UTA Opposes Recording Language Expansion in Washington

Holly Chisa

Holly Chisa, HPC Advocacy, UTA Washington Lobbysist

The Washington state Legislature gaveled in for the 2013 session this January with a unique political scenario.  While Democrats hold the majority vote in the House, the Republicans in the Senate have partnered with two Democrats to take the majority in the Senate as a coalition government.  The controlling majority has appointed both Democrats and Republicans to chair the various committees in the Senate, and both Republicans and Democrats hold leadership positions.  Add to this mix a new Democratic Governor, who is still working to put his administration together.  It is under this new structure that House and Senate members will try and write a budget and pass legislation.

Because the House and Senate politically are very far apart, it is unlikely that any significant legislation will pass this session.  UTA members participated throughout the summer and fall on drafting legislation relating to the registration of trustees, and potentially making changes to underlying foreclosure law.  However, as of this writing no formal legislation has been introduced to require additional information from trustees before they can practice in Washington.  UTA members did agree to a reasonable increase in information to be provided to the Department of Financial Institutions, including contact information, an expanded physical presence, and some limited enforcement provisions to remove trustees that weren’t following the laws.  However, some parties wanted more expansive requirements, including credit checks, background checks, finger printing and potential criminal charges.  UTA actively opposed these suggestions, and will oppose any legislation that puts an undue burden on the industry.

UTA has also provided input on legislation that has received hearings in the House and Senate.  We have already seen legislation requiring the recording of every assignment and transfer of real property with the county in which the property is located.  We have also seen legislation that would attempt to fix language where there is conflicting verbiage between what entity is the “holder” of the note vs. the “owner” of the note.  UTA testified against the recording language, and continues to oppose legislation with this language.  Additionally, the Association members have concerns with attempts to fix the holder/owner language without agreement among all of the stakeholders on the exact language needed.  Incorrectly addressing this issue could have long-term implications that could dramatically affect nonjudicial foreclosures in Washington.

Generally, there is a sense that the Foreclosure Fairness Act is working to provide closure to homeowners.  Under a report released by the Washington Department of Commerce in December 2012, 4,142 borrowers were provided housing counseling by the WA State Housing Finance Commission, and 1,655 homeowners were referred to mediation.  While it is difficult to quantify the definition of success for this program from a statistical standpoint, it is generally recognized that the FFA is working to provide a face-to-face meeting between homeowners and beneficiaries, and helping to bring closure to homeowners working through foreclosure.  There are still thousands of homeowners working their way through the FFA program, and it will take a few more years to determine what aspects of the program are successful, and what parts of the mediation program will need tweaking.  In the meantime, stakeholders have agreed to leave the statutes alone, and allow the program to work for a period of time with no major changes.

One change that HAS been suggested by the homeowner advocates is to change the threshold for financial institutions to qualify to participate in the mediation program.  Under current law, financial institutions with less than 250 NOTS per year can apply for an exemption from the mediation program.  However, homeowner lawyers argue there are large, multi-state financial institutions exempt from the program because of their limited presence in Washington.  They argue that these large financial institutions are being protected by a loophole only intended for smaller, community-based banks and credit unions.

UTA is listening to discussions with the stakeholders to determine if there is a way to include financial institutions with a large national presence but a limited presence in Washington.  While not an issue of direct importance to UTA members, the Association does want to be sure that any changes to the statute create a clear, bright line for trustees to know which financial institutions are required to participate in the mediation program, and which are exempt.

As the Washington state session grinds forward, UTA will continue to monitor legislation for its members, and watch for bills that both benefit and harm the industry.  While changes to the FFA as a whole are unlikely, there is still a significant effort to pass other pieces of legislation which will render the non-judicial foreclosure process unwieldy for trustees, or derail the process altogether.  UTA will oppose those bills that would severely restrict the non-judicial process.  Likewise, UTA members will support legislation which provides clarity to the system, and simplifies the handling of deeds of trust.