Washington State Foreclosure Fairness Act (FFA): The Complete Mediation Guide

Falling behind on mortgage payments is a terrifying experience, but Washington State offers a powerful lifeline. The Foreclosure Fairness Act (FFA) was created to level the playing field between homeowners and massive financial institutions. Instead of allowing banks to rush through a non-judicial foreclosure, this law forces lenders to sit down at the mediation table and explore alternatives like loan modifications.

Whether your home is in Seattle, Spokane, or Tacoma, the rules of the FFA remain consistent across the state. The process requires strict adherence to timelines and heavy documentation, which is why working with a local professional from our directory of Washington lawyers or approved housing counselors is critical to protecting your home.

Step-by-Step Process in Washington State

The FFA mediation process is highly structured. From the moment you receive your first warning to the actual mediation session, you must follow specific procedural steps to force your servicer to negotiate.

Step 1: The Initial Notice and the Meet and Confer Mandate

Before a lender can officially start a foreclosure, they must issue a Notice of Pre-Foreclosure Options. Under Wash. Rev. Code § 61.24.031, this triggers the 'Meet and Confer' period. The lender must attempt to contact you to assess your financial situation and discuss options to avoid foreclosure. You have 30 days to respond to this notice. If you respond, the lender is prohibited from issuing a Notice of Default for an additional 60 days, giving you precious time to seek help.

Step 2: Contacting a DFI-Approved Housing Counselor

You cannot request FFA mediation on your own; it must be done through a qualified professional. You must contact a counselor approved by the Washington State Department of Financial Institutions, Olympia, or a licensed Washington attorney. This advocate will review your finances and determine if mediation is the right step for you.

Step 3: Requesting FFA Mediation and Timelines

If your counselor or lawyer determines mediation is appropriate, they will send a formal referral to the Washington State Department of Commerce, Olympia. Timing is everything. Under Wash. Rev. Code § 61.24.163(2), a referral can be made any time after a Notice of Default is issued, but no later than 90 days before the sale date listed in the Notice of Trustee's Sale. If an amended notice of trustee's sale is recorded after the sale was stayed pursuant to Wash. Rev. Code § 61.24.130, the referral deadline is no later than 25 days prior to the amended sale date. Once the Department of Commerce receives the request, the foreclosure sale is legally paused.

Step 4: Gathering Documents for the Net Present Value (NPV) test

During mediation, the most crucial tool used is the Net Present Value (NPV) test. This mathematical formula compares the financial return to the lender if they modify your loan versus if they foreclose and sell the house. To pass the NPV test, you must provide comprehensive financial documents, including recent pay stubs, tax returns, and a completed Form 710, FED, Fannie Mae, Mortgage Assistance Application. If the NPV test shows a modification is more profitable for the investor, the lender is generally required to offer it.

Step 5: Good Faith Negotiation Standards for Servicers

Under Washington law, both you and the bank's representative must mediate in 'good faith.' This means the servicer must send a representative with actual authority to approve a loan modification, provide requested documents in advance, and accurately run the NPV test. If the mediator determines the servicer acted in bad faith, the homeowner can use this as grounds to sue the lender and stop the foreclosure entirely under the state's Wash. Rev. Code § 19.86.020.

FFA Exemptions: Small Community Banks and Credit Unions

It is important to note that not every lender is forced to participate in the FFA mediation program. The law includes an exemption for small community banks and credit unions. If a financial institution conducted fewer than 250 foreclosures in Washington during the previous calendar year, they are generally exempt from mandatory mediation. However, even exempt lenders are often willing to negotiate voluntarily if approached professionally.

How Much Does it Cost in Washington State?

The state has designed the FFA to be accessible to homeowners facing financial distress. Here are the typical costs involved:

• Housing Counselors: Services from a DFI-approved housing counselor are generally free of charge for Washington residents.
• Mediation Fee: Under Wash. Rev. Code § 61.24.163, the statutory mediator fee is capped at $400 for a standard session between one and three hours, divided equally so that the homeowner and lender each pay $200 (unless the Department of Commerce authorizes a different fee, currently set at $600 total or $300 each, or the fee is waived).
• Attorney Fees: If you choose to hire a private foreclosure defense lawyer from our directory to represent you at mediation, fees can range from $2,500 to $5,000 depending on the complexity of your case.

How Long Does the Process Take?

Once your counselor refers you to the Washington State Department of Commerce, Olympia, a mediator is typically assigned within 10 days. The actual mediation session is scheduled to take place within 70 days of the referral. The entire process, from the Meet and Confer notice to the final mediation outcome, generally delays a foreclosure sale by 3 to 5 months, giving you time to stabilize your finances.

Frequently Asked Questions (FAQ)