By Holly Chisa, HPC Advocacy, UTA Washington State Lobbyist

December is the common time for UTA to see legislative proposals for the upcoming session.  Some of the 2023 legislative proposals were rolled out at a stakeholder meeting for negotiation and discussion prior to session.  Here are some of the proposals we expect to discuss during the 2023 session.

As expected, the Washington Department of Commerce (DOC) is asking for an extension of the exemption passed in 2022 to address the continued low numbers of foreclosures in Washington state.  UTA Members may recall that the Legislature in 2022 chose to suspend the requirement that financial institutions have 250 or more NOTS in the previous calendar year to be exempt from mediation.  There was concern that the national moratorium on most foreclosures would allow financial institutions to apply for an exemption from mediation based on the number of NOTS recorded.  As the moratorium spilled into 2022, DOC is asking that the exemption be extended again to require financial institutions participate in mediation even if their NOTS numbers are unusually low.

DOC is also asking for an extension of the exemption for paying fees based on the previous calendar year for similar reasons.  Under current WA law, any financial institution with less than 50 NOTS is exempt from paying for the foreclosure mediation program.  Under DOC’s proposed language, this threshold would be suspended again for 2022 foreclosures to require financial institutions to pay for the FFA program in 2023 even if they had less than 50 NOTS in 2022.

One proposal from advocate groups would expand the duty of good faith required by the trustee in RCW 61.24.010 to include any successors in interest of a deceased borrower.  Current law only requires the duty of good faith to be applied to the borrower, beneficiary, and grantor.  This is a significant expansion of the duty of good faith and opens significant liability for the trustee.  The proposed language also doesn’t address the issue of an age floor for successors in interest, so trustees would remain obligated to send documents and have the added duty of good faith for minors and children even of young age.  While there may be room to adjust the language to make it less expansive, the advocates need to clearly identify what the problem is they want to solve before this bill moves forward.

Two proposals are hold-overs from the 2022 legislative session.  They were discussed but the bills weren’t introduced.

One proposal would prohibit the delivery of the trustee’s deed to the purchaser at a foreclosure sale until 11 days after the sale.  This is, again, one of those legislative proposals where it’s unclear what problem needs to be fixed.  There are few anecdotal stories of fights over getting a trustee’s deed back after the sale, and even fewer examples of problems that have arisen that would justify changing existing law.  Unless it is proven that this law change is necessary, it’s unlikely this bill will move forward.

The second, familiar bill would change the timeline for referral to mediation from 20 to 25 days after the NOD has been issued.  Additionally, the word “recorded” is removed and replaced with the words “transmitted pursuant to RCW 61.24.040(1)(b)(i).”  This section of the statute references the mailing of the NOD rather than the date that the NOD is issued.  In sum, the bill would require that a borrower could elect mediation 25 days after the NOD is mailed to the borrower, not 20 days after the NOD is issued under current law.  The advocates have a reasonable argument here, but the bill needs clarification.  Having mediation determined by the mailing date creates a number of logistical issues for all the parties, including DOC.  Commerce would have to verify the postmarks of mailings to know if a borrower were electing mediation within the allotted window as opposed to verifying the issuance of the NOD – a document they already have.  It would be more reasonable to instead extend the window of time an individual can elect mediation to compensate for slow delivery times, shipping delays, etc., than to change the verifiable date certain to a postmark.  It’s likely this bill will move, but there will need to be negotiations to reach agreement.

There is also proposed legislation to address applications within the Homeowners Assistance Fund (HAF).  Trustees would be required to continue a sale for a period of at least 60 days if a borrower applies for HAF under proposed legislation.  The bill would require that the 60 days be added to the 120 days in current statute.  Specifically, there needs to be clarity on what constitutes “acceptance” into the HAF program – confirmation from the HAF program, DOC confirmation? – and how the 60 days fits into the underlying 120 days.  The bill as drafted raises issues that are reasonably addressed but, again, will need negotiation to work the details.

Additionally, we may see legislation to address foreclosures by HOAs and COAs.  Currently these parties are not required to participate in mediation even though they have the authority to foreclose.  There was much discussion to exempt them back in 2008-2010 when the FFA was established and modified, but now that we have over a decade under our belt, it’s time to revisit this issue.  Including an HOA/COA in the mediation program is challenging – specifically because the Legislature would have to determine how to charge an HOA/COA to pay for their inclusion in the program.  The current formula used to charge financial institutions based on their number of NOTS wouldn’t be viable for HOA/COA foreclosures.  There is no policy draft on this issue at the time of this writing but we expect to see something during the session.

As always, there will likely be discussion of funding for the Foreclosure Fairness Act as well.  There are ongoing impacts to the low number of foreclosures being processed which impact the funding for the FFA.  We have these discussions annually and will continue to debate which financial institutions should be included and which should be exempt, as well as what should be charged to pay for the FFA.

The United Trustees Association will continue to monitor legislation in Washington as these and other legislative proposals are discussed.  The Washington Legislature continues its trend of continued changes to the Foreclosure Fairness Act and mediation year to year, and UTA continues its work of discussion and negotiation to ensure these changes are appropriate and workable.