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Residential and commercial foreclosures tank in the District of Columbia

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Residential and commercial foreclosures tank in the District of Columbia

The number of residential foreclosures in D.C. has flat-out tanked, dropping to 39 in 2013, but District officials expect an uptick as more lenders adapt to a 2010 law crafted to protect homeowners.

Foreclosures have been at a virtual standstill since the adoption of the Saving D.C. Homes from Foreclosure Act, which requires that lenders and borrowers submit to a complex mediation process overseen by a neutral third party (though borrowers do have the option of declining to participate). The program involves attorneys, reams of paperwork and the threat of daily fines — and all have driven lenders and title insurers away.

The number of residential foreclosures totaled 255 in fiscal 2011, 44 in 2012 and 39 in 2013, according to statistics provided by the Department of Insurance, Securities and Banking to the D.C. Council. The number of foreclosed multifamily buildings has collapsed as well, from 109 in fiscal 2011 to 14 in both 2012 and 2013.

“However, it’s possible that this trend could likely not continue,” DISB wrote in response to a question from a council committee. “More lenders have begun to issue Notice of Defaults correctly adhering to the current law and policies.”

Prior to the foreclosure law’s implementation, lenders were delivering upward of 150 notices of default — the first step in the foreclosure process — every month. The average has since fallen to eight per month: 86 default notices in fiscal year 2012, 122 in fiscal 2013 and only 11 through the first three months of fiscal 2014.

Experts say it is unlikely the number of homeowners who are seriously delinquent on their mortgages has fallen as precipitously as the number of foreclosures, meaning there is a massive logjam of borrowers who have avoided foreclosure, but only for now. While mediation can result in a loan modification, repayment or short sale, many more are likely to end in the bank taking the home away.

“Despite the motivation behind the act, its effect may not be as consumer-friendly as hoped,” said Roy L. Kaufman of Jackson & Campbell P.C., an authority on real estate and title matters. “If you stretch out the time that a homeowner is delinquent, missed payments accrue and it is harder to reinstate the mortgage.”

The foreclosure law, DISB noted, “effectively caused lenders to reevaluate and adapt their existing foreclosure processes or lack thereof.” Prior to its passage, the agency states, the foreclosure process in D.C. “was one of the fastest and most lenient in the country,” requiring only that lenders mail a single notice stating that the property would be sold in 30 days.

There were 2,074 foreclosures in D.C. between March 1, 2007, and Feb. 29, 2008.

Neibauer Michael (2014 February 20) Residential and commercial foreclosures tank in the District Retrieved on March 6, 2014 from BizJournals.com

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