Authored By: DC Bar Antitrust and Consumer Law Section
Note: The following FAQs only apply to residential mortgage foreclosures in the District of Columbia. This information is not legal advice. For legal assistance, contract an attorney.
What is a mortgage foreclosure?
When a homeowner defaults on the terms of a mortgage agreement (usually by failing to pay), the lender may start a process to force a sale of the home at a foreclosure auction. The proceeds of the sale are then used to repay the loan.
How does foreclosure happen in D.C.?
Lenders can start a foreclose in one of two ways: 1) judicially—by filing a complaint in D.C. Superior Court seeking foreclosure, or 2) outside the court system—by issuing a Notice of Default and offering mediation through the D.C. Department of Insurance, Securities, and Banking (DISB) before issuing a notice of foreclosure.
The lender gets to choose which path to take in seeking foreclosure and when to start the foreclosure process.
How will I know if a lender is attempting to foreclose on my home?
If a lender has filed a court case against you, you will receive a stack of papers including an Initial Order that has your first court date, a Summons, and a Complaint. You will also receive a notice called “Important Notice for Defendants in Foreclosure Cases,” which explains how to get help from a housing counselor and/or a lawyer.
If a lender has decided to use the out-of-court process, you will receive a stack of papers in the mail talking about your right to go to mediation through a program run by the D.C. Department of Insurance, Securities and Banking (DISB). The papers will include a Notice of Default, which will provide you with details about how much the lender believes you owe on your mortgage and what you need to do to participate in mediation with your lender. The paperwork will also contain information about how to get help from a housing counseling and/or a lawyer.
What should I do if I receive a Complaint and Summons?
- Come to Court: The Initial Order you receive along with the Complaint and Summons will tell you when to appear in court. (Look for the “Initial Conference” date, located in the bottom left corner of the Initial Order.) It is very important that you appear at the date and time listed for the initial conference date on the Initial Order.
- File an Answer: Court rules require you to file an Answer to the Complaint within 20 days of receiving the Complaint. If for some reason you miss your Answer deadline, you should still come to court.
What to Expect On Your First Court Date:
When your case is called, you will appear before a judge. The judge will ask if you would like a chance to try to work things out with your lender. If so, the judge will likely put your case on a special “early mediation” schedule.
The early mediation schedule will include a number of court dates and document deadlines for you and the lender. One of your first responsibilities will be to complete a loss mitigation application, which allows the lender to see if you qualify for a loan modification or other alternative to foreclosure (such as a short sale or deed-in-lieu of foreclosure). You will need to provide detailed financial information and supporting documents.
Housing counselors and lawyers are available in the courtroom and may be able to provide free assistance if you do not already have a housing counselor and/or a lawyer helping you with your case.
What to Expect From the Rest of the Court Process:
If you go to early mediation, the homeowner, lender, and a neutral mediator from D.C. Court’s Multi-Door Dispute Resolution Division will sit down and see whether you can reach an agreement in your case. If you submitted a loss mitigation application, your lender should be able to discuss whether a loan modification or other alternative to foreclosure is available to you.
If early mediation is unsuccessful or you do not go to early mediation, you will be given a scheduling order that includes deadlines to complete discovery and file motions. If you have legal defenses to the foreclosure, you must raise them. If you do not have legal defenses, the lender will be able to get a judgment against you. A judgment allows the lender to go forward with a foreclosure sale
What should I do if I receive a Notice of Default?
If you receive a Notice of Default and paperwork talking about the DISB mediation program, you must do three things in order to participate in mediation with your lender:
- Complete the Mediation Election Form
- Complete the Loss Mitigation Application
- Pay $50 fee
Follow the instructions in your paperwork carefully to fill out the necessary forms, send them to the proper parties, and pay the $50 fee to the D.C. Department of Insurance, Securities and Banking (DISB). The $50 fee is the only fee that you will have to pay to participate in mediation.
You must return these forms and send in the fee by the deadline stated in the Notice of Default. If you don’t do these things by the deadline, you may lose your chance to participate in mediation, and the lender may be able to proceed with foreclosure.
What to Expect at DISB Mediation:
At mediation, the homeowner, the lender, and a neutral third-party mediator will sit down and discuss whether an agreement can be reached to avoid foreclosure, such as whether the homeowner qualifies for a loan modification. More information about the DISB mediation program is available at: http://disb.dc.gov/page/information-homeowners-foreclosure-mediation-program-fmp or by calling 202-727-8000
What If DISB Mediation Doesn’t Work?
If you and your lender are unable to reach an agreement at mediation, DISB may issue a mediation certificate—a document that the lender needs to proceed with foreclosure. The lender will then send you a Notice of Intention to Foreclose with the actual date and time of the foreclosure sale. This notice must be sent at least 30 days before the auction.
Do I need an attorney if I am facing foreclosure?
You are not required to have an attorney, but it is almost always better to have an attorney, especially if you have a court case. At a minimum, you may want to consult with an attorney about what options are available to you.
If you have a judicial foreclosure case, attorneys and housing counselors are available in the courtroom to help answer questions you may have. They may also be able to provide free assistance with your case. If you are participating in DISB mediation, you can bring a lawyer or other representative with you to mediation.
Can I get a lawyer for free?
If you are a low-income homeowner, a lawyer may be able to assist you for free. To apply for free legal assistance, call:
- Legal Aid Society of the District of Columbia: 202-628-1161
AARP Legal Counsel for the Elderly: 202-434-2120 (age 60 and over)
What can I do to anticipate and avoid mortgage foreclosure problems?
If you are facing financial trouble, look closely at what you owe and what you earn, and try to eliminate unnecessary spending. Meet with a housing counselor if you are still having trouble paying your mortgage. Call the District’s Foreclosure Prevention Hotline at (202) 265-CALL (2255) or click here to search for HUD-approved housing counselors.
I've reviewed my finances and cut my budget, but I still can't make the mortgage payments on my home. What should I do?
Contact your lender as soon as you have a problem. Lenders may have workout options to help you keep your home. The longer you are behind, the fewer options are available.
You can find out how to contact your lender by looking on your monthly mortgage billing statement or your payment coupon book.
When you call your lender, you want to be able to inform your lender about the details of your loan and information about your income and expenses. Have this information ready:
- Your loan account number;
- A brief explanation of your circumstances and problems;
- Recent income documents, such as pay stubs, benefit statements from Social Security, Disability, Unemployment, Retirement, or Public Assistance. If you are self-employed, have your tax returns or a year-to-date profit and loss statement available for reference; and
- A list of your household and other expenses.
** Expect to have more than one phone conversation with your lender. Usually, your lender will mail you a "loan workout" package. This package contains information, forms, and instructions. If you want to be considered for a workout program, you must complete the forms and return them to your lender quickly. The completed package will be reviewed before the lender talks about a solution with you.
A housing counselor can help you prepare your loan workout package. Call the District’s Foreclosure Prevention Hotline at (202) 265-CALL (2255) or click here to search for HUD-approved housing counselors.
What options are available to save my home from foreclosure?
If you find that you are unable to keep your mortgage payments current, there may be a program available to fit your particular situation. Check with your lender to find out what options are available. Some potential options may include:
- Reinstatement: Your lender likely will want to discuss accepting the total amount owed in a lump sum by a specific date.
- Forbearance: Your lender may allow you to arrange for a reduction or suspension of payments for a short period of time after which another option must be agreed upon to bring your loan current. This option is often combined with a Reinstatement when you know you will have a source of funds to bring the account current by a certain date.
- Repayment Plan: You may be able to work out an agreement where you would resume making your regular monthly payments, in addition to a portion of the past due payments each month until you are caught up.
- Loan Modification: If you can make payments on your loan, but you do not have enough money to bring your account current or you cannot afford the total amount of your current payment, your lender may be able to lower the monthly amount you pay by adding your missed payments to the existing loan balance and then making changes to your loan terms, like lowering your interest rate and extending your loan term.
What if I cannot afford to keep my home?
You may have to think about selling your home. You should give this serious thought if you have equity in your home (meaning that the value of the home is greater than the amount owed on your mortgage and any other liens on the property). If you cannot afford to keep your home, selling it before a foreclosure is the best way to get your equity out and get a fresh start.
If the property's sale value is not enough to pay off the loan in full, you can find out if your lender will approve a “short sale” – a transaction in which the lender agrees to accept less than the full amount owed on the loan. Find out if your lender will forgive any balance on the loan that you may owe after the sale.
Another option for letting go of your property may be a “deed-in-lieu” of foreclosure, in which your lender may agree to take ownership of your property in satisfaction of your loan.
Any transaction that results in the transfer of your property may have tax consequences. You should consult with a tax professional.