Registration Program On Table in Washington

Holly Chisa

By Holly Chisa, HPC Advocacy, UTA Washington State Lobbyist

A small group of lawmakers, homeowner advocates, lawyers, financial institutions and representatives of the UTA have been meeting to talk about the role of trustees in the foreclosure process.  Currently in Washington law, trustees are required to have a physical presence in the state, but are not licensed.  The industry, however, is routinely audited by both federal and state agencies as part of their review of practices by financial institutions in foreclosures.

Initially, homeowner advocates wanted a full licensure program for trustees.  This would have included testing, certification, annual reviews, and a large fee to self-fund the program.  However, the problems identified within the working group could be resolved without a significant new program, but with simple tweaks to current law and the creation of a registration program.

The group recommends the creation of a registration program in Washington for trustee companies that wish to operate in the state.  This would apply to all trustees, and be less expensive than licensure.  The new requirements would include:

• A physical location beyond just a drop box
• Contact information including an e-mail
• The name of the onsite corporate officer
• Affiliation of the trustee – is it affiliated with a financial institution
• Number of foreclosures processed in the last year – unclear yet whether the number would be the number of NODs processed or the number of sales completed
• UBI number
• Enforcement language – utilizing language that already exists with the mortgage brokers and escrow sections of law to give the Director of the Department of Financial Institutions enforcement and penalty powers, including removal of trustees from the state.  (We discussed cease and desist orders, as well as a course of conduct/one time and you’re out provision for certain actions.)

Trustees would pay for the registration program, and also would pay for any investigations performed by the regulator. 

These new requirements would ensure that trustees operating in the state can be contacted at a local number, and have an office where documents and payments can be delivered.  They would also create a new enforcement standard in which the Department of Financial Institutions (which would house the program) would be allowed to remove a trustee for cause after an investigation.

Legislation will be drafted during the month of December, and debated during the legislative session.  We will send out information as soon as it’s available to ensure Washington trustees have the opportunity to review the proposal and make changes.

This working group has also been debating other issues around foreclosure.  One of the most controversial pieces is a requirement to record every assignment of the note.  Financial institutions have expressed concerns that the legislation would require recordings even if the investment is moving among their own internal investment portfolios.  Trustees are concerned that, if the assignments are not accurately recorded, and there’s no effective way to ensure that they are accurately recorded, the trustee could be in violation of the good faith requirements of Washington law.

The financial institutions have offered an alternative – recording the most recent assignment of the beneficial interest before processing the NOD.  This would identify the holder of the note for the homeowner, and would be helpful for the trustee in clearing title as well.  This will be a contentious issue moving forward, and UTA will provide language to its members as the law is drafted.

Finally, there will likely be some small changes made to the Foreclosure Fairness Act.  The general consensus is the FFA should be generally left alone to allow the system to settle in and work.  However, we continue to see small hitches in the program, specifically around the larger financial institutions moving mortgages to smaller financial institutions for servicing, dropping these mortgages – and homeowners - out of the right to the mediation program.  This is a significant issue for the homeowner advocates, who want to be sure all eligible homeowners are able to receive mediation.

2013 will, once again, be an active year for the United Trustees Association in Washington State.  We would encourage you to please participate in the WA Legislature.  Talk with your lawmakers about what you do as a trustee to facilitate the foreclosure process for both homeowners and beneficiaries.  The role of the trustee is not well understood by lawmakers, and it will be important that they understand your work as they develop a registration program for the industry.