By Holly Chisa, HPC Advocacy, UTA Washington State Lobbyist
As a lobbyist, I’ve worked through some unique legislative sessions. A blue-collar labor union took over the Capitol building, sleeping on the floors every night for weeks demanding wage changes. I’ve seen protest rallies with bagpipes, with drums, with squirrels. I rode out an earthquake under a desk. This year again is a new experience – lobbying by Zoom. The Washington Legislature has yet to meet in the Capitol Building, other than to gavel into our legislative session on January 11. Negotiations, committees, floor action – everything is done remotely, with a skeleton crew of lawmakers managing floor action in Olympia.
And as much as the pandemic has affected HOW Olympia operates, it also affects WHAT the focus of the Washington Legislature is. Policy proposals to make modifications to liens and foreclosures have focused almost exclusively on the expansion of the Foreclosure Fairness Act and forestalling foreclosure actions by various public entities for tax liens. There has been little discussion of reforming the mediation system itself, but significant effort to expand the program to include non-owner occupied properties to head off the likely downturn in the private rental market once evictions are allowed.
HB 1108 as of this writing has passed the House and moved on to the Senate for further consideration. The bill makes fundamental changes to the NOPFO and Foreclosure Fairness Act (FFA) by including non-owner-occupied residential real property up to four units. The bill does attempt to narrow this inclusion to only properties that are held by an identified individual – not an LLC or corporation holding. This is a permanent change to the FFA and NOPFO process, and the first-time property NOT occupied by a homeowner will be included in the program. Changes to the requirements prior to a trustees sale for these properties will now include:
– Changes to the Notice of Default
– The Notice of Preforeclosure Options (NOPFO)
– The beneficiary declaration that proves the beneficiary is the owner of the obligation secured by the deed of trust; and
– Meet and confer requirements and mediation if necessary
This will significantly expand the FFA program both for NOPFOs and for mediation, especially as we transition from moratoriums on evictions and foreclosures.
The bill also changes the funding source for the FFA in several ways. The program has historically been funded solely by fees on financial institutions of a certain size and which file a minimum number of NOTS or NODS (depending on the legislation) annually in Washington. Currently, beneficiaries are exempt from the mediation program if they certify under penalty of perjury that they were not a beneficiary of a deed of trust in more than 250 trustee sales in the previous year. Beneficiaries that are not exempt from the program are required to pay $325 per NOTS if more than 50 NOTS were recorded on its behalf in the preceding year. Under the proposed changes, beginning in January 2023, beneficiaries will only be exempt from the mediation program if they can certify that during the previous year they were not beneficiaries of more than 250 trustee sales of residential real property regardless of whether that property was owner-occupied up to four units.
Much of the funding increases won’t begin until 2023, but the inclusion of non-occupied 1-4 in the NOPFO and mediation process begins IMMEDIATELY upon the Governor’s signature. We are working to provide a waiver for those NOPFOs and NODs that have been issued prior to the emergency date.
We anticipate a significant amount of money to also be infused into the FFA and the mediation program in anticipation of a sharp increase in foreclosures in 2021/2022. As UTA members know, the FFA and mediation programs have been poorly funded, relying solely on fees from financial institutions. The Governor’s budget – and it’s believed the House and Senate budgets as well – will include a significant increase in funding for the 2021-2022 biennium. The Governor allocated $17 million to fund the FFA, mediation, and other programs to help homeowners facing foreclosure. As of this writing, we have not seen the House or Senate budgets but anticipate similar dollar values in addition to fees from financial institutions.
A positive bill from Olympia, HB 1376, repeals the use of the Torrens Act in real estate registration in Washington State. For property currently registered under Torrens, the bill creates a timeline to transition those properties to the county’s more common registration system by July 1, 2022. While little used in Washington, there are those that use the Torrens system believing it protects their home or property from foreclosure. It does, however, create title issues, and requires entities to go to court to file liens. County Auditors across Washington testified in support of repealing this method of property registration; there was no opposition.
The Legislature is expected to adjourn on April 25. It will be the first session I anticipate working 105 days without having set foot in the Capitol Building. The risks of managing new policies without sitting in a room together are significant and require additional input from UTA members over the next four to six weeks. I appreciate the continued guidance from members as we work through these issues.