Holly Chisa, UTA Washington State Lobbyist, HPC Advocacy

Bumpy Start to the Washington Session Ends in a Trustees Study During Interim

 By Holly Chisa, UTA Washington State Lobbyist, HPC Advocacy

Back in the fall of 2021 during the United Trustees Association Conference, I shared with you the broad list of issues advocates had raised as “concerns” by housing groups.  This included:

1. Licensing and regulation of trustees as they are paid for by the beneficiary and thus biased toward beneficiary;
2. Mediations should require presence of same rep. from bene at all meetings;
3. The Notice of Default should expire;
4. The Beneficiary Declaration should have to be signed by someone employed directly by the Beneficiary;
5. The Statute of Limitations should apply to non-judicial foreclosure;
6. Changes to the Deceased borrower process – contacting those under age 16, mailing requirements;
7. All loan modifications should have to be recorded;
8. We need to “deal” with the NPV issue;
9. The Trustee’s Deed should not be allowed to be issued until 11 days after the sale;
10. The trustee should be required to “timely” deposit surplus funds;
11. The local contact (required physical presence in WA) for the trustee must know everything about the individual foreclosure when someone calls.

And while surplus funds was on this list, they rejected legislation drafted by UTA members to restructure the disbursement of funds asking instead to address that issue during the interim of 2022.

We did receive proposals from the above list in mid-December.  The first would change the timeline for when a trustee’s sale is considered final.  Under current law, the sale is final when the bid is accepted as long as the trustee’s deed is recorded within 15 days post sale.  Under this new proposal, the sale would be final after 11 days from the trustee’s sale.  The trustee’s deed would be filed between days 12 and 15 post sale.  Those who support the change argue that the eleven days are needed to ensure that the sale is proper and there are no reasons to declare the sale void.  They argue that it’s difficult to unwind the sale even when a defect has been found since the sale is considered final when the bid is accepted.  However, current law already allows for trustees to void the sale for a variety of issues, when it learns of information not revealed prior to the sale, and other valid reasons.  The advocates were unclear what the problem is they’re trying to solve, and we’ve asked for tangible reasons why we need an additional eleven day hold before the sale is considered final.  Tightening the window for recording to days 12 to 15 carries its own concerns including state holidays, closures of government offices and courts, and other considerations that could delay the filing.

Until valid arguments of systemic problems with the current system are presented, it will be difficult for UTA to agree to the proposed changes.  We know that trustees already do their due diligence to look for deficiencies within the fifteen-day window and see no reason to make statutory changes.

A second proposal would change the dates for when a borrower can be referred to mediation from twenty to twenty-five days from the date a notice of trustee sale (NOTS) is transmitted by the postal requirements within RCW 61.24.040(1)(b)(i) – both certified or registered mail AND first-class mail.  The argument is that the date of recording and the date of mailing may not be the same day, cutting into the time for the borrower to be referred to mediation.  The challenge is verifying when the documents were sent with the Washington Department of Commerce.  Under the proposal, the Department can no longer rely on the recorded NOTS date; they’d have to confirm with the trustee when the documents were mailed.  A suggestion was made to instead adjust the dates out further from the NOTS to provide a larger window, but keep the NOTS filing date.  We were not able to reach agreement on that point before we ran out of time this session.  Expect to see this discussion during the interim.

Legislation to end the Torrens Registration System has passed the Legislature and on its way to the Governor for signature.  Currently there are five counties that still have the Torrens system available.  HB 1376 ends the Torrens system and moves those registrations back to the county recording system.  Owners of registered land will have the opportunity to move their registration free of charge to the recording system in the five counties by July 1, 2022.  After July 1, the auditor must close the registration volumes and indices and place them in the permanent deed records.  All properties remaining in the registration are withdrawn as of that date and the documents will be recorded by the county.

No legislation is expected to pass this session related to the DOTA and foreclosure.  There will be significant work during the interim on these issues including the bills previously mentioned, surplus funds and successors in interest as well.

Finally, as of this writing the House has appropriated $140,000 in funds from the Department of Financial Institutions to do a survey of the actions and regulations of foreclosure trustees in Washington.  Under current law trustees are not licensed by an agency beyond standard business license requirements as almost all trustees are attorneys.  The industry, however, is well-related through provisions of RCW Title 64. The “survey” as its referenced in the budget would require DFI to survey the work of trustees, the regulations that cover that work, and the trustees’ relationship to both beneficiaries and borrowers.  The hope of the drafter of the budget proviso, Representative Orwall, is that an impartial survey of the work of trustees might put to rest the long-standing rumors of “unregulated” trustees taking actions against borrowers with malicious intent.  The Senate would have to agree to the funding; it is not included in their budget proposal.

The Washington Legislature adjourns Signe Die on March 10.  With an almost $15 billion surplus, it is expected they’ll pass a final budget on time and head home – just in time for campaign season.  The UTA will continue to work with lawmakers, advocates, and financial institutions on these challenging issues as the session ends and the interim work begins.