Uptick in Washington foreclosure filings as rate drops nationally

Even as the rate of foreclosures starts to drop nationwide, the number of November foreclosure filings in the Seattle area rose nearly 21 percent from October, according to RealtyTrac. However, Washington still has a slightly lower foreclosure rate than the national average.

As foreclosures continue to wind through the courts, the highest court in the state recently weighed in on whether a company that has foreclosed on millions of mortgages can be sued for fraud. The court held that consumers can seek damages from Mortgage Electronic Registration Systems (MERS) if they can show they were harmed.

Flaws with the database

Banks set up MERS in the early 1990s to speed up the mortgage securitization process. After processing a new mortgage at a local branch, the bank would place MERS' name on a deed and avoid filing paperwork with a local recorder of deeds each time the mortgage changed hands. Any change of ownership was noted through the MERS system. Once the foreclosure crisis hit, however, flaws were found in the database.

The homeowners who brought the case argued that the MERS system made it impossible to find out who owned their loan. The Washington Supreme Court found MERS' business practices had the "capacity to deceive" much of the public. This could easily happen when a consumer thought that MERS was the beneficiary of the mortgage when in fact it did not itself hold any interest in the mortgage. Banks have now stopped using MERS' name to foreclose on homes.

In a case with MERS involvement there may be remedies available for borrowers. Consulting an experienced Washington foreclosure attorney is one way to understand how and if the recent case holding might affect your unique situation.

Another way to seek relief from foreclosure is through a Chapter 13 bankruptcy.

Relief through bankruptcy

Filing for Chapter 13 bankruptcy relief before a sheriff's sale will halt the foreclosure process. Borrowers can reorganize their debts through a five-year payment plan. This allows time to pay mortgage arrears and may even remove a second mortgage on an underwater loan. The flexibility offered through a bankruptcy filing may allow the borrower to keep his or her home.

If there becomes a point when payments cannot be made through the Chapter 13 plan, it is possible to convert to a Chapter 7 and discharge remaining debt. In some cases, this may also include the deficiency balance caused by a short sale or foreclosure.

Timing is very important in any foreclosure action. A local bankruptcy lawyer can answer questions you might have about the bankruptcy filing process. After discussing your individual circumstances, an attorney can also advise whether Chapter 13 may provide you with an option to stay in your home.