Before starting a foreclosure in the District of Columbia, a lender must wait until the 120-day waiting period required by federal law expires. Afterward, the lender can foreclose by filing a lawsuit in court (judicial foreclosure) or by using a nonjudicial process that allows a lender to sell a house after taking steps outlined in the law. In the past, most lenders would choose the less expensive nonjudicial route. Now, because of the additional homeowner rights available only in a nonjudicial process—such as the foreclosure mediation program (discussed below)—it’s just as likely that you could face a judicial foreclosure. In this article, you’ll learn about both procedures, as well as about options that might help you avoid foreclosure.
(For a foreclosure overview, see Foreclosure and Your Home: Understanding the Process, Your Rights, and Your Options.)
Payment Must Be Delinquent by 120 Days
Homeowners who don’t make their mortgage payments will eventually lose their home through the foreclosure process. But it doesn’t happen right away.
The entity responsible for your loan—either the owner of the loan or the mortgage servicer (the company that collects your payment)—must wait until your payment is more than 120 days late before starting the foreclosure. This waiting period gives the homeowner sufficient time to submit a “loss mitigation” application asking the lender to consider a foreclosure alternative, such as a loan modification. If the homeowner does not apply for loss mitigation, the foreclosure can begin after the 120-day period elapses. If the owner completes an application, the lender cannot start the foreclosure until it evaluates the paperwork.
(Learn details about the federal waiting period in Delaying Foreclosure: The Dodd-Frank Act 120-Day Rule.)
District of Columbia Foreclosure Processes
In the District of Columbia, the foreclosing lender has two foreclosure options: a judicial foreclosure or a nonjudicial foreclosure.
Judicial foreclosure. The foreclosing bank files a lawsuit in court and serves you with a copy. If you don’t respond, you will automatically lose the case. By contrast, if you want to raise a defense, you must file an answer with the court. The case will likely proceed to trial, and, if the lender wins, the court will enter a judgment of foreclosure, allow the lender to sell the home, and apply the proceeds to the debt.
Nonjudicial foreclosure. The lender must follow certain procedures detailed in the District of Columbia law. After completing the steps, the lender can sell the home at a foreclosure sale without first receiving court approval.
(Do you want to learn more about both types of foreclosure? Read What Are the Differences Between Judicial and Nonjudicial Foreclosures?)
Nonjudicial Foreclosure Steps
If the lender chooses nonjudicial foreclosure, the homeowner is entitled to several notices about the process. The homeowner has an additional right to participate in an alternative dispute resolution process, called mediation, that might help the owner avoid foreclosure.
Notice of the default. First, the lender must mail a notice of default to the borrower that includes the amount required to reinstate the loan (bring it current). A borrower who cannot afford to catch up on the loan can participate in mediation.
Foreclosure mediation. The lender must send information about the District of Columbia foreclosure mediation program along with the notice of default. The homeowner, lender, and a neutral third party (the mediator) meet face-to-face and discuss whether the owner qualifies for a foreclosure avoidance program. To opt into the program, you must follow the instructions included with the notice of default. You’ll start by returning the mediation election form no later than 30 days after the date the lender mailed the notice of default. An additional benefit of the mediation process is the foreclosure must stop until it’s complete.
Notice of the intention to foreclose. If the homeowner and lender cannot work out a way to avoid foreclosure, it will officially start when the bank sends a written notice of the intention to foreclose to the borrower. This notice must state when the sale will take place. The lender must send a copy of the notice to the mayor at least 30 days before the sale, as well.
Public notice of the sale. The mortgage or deed of trust will outline any public notice requirements. Usually, a deed of trust will require the trustee (the third party who administers the nonjudicial foreclosure) to advertise the sale publically in a newspaper.
Stopping Foreclosure by Reinstating the Loan
A homeowner in foreclosure can “reinstate” the defaulted loan by paying all missed payments plus outstanding fees and costs. In the District of Columbia, you can reinstate up to five business days before the foreclosure sale. You can’t reinstate more than one time in any two consecutive calendar years, however.
No Right to Redeem After the Sale
Some states allow the homeowner to redeem (buy back) the home after the foreclosure. In the District of Columbia, the homeowner does not have the right to redeem the property following the foreclosure sale.
Deficiency Judgments After Foreclosure
If the house sells for less than the amount owed at the foreclosure sale, the difference is a “deficiency balance.” In the District of Columbia, the lender can get a “deficiency judgment” against a foreclosed homeowner by filing a separate lawsuit following a nonjudicial foreclosure or as part of the judicial action. The judgment allows the creditor to employ various collection techniques to collect the balance, such as a bank levy (the bank hands over money from your account) or a wage garnishment (your employer takes money out of your paycheck).
Finding the District of Columbia’s Foreclosure Laws
You can review the District of Columbia’s nonjudicial foreclosure laws in the District of Columbia Code (sections 42-815 through 42-816).
Questions for Your Attorney
- What are the advantages of participating in foreclosure mediation?
- Can I avoid foreclosure another way?
- Should I file for bankruptcy if the lender gets a deficiency judgment against me?