The D.C. Department of Insurance, Securities & Banking ("DISB") proposed new rules for governing residential mortgage foreclosures in an attempt to clarify legislation that affects the city's mortgage foreclosure process.
D.C. Council had made fundamental changes to the city's mortgage foreclosure process last year by adding (among other things) a requirement that lenders and borrowers make an attempt to mediate their disputes.
After the parties concluded their attempt to mediate, the lender was then entitled to record a "mediation certificate" and proceed to a foreclosure sale and enforce its rights under the deed of trust.
However, the requirement mandated by the "Saving D.C. Homes from Foreclosure Act of 2010," which the Council passed in an attempt to keep pace with reforms made by Maryland and other states, raised concerns among lenders and title insurers.
The raft of changes to the D.C. mortgage foreclosure law and rules thereunder opened a Pandora's Box of loopholes that increased the risk of clouded title for any property sold at, or even after, a foreclosure sale.
The aim of the new rules is to clarify the legal effect of recording a mediation certificate and make an amendment to the wording in the certificate.
Lenders and their allies have been clamoring for a change to the rules to state that recording a mediation certificate is prima facie evidence - that means presumptive validity - of all the procedural steps taken prior recording.
This change would prevent a borrower who participated in mediation and loss prevention from raising any objection to the conduct of this process after the foreclosure sale.
An aggrieved borrower could still raise objections, file a lawsuit, or take any other action to contest the lender's conduct during the process.
It will still take some initial stumbling through the maze of new rules by both lenders and borrowers to work out the kinks in the new procedure.
Hopefully, the new requirements will give borrowers increased opportunity to modify loans, and if modification isn't realistic, it will give title insurers, lenders and purchasers confidence that their title will be undisturbed.
About the author
Jack Reid is Of Counsel with the firm Tobin, O'Connor, Ewing and handles matters in the areas of real estate, probate and business law.