It's no secret that Lenders, Loan Servicers and Foreclosure Mills have used Washington's Non-Judical Foreclosure laws to prematurely foreclose on thousands of distressed Washington State home owners.
In too many cases, Lenders, or their assigned Servicer, have auctioned homes without taking the time to provide homeowners a face-to-face meeting with the lender to discuss foreclosure mitigation options, including modification, as provided by state law.
In too many cases, Lenders, or their assigned Servicer, have auctioned homes without taking the time to provide homeowners a face-to-face meeting with the lender to discuss foreclosure mitigation options, including modification, as provided by state law.
HB 1362 seeks to provide a process to ensure that homeowners are protected from unnecessary foreclosures. But this bill does nothing to provide relief for homeowners who have already been taken advantage of by lenders, predatory servicers and the hordes of real estate investors who are willing to overlook federal and state statutes, not to mention basic "business ethics" to secure a smoking hot real estate deal at the distressed homeowner's expense. Who makes money on these foreclosures? Well, it goes without saying, the real estate investors, who pick houses up at a fraction of their real value just to turn around and sell them for a big profit. And, of course there is the servicer, who only makes money if it auctions off the home. Who is left in the lurch? The homeowner, who loses every penny of equity that was in the home after years of making regular payments.
Hence, HB 1768 has been introduced, which requires County Auditor's to collect a fee to provide funding for very low income residents and displaced homeowners, now referred to as "the homeless."
Hence, HB 1768 has been introduced, which requires County Auditor's to collect a fee to provide funding for very low income residents and displaced homeowners, now referred to as "the homeless."
HB 1362 Addressing Home Owner Foreclosures
Companion Bill SB 5275
Title: An act relating to protecting and assisting homeowners from unnecessary foreclosures.
Sponsors: Representatives Orwall, Hope, Rolfes, Moeller, Liias, Probst, Green, Darneille, Frockt, Kirby, Miloscia, Roberts, Hunt, Dickerson, Upthegrove, Fitzgibbon, Kagi, Eddy, Hasegawa, Pettigrew, Ormsby, Sells, Kenney, Cody, Hudgins, Lytton, Moscoso, Ryu, Appleton, Reykdal, Van De Wege, Carlyle, Dunshee, Santos, McCoy, Tharinger, Haigh, Goodman, Jinkins, Jacks, Takko, Sullivan, Blake, Seaquist, Billig, Stanford, Ladenburg, Finn and Pedersen.
Brief Summary of Bill
ŸAmends the "meet and confer" requirement to, among other things, repeal the
expiration date and make it applicable to all deeds of trust for owner-occupied
residential real property.
Establishes procedures for foreclosure mediation, if the borrower elects mediation.
Makes it a Consumer Protection Act violation if a beneficiary fails to comply with the "meet and confer" and mediation provisions.
Requires the county auditor to impose a $30 surcharge when a notice of trustee sale on owner-occupied residential real property is recorded.
Makes other changes to the deeds of trust statutes.
Hearing Date: 1/26/11
Staff: Trudes Tango (786-7384).
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This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.
House Bill Analysis - 1 - HB 1362
Background:
Foreclosure Process for Deeds of Trust.
Unlike a mortgage, which requires judicial foreclosure, a deed of trust may be nonjudicially foreclosed if the borrower defaults on the loan obligation. The deeds of trust act establishes procedures for foreclosure and imposes certain requirements on beneficiaries and trustees.
To foreclose on a deed of trust, the beneficiary or trustee must send a notice of default to the borrower. After 30 days from when the notice of default is sent, the trustee may record a notice of foreclosure sale. The notice of sale is recorded in the county auditor's office. The foreclosure sale may not occur until after 90 days from the time the notice of foreclosure sale is recorded,
and may not occur until at least 190 days from the date of default. Within that time frame, the borrower may cure the default and discontinue the sale. The trustee's sale is automatically stayed if the borrower files for bankruptcy. The trustee also has authority to continue a sale for up to 120 days for any cause the trustee deems advantageous.
In 2008, the Legislature enacted Engrossed Senate Bill 5810 which, among other things, requires a beneficiary to contact a borrower before issuing a notice of default in order to assess the borrower's financial situation. The contact must be by telephone and letter. The beneficiary must give the borrower information for housing counseling agencies and must inform the
borrower that he or she can request a subsequent meeting with the beneficiary to explore options for the borrower to avoid foreclosure. This requirement is referred to as the "meet and confer" requirement. The "meet and confer" requirement applies to deeds of trust made from January 1, 2003 to December 31, 2007 on owner-occupied residential property and expires on December 31, 2012.
Summary of Bill:
Numerous changes are made to the deeds of trust foreclosure process.
Meet and Confer. The "meet and confer" provision is amended to: (1) require that the subsequent meeting, if requested by the borrower, be in person unless the borrower waives the requirement to meet in person; (2) make the "meet and confer" requirement applicable to all deeds of trust (not just
deeds made from 2003 to 2007); and (3) repeal the expiration date of the "meet and confer" requirement.
Mediation.
A procedure is added for foreclosure mediation if the borrower elects mediation. The mediation provision applies to deeds of trust on owner-occupied residential property. It does not apply to community banks and credit unions.
Anytime after the notice of default is sent but before a notice of sale is recorded, the beneficiary must conduct a good faith review of the borrower's financial situation and offer a loan modification or other option if the borrower is eligible. A good faith review means that the beneficiary: (1) evaluates the borrower's eligibility for all loan modification programs; and (2) participates in foreclosure mediation, if the borrower elects mediation. If the beneficiary fails to conduct a good faith review, it is a defense to foreclosure.
House Bill Analysis - 2 - HB 1362
Before recording a notice of sale, the trustee or beneficiary must provide a notice to the borrower and to the Department of Commerce (DOC) with certain information, including: (1) contact information for a person with authority to negotiate a loan modification; (2) contact information for housing counseling agencies; and (3) a form notice explaining the availability of the mediation program. This is in addition to the information the beneficiary must provide for the “meet and confer” process. The form notice, created by the DOC, must contain an option for the borrower to elect or waive mediation and must encourage the borrower to meet with a counselor or attorney before mediation. The borrower must return the form to the DOC within 30 days or the borrower
waives mediation.
If the borrower elects mediation, the DOC must select a mediator and notify the parties. The foreclosure mediator must convene an in-person mediation session within 45 days after receiving a referral from the DOC, unless the parties agree in writing to extend the time.
Provisions are established to address when the mediator must send the parties notice of the mediation session, what documents and calculations the parties must provide to the mediator, and what factors the parties must consider during mediation. Parties in mediation have the duty to act in good faith. Sharing information, negotiating willingly, cooperating with the mediator and keeping agreements are indications of good faith. A violation of the duty to act in good faith can include, but are not limited to, the failure to timely
participate in mediation without good cause, the failure of either party to provide certain information to the other party, and the failure of the beneficiary to agree to a modification when the net present value of a modified loan exceeds the anticipated net recovery at foreclosure. The mediator must certify to the DOC the outcome of mediation and whether the parties acted in
good faith. Provisions are established regarding the mediator's fees. The DOC must maintain a list of approved foreclosure mediators and the DOC may establish a training program for mediators.
The DOC must make annual reports to the legislature on the results of the mediation program.
A foreclosure sale cannot occur less than 60 days from the date the mediator submits a written certification to the DOC, if the borrower elected foreclosure mediation.
Consumer Protection Act.
It is a Consumer Protection Act violation for any person to violate the duty of good faith in the mediation requirement or for failing to comply with the “meet and confer” requirement.
County Auditor Surcharge.
The county auditor must impose a $30 surcharge when a notice of trustee’s sale on owner occupied residential real property is recorded. The county may keep up to 2 percent of the fee collected, with the remaining funds going to the DOC to be used to fund housing counselors. The DOC may enter an interagency agreement with the Washington State Housing Finance Commission to administer the funds.
House Bill Analysis - 3 - HB 1362
Servicer's Duty.
A servicer's duty to maximize net present value under a pooling and servicing agreement is a duty that is owed to all parties in a deed of trust pool, not to a particular party, and the servicer acts in the best interests of all parties if it agrees to a modification where the anticipated recovery under a modification is more than the anticipated recovery through foreclosure. The beneficiary
must offer a borrower a modification unless the beneficiary produces evidence showing that the modification is prohibited by express terms of a pooling and service agreement and those terms cannot be waived.
Real Estate Excise Tax.
If a deed in lieu for foreclosure transaction includes providing the transferor with a nominal sum of funds to assist the transferor with relocating, the transfer is not considered a sale for the purposes of the real estate excise tax.
Appropriation: None.
Fiscal Note: Available.
Effective Date: The bill takes effect 90 days after adjournment of the session in which the bill is
passed.
House
HB 1768 Concerning a surcharge for very low income and homeless housing assistance
Sponsors: Representatives Kenney, Upthegrove, Santos, Dickerson, Kagi, Hasegawa, Van De
Wege, Pedersen and Tharinger.
Brief Summary of Bill
ŸDirects county auditors to assess a surcharge of $48 when recording an assignment or substitution of a previously recorded deed of trust.
Requires collected fees to be used for specific affordable housing and homelessness purposes.
Hearing Date: 2/10/11
Staff: Jennifer Thornton (786-7147).
Background:
Duties and Authority of County Auditors.
The county auditor is responsible for the recording of specified documents required by law to be
maintained as part of the public record kept by a county. The documents that must be recorded
by a county auditor include judgments, liens, deeds, mortgages, and many other categories of
documents pertaining to property ownership and real estate transactions.
State law specifies requirements that must be met by an auditor when exercising his or her
recording duties, including the collection of specified fees when a document is recorded. These
fees include certain surcharges used for the funding of state and local programs to provide
affordable housing for low-income persons and housing assistance for the homeless.
––––––––––––––––––––––
This analysis was prepared by non-partisan legislative staff for the use of legislative
members in their deliberations. This analysis is not a part of the legislation nor does it
constitute a statement of legislative intent.
House Bill Analysis - 1 - HB 1768
Assignments and Substitutions of Previously Recorded Deeds of Trust.
An assignment of a deed of trust occurs when a loan used to buy a home is transferred from one
lender to another. It is assigned to transfer debt or sell the loan. Lenders frequently sell
mortgages to other lenders.
When a deed of trust is recorded it names a trustor (borrower), the beneficiary (lender), and the
trustee. A substitution of trustee of a deed of trust is a legal document filed when a successor
trustee takes the place of a previous trustee. Among other reasons for appointing a substitute
trustee, one is generally appointed when a property needs to be foreclosed.
Assignments and substitutions of previously recorded deeds of trust are exempted from the $48
in surcharges collected by county auditors for affordable housing and homelessness programs.
Summary of Bill:
County auditors are directed to assess a surcharge of $48 when recording an assignment or
substitution of a previously recorded deed of trust.
County auditors must distribute the fees to be used for the following purposes:
ŸRetain 2 percent for collection of the fee;
Remit 49 percent to the State Treasurer for deposit in the Affordable Housing for All
Account to be used by the Department of Commerce to support building operation and
maintenance costs of specified types of housing projects or units within housing projects; and
Remit 49 percent to the State Treasurer for deposit in the Home Security Fund Account to
be used by the Department of Commerce to provide housing and shelter for people who
are homeless and fund the Homeless Housing Grant program.
Appropriation: None.
Fiscal Note: Requested on February 1, 2011.
Effective Date: The bill takes effect 90 days after adjournment of the session in which the bill is
passed.
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