The Foreclosure Process in Washington, D.C.
In Washington, D.C., foreclosure is a non-judicial process. A notice of foreclosure sale must be sent to the homeowner and to the D.C. Recorder of Deeds.
NeighborhoodInfo DC has been using data from D.C. government administrative records to track the incidence and concentration of the foreclosure problem in city's wards and neighborhoods. The most recent data that we have analyzed show that the national foreclosure crisis has not spared households in the District of Columbia. Although the intensity of the foreclosure problem is not as severe as in other parts of the region, the nation's capital has seen a marked and steady increase in foreclosures since the beginning of the housing market downturn.
A foreclosure is a legal proceeding that ends an owner's rights to a property that was used to secure a mortgage loan. The foreclosure process is initiated by the mortgage lender, or someone legally authorized to act on the lender's behalf, when an owner falls behind on mortgage payments and the lender determines that there is no other recourse for recovering the mortgage debt. The steps in carrying out a foreclosure, and the specific options for the owner to avoid foreclosure, are largely determined by local laws and regulations that govern the process.
In the District of Columbia, foreclosure is a non-judicial process, which means that foreclosure is usually accomplished without use of the courts or without any judicial review or oversight. In the event of a mortgage delinquency, normally the lender or loan servicer will make several attempts to reach the borrower requesting that the overdue payments be made. If the loan continues to remain past due, then the lender or servicer may begin a foreclosure process to sell the property and attempt to recover unpaid loan amounts and other costs. Most lenders or servicers will wait until a borrower is 90 days late or more on mortgage payments before initiating foreclosure proceedings. In the District of Columbia, however, there does not seem to be any legal restriction on when the foreclosure process can be started against a delinquent borrower.
To initiate a foreclosure against a homeowner, the lender, or the lender's agent, must send a notice of foreclosure sale, by certified mail, return receipt requested, to the property owner at the owner's last known address. A copy of this notice must also be sent to the D.C. Recorder of Deeds. The notice of foreclosure sale must include the following information:
- The names and addresses of all property owners.
- The date, time, and place of the foreclosure sale.
- The address and a description of the property.
- The amount of the balance owed on the loan, and the minimum amount required to cure the default obligation and avoid the foreclosure.
- The name and contact information for the person to contact to stop the foreclosure sale.
The foreclosure sale may not take place less than 30 days after the notice has been received by the Recorder of Deeds.
In the event that a notice of foreclosure sale has been issued against a District of Columbia property owner, there are several outcomes that can take place:
- The property owner can pay the minimum amount required to cure the loan default, and thus stop the foreclosure. The amount required to cure foreclosure is specified under D.C. law (DC ST § 42-815.01), and may include late fees, attorney fees, foreclosure costs, and all accruals. D.C. law specifies that a borrower may only cure a default on a mortgage to avoid foreclosure up to five business days prior to the date of the sale and only one time in any two consecutive calendar years.
- The property owner can try to reach an accommodation with the lender, such as negotiating a forbearance agreement or a loan modification (such as reducing the principal owed on the loan or lowering the loan's interest rate), which will allow the owner to remain in the home and continue to make loan payments to the existing lender.
- The property owner can attempt to refinance the property with a new, more affordable mortgage with the same or a different lender.
- The property owner can attempt to sell the property to try to recover proceeds to satisfy the debt obligation. If the sale price is more than the amount currently owed on the mortgage, then the sale proceeds can be used to pay off the mortgage in its entirety. If the price is less than what is owed, however, the owner must either come up with the remaining funds from another source or else try to convince the lender to accept a short sale. In a short sale, lender agrees to accept the proceeds of the sale even though they are less than the total amount owed. The homeowner will walk away from a short sale having lost the home but, in most cases, without any outstanding debt. If, however, the lender refuses to forgive the outstanding amount owed, the owner may still be encumbered by debt after a short sale.
- Another alternative is for the lender to accept a deed in lieu of foreclosure. In this case, the owner turns the home over to the lender who agrees to accept it instead of going through a foreclosure. As with a short sale, the owner may be able to walk away without any outstanding debt, but the lender may also choose not to forgive the full loan balance if the home cannot be sold to cover the entire amount owed.
- Finally, the foreclosure sale can go through as specified in the notice. In the District of Columbia, this is accomplished through a trustee's deed sale. In most cases, a new owner will acquire the property at the foreclosure sale. In some circumstances, however, no new owner will be willing to buy the property at an acceptable price, in which case the property reverts to the lender. This is referred to as a real estate owned (REO) property.
Last Updated: 10/28/2009