Holly Chisa

By Holly Chisa, HPC Advocacy, UTA Washington State Lobbyist

Most of you are familiar with the recurring discussions in Washington State among stakeholders about trustees – how the industry is regulated, whether trustees should be licensed, do trustees remain independent during the nonjudicial foreclosure process.  The industry has responded effectively for years that trustees in Washington follow the law, remain independent, and are a critical link in the nonjudicial foreclosure process.

In an attempt to bring finality to these questions, the Washington Legislature included funding in the final budget agreement to study the work of trustees operating in Washington State.  The budget directive (found in SB 5693 in Section 152) states:

NEW SECTION. Sec. 152. A new section is added to 2021 c 334 (uncodified) to read as follows: FOR THE DEPARTMENT OF FINANCIAL INSTITUTIONS Financial Services Regulation State Appropriation. . . .. . . $140,000 TOTAL APPROPRIATION

The appropriation in this section is subject to the following conditions and limitations: The entire appropriation is provided solely for the department of financial institutions to conduct a survey of foreclosure trustees doing business in the state of Washington for owner-occupied residential real property between January 1, 2017, and December 31, 2019.

(1) The survey must include:

• The name and place of business of the trustee, its owner, and any affiliated firms or businesses that do business in Washington;
• The number of notices of trustee sale filed each year for each beneficiary;
• Templates without personally identifiable information of all notices sent to borrowers within the survey period; and
• Samples of service contracts between the trustee and each beneficiary.

(2) By January 1, 2023, the department of financial institutions shall submit a report to the legislature on the results of the survey and include a discussion of the regulation of foreclosure trustees in Washington’s nonjudicial foreclosure system.

The Department of Financial Institutions (DFI) has reached out to the United Trustees Association to discuss the intentions and structure of the study.  The agency will be focused on this specific language in the proviso: “… a survey of foreclosure trustees doing business in the state of Washington for owner-occupied residential real property between January 1, 2017, and December 31, 2019.”

Since the mid-2000s, UTA members have educated Washington lawmakers on the role of trustees in the nonjudicial foreclosure process.  While foreclosure trustees have worked for decades in Washington, specific focus on the role of the trustee has grown since the housing market crash in 2008-2010.  While most lawmakers understand the role of the trustee in foreclosure, other stakeholders continue to allege shady practices within the industry.   Lawmakers hope that this study, completed by an impartial third-party agency, will put these assertions to rest.

The Department of Financial Institutions (DFI) has already requested a meeting for late June with trustees operating in Washington.  An agency that primarily works with state-chartered financial institutions, DFI wants to better understand the roll of the trustee in the nonjudicial process.  This agency will provide an impartial forum to survey trustees and review the laws that specifically regulate the industry.  In a report back to the Legislature in January 2023, DFI will provide their analysis of how trustees operate in Washington and whether current regulations are sufficient or need improvement.  It is not the roll of DFI to look at the larger nonjudicial foreclosure process.

UTA needs your help as we work through this survey process.  Those UTA members that operate in Washington will need to provide some data as appropriate to DFI and help answer their questions.  Additionally, we would ask for trustees to participate in meetings with DFI staff to provide more details about trustee operations and your role in the nonjudicial process.  It is NOT necessary for you to provide details that are privileged or proprietary – this is not an audit of your individual firms or an inquisition of the industry as a whole.  This is, instead, intended to be a review process by a state agency to answer some of the long-standing questions about how trustees are properly regulated and follow the nonjudicial foreclosure laws.

This is also your opportunity as trustees to talk about the work you do as the impartial, third party in the foreclosure process.  UTA knows our members are proud of the work you do to ensure nonjudicial foreclosures proceed correctly and within the law.  We know you have taken actions to halt incorrect foreclosures and assisted homeowners as you have also worked with beneficiaries.  This is the time to talk about the role of the trustee, how you are licensed and regulated, and your commitment to ensuring that foreclosures are completed correctly.  This is also an opportunity to discuss the value of the nonjudicial foreclosure process both for homeowners and beneficiaries in keeping these issues out of the judicial system.

UTA will be heavily involved in this process as well, attending all meetings and participating in discussions as appropriate.  If you’ve got questions of DFI we’re happy to assist with connecting you to the right agency folks to find you answers.  This report should provide trustees the opportunity to bring finality to the years of questions about what you do and how you do it.  We look forward to educating DFI and lawmakers about the regulations of trustees and the impartial work you do in the foreclosure process.