By Holly Chisa, HPC Advocacy, UTA Washington State Lobbyist

Lawmakers in Washington State face a significant challenge for the 2025 session – how to fund specific projects facing a budget deficit that could reach $15 billion.  This fiscal challenge is attributed to increased spending, with state expenditures rising from $33.6 billion in the 2013–2015 biennium to an anticipated $72 billion in 2025.  In response, Governor Bob Ferguson has proposed a budget that includes $4 billion in spending cuts, aiming to balance the budget while protecting essential services such as K-12 education, public safety, and the ferry system.

UTA is engaged on several bills that would increase costs to home buyers, including expansion of REET and several new filing fees.

Senate Bill 5686

Over the years lawmakers have struggled to find a long-term funding source for the FFA.  As we’ve discussed for over a decade, lawmakers have toggled between charging financial institutions fees based on the filing of notices of trustee sale and processing notices of default.  Currently most financial institutions are charged $250 per notice of default to fund the program. Neither system has generated the stable funding that lawmakers want for the health of the program.  The Foreclosure Fairness Act and mediation as a program has also grown exponentially, from $3 million for its initial launch in 2011 to over $14 million for the 2025-2027 biennium.  This growth has occurred even as foreclosures have dropped significantly over the years in Washington as our region benefits from a hot real estate market and more stable lending practices.

A decision has been made this year to create a different funding mechanism at a much higher dollar rate.  ESSB 5686 creates an $80 fee on certain loan originations to pay for the mediation program.  This would be the first time that homeowners specifically will be charged to pay for the Foreclosure Fairness Act.  The program was originally intended to be paid for by financial institutions to help homeowners meet with their lenders.  Now, other homebuyers will be charged to pay for the program.  The fee is expected to generate $17 million per biennium.  The bank charge per NOD will also remain in place.

Senate Bill 5686 aims to help owners in HOA and COA facing foreclosure by providing a structured mediation process for those entities.  The policy establishes a framework for housing counselors to work with borrowers and unit owners to resolve issues with beneficiaries or associations before formal foreclosure proceedings commence. The bill also requires housing counselors to negotiate in good faith within a 90-day period following initial contact from a beneficiary or association.  This will be the first time COA and HOA have been required to use the mediation program for foreclosures.

House Bill 1858

House Bill 1858 proposes to eliminate the current exemption for assignments or substitutions of previously recorded deeds of trust from the document recording fee and the Covenant Homeownership Program (CHP) assessment.  The exemption for assignments or substitutions of previously recorded deeds of trust is removed from the $183 housing and homelessness document recording surcharge, and from the $100 Covenant Homeownership Program assessment.  By closing this exemption, the bill aims to increase funding for housing and homelessness services, potentially generating an estimated $24 million annually for low-income housing initiatives in Washington State. Unfortunately, the bill would put costs on the front end for trustees, and they may not be able to get those costs back.  The fee is not opposed by financial institutions who believe that they would not be impacted because they use the MERS system.  Trustees will watch this bill because of the potential costs to the industry.

House Bill 1217

Finally, House Bill 1217 seeks to enhance housing stability for tenants governed by the Residential Landlord-Tenant Act and the Manufactured/Mobile Home Landlord-Tenant Act. Key provisions of the bill include:

• – Limiting rent and fee increases, with annual rent hikes capped at 7% and a requirement for landlords to provide a 90-day notice before any increase.
• – Establishing a landlord resource center to offer associated services.
• – Authorizing tenant lease termination under specified conditions.
• – Creating parity between different lease types.
• – Providing for enforcement by the Attorney General.

The bill has been worked by stakeholders to lessen the impact to property holders and managers while still offering some protections for renters.  There will be further negotiations on the bill as it moves to the Senate for additional testimony.  Republicans would like to see further changes to the bill including allowing for additional flexibility for fees to be charged by landlords. The Washington Legislature is scheduled to adjourn April 27.  These are just some of the many issues yet to be effectively resolved and much work to be done in the next five weeks.  Mid-March we will see the new revenue forecast.  This report will help lawmakers to determine what state budget costs will be for the upcoming biennium, and how much tax revenue they’ll have to cover those costs.  With adjournment only five or so weeks away, it is possible lawmakers will struggle with a final budget agreement and have to extend the session to try and resolve differences.