UTA Lobbies Effectively Against Washington Loan Mod Bill

By Holly Chisa, Tower Ltd, UTA Washington Lobbyist

As we near the close of the Washington State legislative session on March 11, lobbyists for the UTA in Washington have successfully fought off three attempts to negatively impact the role of the trustee, and the process of foreclosure.

The most onerous bill, SB 6648, required financial institutions to participate in a mandatory mediation at least 30 days before the filing of the notice of sale.  The beneficiary was required to make a good faith review of a borrower’s financial situation, and offer a loan modification whenever possible.  Additionally, during the loan modification negotiations, if at any time the borrower failed to bring one piece of a long list of documents to that negotiation, the error was considered a defensible position against the foreclosure, and it could not move forward.

We were concerned about this bill for a number of reasons, not the least of which was the tremendous timeline this legislation would create within the foreclosure process.  As UTA members have seen in other states, requiring loan modifications and work-outs drag on the foreclosure process for months, and leave properties in limbo as beneficiaries and homeowners wait for their turn before a mediator, even if the home may end up in foreclosure anyway.  We argued that this delay would likely push a beneficiary into the judicial foreclosure process – more expensive for the beneficiary in the short-term, but in the long-run more expedient.  And those judicial foreclosures are far more damaging to the homeowner.

This bill did pass the Senate Labor, Commerce and Consumer Protection Committee, but was referred to the Senate Ways and Means Committee because of the cost of the bill.  The bill created a fee on the filing of the notice of sale to pay for more housing counselors and help defray the costs to different state agencies to pay for the program.  Through our lobbying efforts, we were able to kill the bill in that committee, and it did not move forward.

Additionally, there were two other bills of concern to the trustees which we continue to monitor.  HB 2623 and SB 6694 would have delayed the foreclosure on a home for up to one year when the homeowner was determined to be receiving unemployment.  The bill also expanded last year’s new notification requirements for homeowners in default from just homes purchased between 2003 and 2007 to all homes moving through the foreclosure process.  The bill was modified into a study, and now requires the Washington Housing Finance Commission to review the effectiveness of last year’s foreclosure laws.  They are to determine whether the contact requirements in that bill have increased the number of loan modifications, and whether other statutory provisions, like mandatory mediation, are needed.  The Senate budget includes funding for this study as well.  Should this pass, we will need to monitor the results of the study to determine whether the Legislature will try and move forward on mandatory arbitration in 2011.

We continue to monitor other legislation with generous titles that might give enough room to hang foreclosure language onto the bill.  Until the session ends, we will have to watch to make sure there are not efforts to modify the underlying foreclosure process in a method detrimental to trustees.