By Jennifer Ngai Lavallee, Legal Aid Society of the District of Columbia
Effective immediately, struggling homeowners who are sued for foreclosure in D.C. Superior Court will have the benefit of procedural enhancements designed to promote early case resolution through court-sponsored mediation offered at the outset of every case.
These new procedures were developed as the result of a collaborative effort by consumer advocates, key members of the judiciary, the D.C. government, and mortgage industry attorneys. The new procedures coincide with what appears to be a major shift in the way lenders are initiating foreclosures in the District, where, historically, mortgage foreclosures have occurred almost entirely through an out-of-court process.
The procedural enhancements also represent an acknowledgment of the benefits to homeowners and lenders alike of preventing foreclosures whenever possible.
The introduction of early mediation in judicial foreclosure cases was specifically recommended by a working group consisting of representatives from Legal Aid; AARP Legal Counsel for the Elderly; the D.C. Office of the Attorney General; the D.C. Department of Insurance, Securities and Banking; and law firms representing mortgage lenders—including one law firm that has filed the vast majority of judicial foreclosure cases pending in the District.
The working group was formed after consumer advocates filed briefs as amici curiae in a set of judicial foreclosure cases being heard by Judge Neal E. Kravitz in D.C. Superior Court.
In devising its recommendation, the working group addressed several key concerns of stakeholders, including the need for enhanced protections for struggling homeowners; access to legal and housing counseling resources; certainty and finality in the foreclosure process; and efficient and effective use of court, mediator, and party resources.
The working group ultimately agreed that, although judicial foreclosure cases are exempt from the Saving D.C. Homes from Foreclosure Act (providing specific mediation and related requirements for out-of-court foreclosures), D.C. Superior Court should use its equitable powers to provide early court-based mediation in all foreclosure cases filed with the court.
The addition of the early mediation component to judicial foreclosure cases provides a major practical benefit to homeowners, allowing them to talk with their lenders about the possibility of loan modifications or other alternatives to foreclosure.
Although court-sponsored mediation in civil cases is not new, scheduling mediation to occur at the outset of the case—before the case is even placed on a regular civil track—is a significant change that can result in big benefits and resource savings for homeowners, lenders, and the court. In addition, one of the most important components of the new court process for homeowners is the ability to come to court on the first court date and request mediation even when an answer to the complaint has not yet been filed.
Prior to this change in the process, whenever a homeowner missed the answer deadline, his or her court date would be cancelled and the case could then quickly proceed to judgment as an uncontested matter. The new judicial foreclosure procedures also incorporate other, complementary components.
These include a prominent court notice to homeowners (provided along with the complaint), instructing them to come to court and providing information on how to seek help from lawyers and housing counselors; a court-issued scheduling order tailored to the early mediation process; and the consolidation of judicial foreclosure cases onto a single calendar with initial hearings scheduled for the same day each week, allowing legal services attorneys and housing counselors to come to court at-the-ready to connect with homeowners in need of help.
Upward of 200 judicial foreclosure cases already have been filed in D.C. Superior Court in the past year. The filing of these cases signals the beginning of what is expected to be a large-scale shift by lenders to file judicial cases seeking foreclosure by court order. Thus, the procedural enhancements for judicial foreclosure cases are being implemented at a critical time.
The D.C. Bar Antitrust and Consumer Law Section will be hosting a program on “The Changing Legal Landscape of Foreclosures in the District of Columbia” from 12 p.m. to 2 p.m. on June 13 at the D.C. Bar Conference Center, 1101 K Street NW, first floor. The program will cover the changes to the court process described above; provide updates on the D.C. Department of Insurance, Securities and Banking mediations; and highlight the ways in which the new federal mortgage servicing rules impact local proceedings.
