance Act, but we lost at trial. The Court thought our client’s property was not far enough along in the foreclosure process to qualify as a “distressed property”. In their decision, the Supreme Court expanded the definition of what qualifies as a “distressed property” to include a situation like our client’s, and they imposed additional procedures for the investors to follow that expanded protections for all Washington State homeowners.
Impact litigation also includes class action lawsuits and amicus curiae briefs.
A class action lawsuit is a lawsuit brought on behalf of a group of people who are all believed to have suffered the same type of injury from the same individual or organization, but either the people do not know they were injured, or the injury, though significant, is not severe enough to make it worth it for each person to hire a lawyer to sue on their own. Without the option of a class action lawsuit, therefore, many people could be injured and never have a chance to bring the offender to justice. Class actions are also much less burdensome on the court system than if every individual – of whom there could be hundreds of thousands or even millions – started their own lawsuit.
Staff attorneys at NWCLC have a pending class action lawsuit against a foreclosure trustee company for unfair and deceptive practices. Foreclosure trustees are supposed to act fairly and not be biased in the interests of the homeowner or the mortgage lender, but this one (as we allege) has been acting in favor of the banks.
Specifically, we allege that the trustee has been refusing to confirm whether or not it will be postponing a foreclosure sale until as late as 30 minutes before the foreclosure sale is scheduled to occur – effectively keeping homeowners in the dark as to whether they are losing their home or whether they will have more time to figure out how to save it. Here are a couple ways in which this is unfair to the homeowners and gives an unfair amount of power to the banks:
● If a homeowner is thinking about filing for bankruptcy to stop the sale, they would only have 30 minutes to file an emergency bankruptcy, which very few homeowners would be able to do.
● If a homeowner wants to file a motion with the court to stop the foreclosure sale, court rules dictate that they need to do so at least 5 business days before the sale is scheduled, which they obviously cannot do here.
As a result homeowners are losing their homes, losing money, and experiencing severe emotional distress because they are prevented from having all the information they need to protect their rights and make the best decisions for themselves.
If the case were successful, we would get the Court to order the trustee to stop waiting until the last minute to inform homeowners of the status of their foreclosure sale, and instead to promptly give them the status as soon as it is available. One of the laws we are suing under also says that each homeowner in the class can get monetary compensation of up to $1,000.00. Lastly, NWCLC would get an award of attorneys’ fees to help us continue making an impact on consumer rights.
Our staff attorneys have also filed a class action lawsuit against a major nationwide mortgage loan servicing company for illegal actions related to homeowners insurance which have forced a large number of borrowers into foreclosure, causing them injury. This case involves greedy and unethical actions with regard to “force-placed” hazard insurance policies, as described below:
When a homeowner gets a mortgage, pretty much all lenders including this company require them to have insurance.
If for any reason the insurance coverage lapses, the lender can take out another policy for the homeowner and make them pay those premiums. That would be the “forced-placed” insurance.
This particular company (we allege) has been force-placing insurance policies much larger than they needed to be, with larger premiums.
In return, the company has been getting commissions and kickbacks from the insurance companies.
Homeowners get injured by having to pay these higher premiums.
If they cannot afford to pay them, the homeowners can (and do) get foreclosed upon and lose their homes.
If we are successful in this case, we will get the Court to order the company to stop force-placing insurance policies that are more expensive than necessary, return all the money that it wrongfully earned, pay “exemplary” damages (i.e., make them hurt more just to teach them a lesson), give monetary compensation to the homeowners as required by the laws we’re suing under, and attorneys’ fees for NWCLC to help fund our important work.
An amicus curiae brief, also known as an amicus brief or sometimes just an amicus, is a written legal argument in support of one side of the case that is given to the court to consider, if the judge allows it, by somebody who is not directly involved in the lawsuit but has a strong interest in how it turns out. “Amicus curiae” is Latin for “friend of the court.” Colloquially speaking, those who submit amicus briefs are chiming in with their two cents – not to belittle the significant influence that well-written amicus briefs have had and continue to have on important cases that affect consumer rights. NWCLC has collaborated with Columbia Legal Services and the Northwest Justice Project in preparing three submitted amicus briefs so far, and a fourth is in progress.
Since our inception two and half years ago, NWCLC has quickly integrated with other influential consumer and social justice organizations, teaming up to make a bigger difference.
In partnership with the many other outstanding legal aid organizations in Washington state, NWCLC is shifting the landscape of consumer rights.
Washington’s Foreclosure Fairness Act (FFA) is a state law that gives certain homeowners facing foreclosure the right to a process called mediation, in which they meet with their lender to work out alternatives, such as modifying the mortgage so they can afford it and keep the home, or giving up the home in a way that is most advantageous to them and avoids the damage to their credit that foreclosure would cause. Unfortunately, too many homeowners go through mediation “pro se”, meaning without the help of an expert such as an attorney or a housing counselor, which puts them at a great disadvantage in the negotiations. One of NWCLC’s primary objectives is to change that by providing low-cost or free legal advice and representation to as many of these homeowners as possible. To accomplish this, we maintain excellent working relationships with other legal services organizations, such as the Northwest Justice Project and Columbia Legal Services, as well as housing counseling organizations such as Parkview Services. We refer clients to and receive client referrals from these organizations, and we regularly exchange information with these organizations to maximize the effectiveness of our services.
Education and Outreach
A crucial component of NWCLC’s mission is to reach out to communities and educate consumers. We envision a world where consumers, armed with knowledge and resources, can avoid financial difficulties by making smart choices and recognizing fraudulent business practices. To learn more, please click here to visit our Education and Outreach page.
Washington has two types of foreclosure procedures: nonjudicial for the vast majority of residential properties and judicial for agriculture and some commercial properties.
Under the nonjudicial procedure, the first lien (commonly called a mortgage) is cancelled in exchange for the property, with no resulting deficiency or further liability on (being “on the hook” for) the first lien. However, if there is a second loan or equity line of credit, the homeowner remains liable for that obligation and can be sued after foreclosure for that amount. Also, homeowner associations (HOA’s) may have liens for unpaid dues that can be foreclosed, sometimes taking priority over mortgages. The nonjudicial procedure is found in RCW 61.24 and generally can take between 8 and 18 months to complete. Homeowners have several ways to exercise their legal rights in order to delay or stop a nonjudicial foreclosure, including bankruptcy, loan modifications, and mediation.
How does nonjudicial foreclosure work?
The procedure for a nonjudicial foreclosure usually starts after the borrower has missed 3 or 4 monthly payments. The mortgage lender or servicer employs a separate company called a trustee, which is supposed act neutrally to facilitate the process in a way that is fair to both sides. The trustee must follow these procedures:
1. Letters and calls demanding payment.
2. Loan modification. Various federal programs, such as the Home Affordable Modification Program, should be considered at this point. The foreclosure should be put on hold while the homeowner is being considered for a loan modification, but you should watch very carefully for any notices that may indicate the foreclosure is going forward.
3. Notice of Preforeclosure Options. This important letter will explain options for a meeting with the lender to discuss alternatives to foreclosure. A homeowner can delay foreclosure by requesting a meet and confer with the lender.
4. Notice of Default. This notice is posted on the property and mailed by certified mail to all occupants. This statutory (required by statute, or written law) notice tells the homeowner how much money needs to be paid to stop the foreclosure, and includes foreclosure costs incurred to date. If this notice is ignored, the foreclosure will continue. Under the Washington Foreclosure Fairness Act, once the Notice of Default is received, certain homeowners can have an attorney or housing counselor submit a referral for mediation. Mediation is a process in which the homeowner meets with the mortgage company to see if there is a way to avoid foreclosure.
5. Notice of Trustee Sale and Foreclosure. The trustee schedules a foreclosure sale date for at least 90 days from date of the notice, which tells the homeowner the time, place, and date of sale. This notice cannot be sent until at least 30 days after the Notice of Default has been sent, and can be delayed by requesting pre foreclosure options discussed previously. The sale date cannot be sooner than 7 months from the initial default, but this requirement is altered by options discussed below. It is important to understand that after the sale of the property, the homeowner has no right to redemption (getting caught up on what they owed and getting their home back). Once the Notice of Trustee Sale has been issued, the homeowner has only 20 days from the date of the Notice to request a referral to mediation as discussed above.
6. Delaying or stopping the foreclosure. Prior to the sale date, the procedure can be tolled (paused) by requesting a mediation, filing a lawsuit and getting an injunction (an order by the court to stop the sale), or filing for Chapter 7 or 13 Bankruptcy. These options may only delay the sale for a short time, so you should consult an attorney immediately. Also, if a loan modification is agreed upon by the lender, you should make sure that the sale does not occur anyway. An attorney can assist with this.
7. The foreclosure sale. Properties are sold at any public place in the county as specified in the Notice of Trustee Sale. Once the sale occurs, the property is deeded (given) to a purchaser, either the lender who can credit bid the debt, or a third-party purchaser who becomes the owner when the deed is recorded. Sometimes a sale can be cancelled if the trustee’s deed is not recorded and a major error is discovered.
8. Eviction. 20 days after the sale, the new owner can file an unlawful detainer lawsuit to evict the person still in possession (living there). If there is a tenant under a lease, this period can be extended for 60 days or longer. The court will issue a writ of restitution at the eviction hearing (meeting with judge in court). If the judge determines that the procedures have been followed properly, the court will direct the County Sheriff to remove the occupants after a few days notice is posted on the property.
9. Post-sale challenges. Rarely, a sale can be set aside (cancelled or undone) after completion for failure of the lender or foreclosing trustee to properly follow the procedures. This must be done by filing a lawsuit, which is very unlikely to be won, but can get the homeowner a judgment award of monetary damages (compensation).
You should consult an attorney if you think any of these violations have occurred. A lawsuit can be filed under the Fair Debt Collection Practices Act (FDCPA), which could get you a judgment award of monetary damages.
Chapter 7 bankruptcy is a liquidation bankruptcy. Technically this means that the court-appointed representative called a trustee sells off your assets for the benefit of your creditors (people and business to whom you owe money). However, that sounds a lot worse than it really is.
Most Chapter 7 bankruptcies are considered non-asset cases. This means that the trustee makes a determination that there are no assets to be liquidated for the benefit of creditors. You may have assets such as a car or home, but this does not mean you will lose them as part of the bankruptcy proceeding. In fact, most debtors are able to keep all of their assets without losing one piece of property! When the Chapter 7 bankruptcy laws were passed, the intent was to give debtor’s a fresh start. Taking all of your assets and leaving you on the street corner is not giving you a fresh start. This is why the law allows you to keep assets under different exemption categories. There are exemption categories for your home, car, household goods, retirement, etc. What all of this means for you is that it is possible to discharge (get rid of) your debt while keeping your home, car, bank account, and other assets. This gives you the ability to start over and truly get the fresh start the government intended.
Please be advised that, due to funding limitations, NWCLC is temporarily unable to accept non-homeowner clients seeking bankruptcy services on a free (pro bono) basis. All non-homeowner clients NWCLC agrees to represent in Chapter 7 Bankruptcy will be required to pay a retainer fee of $900.00 in advance, in addition to any court filing fees or other costs that may apply.
A Chapter 13 Bankruptcy is also called a wage-earners plan, or reorganization. A Chapter 13 is used when you need to stop a foreclosure, reinstate a driver’s license, or you earn too much money to qualify for a Chapter 7 bankruptcy. Perhaps you want to make your best efforts to pay off your creditors. A Chapter 13 bankruptcy may be for you.
Chapter 13 is much more complicated than a Chapter 7. In order to enter a Chapter 13 bankruptcy, you have to propose a plan to the Court that states how you are going to reorganize your finances. If the Court believes you can make the plan work, and you have proposed the plan in good faith, the plan will be confirmed and your bankruptcy will be mostly complete. The critical issue to the Chapter 13 plan is that regular payments must be made. You will make your first plan payment within 30 days of filing the plan. The monthly payment is critical to a Chapter 13 plan. In order to reorganize you contribute any existing disposable income to the plan which is then distributed by the Chapter 13 trustee to the creditors. Disposable income is defined as money which is available after all the base expenses have been paid.
What are the advantages of a Chapter 13 Bankruptcy?
We compare Chapter 13 to Consumer Credit Counseling on steroids. Chapter 13 is one of the best financial tools available to prevent serious financial trouble before it starts. With a Chapter 13, it is possible to strip away debt that cannot be sustained, lower car payments, adjust interest rates on debt you choose to keep, and payoff other debt entirely. Chapter 13 lets you rearrange your finances, repay a portion of your debts and put yourself back on your financial feet. The plan will last from three to five years. It takes time, but it can be an extremely successful way to alter your financial course and get back on track.
Just how powerful is the Chapter 13 Bankruptcy?
Extremely, you can use it to stop a house foreclosure, catch up on mortgage payments. You can actually lower your car payment and pay it off over the course of the plan. You can payoff your back taxes and stop interest from accruing on your debts. The filing of the bankruptcy automatically stops all creditors in their tracks. This is because from the moment you file, the court extends its arms around you and protects you from your creditors. This protection is called the ‘automatic stay.’ Creditors cannot legally garnish your wages or your bank account. They cannot repossess your car, house, or other property. They cannot cut off your utility service or welfare benefits.If you car has been repossessed, the filing of a Chapter 13 within 10 days will get the car back from the repo man.
Chapter 13 can be used to buy necessary time. Perhaps you know you can’t catch up your mortgage payments, but you need some time to sell your home. Chapter 13 can be a good way to buy the necessary time.
What are the disadvantages of Chapter 13 Bankruptcy?
Chapter 13 requires a three to five year commitment. Each month you will have to make a payment to the Chapter 13 trustee. It’s a big commitment. It requires steady and stable income. If you are unemployed, chances are it will be difficult to fund a plan. The biggest reason plans fail is because debtors fail to make their Chapter 13 payments. When you have Northwest Consumer Law Center represent you, we endeavor to make sure that the plan payment is something you can afford. If a plan is not feasible, we will recommend another course of action prior to the filing.
What about my credit?
The Fair Credit Reporting Act does allow for the Chapter 13 bankruptcy to be reported for up to ten years, however, most credit bureaus have a policy of taking Chapter 13 bankruptcy off in seven years. Now, this does not mean you are in credit purgatory for seven to ten years. Far from it. As soon as your plan has been confirmed, you are going to start rebuilding your credit. It will be slow at first and the success of the reorganization plan should be a priority. When the plan has successfully completed and your case is discharged, that is when the credit rebuilding process truly begins. It will take about two years to get back on top of your credit score, but that is still a lot shorter than ten years.
3-5 years sounds like a long time. Are there any quick fixes?
The lottery would be a quick fix, but we don’t see that as a realistic possibility. People who guarantee you an overnight solution or anything else are trying to take your money for their own benefit, not yours. Reorganization takes time and it takes time for a reason. In order to ensure your success, you have to be given enough time to work your debts out without being hit too hard in the pocketbook. We create plans for you that are manageable and successful.We know that three years does seem like a long time. But consider where you were three years ago and it probably seems like those three years flew by. The same will be true with the next three years.
Who can file for a Chapter 13 Reorganization?
Let’s change the question and ask – “Who can’t file for a Chapter 13 Bankruptcy?” Businesses cannot file for a 13 bankruptcy. If you own a business, you can file as an individual and include your business related debts. Everyone else can file for a Chapter 13 bankruptcy so long as your secured debts do not exceed $807,750.00 and your unsecured debts do not exceed $269,250.00. In order to file, you need to have a stable source of regular income. The money does not necessarily have to come from employment. It can be pension plan payments, social security, disability payments, unemployment benefits, child support or maintenance, royalties and rents, gifts of money from friends or family, and proceeds from selling property.Once you have the money source, you have to have enough to fund the plan, this means you must have disposable income. It is your disposable income which will fund the plan.
How do I know if I should file for a Chapter 7 or Chapter 13?
Northwest Consumer Law Center will be able to provide you with a proper analysis when we actually meet with you. You may a good candidate for a Chapter 13 if:
you are behind on your mortgage payments or car loan, and want to make up the missed payments over time;
you have taxes which are unpaid and are non-dischargeable;
you want to discharge certain debts in a Chapter 13 which are considered non-dischargeable in a Chapter 7 (also known as a super discharge); and/or
you really want to pay off your debts, but simply cannot do it without the protection of the bankruptcy court.
Please be advised that, due to funding limitations, NWCLC is temporarily unable to accept non-homeowner clients seeking bankruptcy services on a free (pro bono) basis. All non-homeowner clients NWCLC agrees to represent in bankruptcy will be required to pay a retainer fee in advance, in addition to any court filing fees or other costs that may apply.