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Work Continues in Washington State on Foreclosure Laws, and the Hirst Decision

Holly Chisa

By Holly Chisa, HPC Advocacy, UTA Washington Lobbyist

First, an update on foreclosure laws in Washington. Throughout the 2017 legislative session, the UTA and other stakeholders worked together to develop legislation to address the NationStar case. The 2016 ruling prohibits financial institutions and their contractors from taking action on a property until after sale, severely limiting the ability for financial institutions and others to conduct property maintenance and property preservation, even on abandoned properties. Financial institutions want to pass legislation to amend the ruling and allow limited, specific access to the property. In exchange for this legislation, financial institutions agreed to a higher fee structure to pay for the components of the Foreclosure Fairness Act (FFA.) Trustees agreed to float the increased fee structure only in exchange for clarification on DOTA issues for deceased borrowers, and also for some legal protections for non-monitory interest.

Regretfully, this legislation did not pass during the legislative session; however, the UTA and others remain committed to addressing these problems. UTA intends to meet with stakeholders in the fall to see if specific legislation can be drafted to address the non-monitory interest and deceased borrower issues. It may be possible to at least get these provisions passed, but it will take agreement from both sides of the issue.

As part of these negotiations, UTA members may be asked to provide the beneficiary declaration at the time of the NOD. This is a request the homeowner advocates have made for years, and may be asked as part of a deal to pass legislation to address deceased borrowers and non-monitory interest. We’d be interested in your feedback on this idea, and how it could impact the foreclosure process for trustees. Meetings will be scheduled during September and October.

The Washington Legislature also spent a significant time this session trying to resolve the Hirst decision. In October, 2016, the Washington State Supreme Court ruled in Whatcom County v. Western Washington Growth Management Hearings Board (also known as Hirst) that counties that previously relied on the Washington State Department of Ecology for instream flow levels for developments could no longer do so. From the Washington DOE website:

[Washington Department of Ecology protects] rivers and streams across the state by creating instream flow rules, which set the amount of water necessary for protecting fish, wildlife and recreation. In 1985, we adopted an instream flow rule for the Nooksack River (WAC 173-501) in Whatcom County. This rule closed most streams in the watershed to new water right permits but allowed landowners to use permit-exempt wells in most of the area. Whatcom County’s development regulations followed our instream flow rule.

A reliable, year-round supply of water is necessary for new homes or developments. Before the Oct. 6, 2016, court decision, many counties relied on what the Department of Ecology said about whether year-round water was available. This court decision changes that – counties now have to make their own decisions about whether there is enough water, physically and legally, to approve a building permit that would rely on a well.

While the ruling on its surface may not be significant, for home construction it has a statewide impact. Counties, especially small, rural counties, do not have the local resources to determine whether there is enough water in an area for home construction. Some counties have begun water banking requirements, but it could take a year or more to ensure enough water for a county to issue a building permit. Other counties have issued building permits with qualifiers, or stopped issuing building permits at all.

For the United Trustees Association, issues affecting building and construction can have long-term impacts across the industry. Financial institutions have stopped lending in some areas for home construction, specifically for those building individual homes with wells. This will severely impact rural communities in Washington State, and lending in those areas. Long-term, limiting construction based on water rights will have significant impacts to Washington State as a whole, especially in rural and agricultural areas. Most properties in Eastern Washington are sited on individual wells, or shared wells with a few homes located on one well site. If these areas cannot be developed or farmed from new wells, the economic hit in Eastern Washington and remote Western Washington areas will be significant.

The sticking point is the requirement that counties to be able to provide evidence that construction of the home or small development would not impact instream flows, water levels for surrounding water bodies, and senior water rights. Developers have argued that it would be nearly impossible to determine whether a single well would have broad environmental or water flow impacts. Proponents of the court ruling believe that these impacts should be measured to determine the long-term impact of the construction of a well.

Republicans, which control the Senate as part of the Majority Coalition Caucus, want legislation passed to overturn portions of the court ruling. Democrats, supporting the environmental community and tribes, do not want significant changes to the law. This specific issue pulled the Washington Legislature into July, and our longest legislative session in state history. No bill was passed, but it is hoped that negotiations will continue. If agreement is reached, the Legislature may return to Olympia for a one-day or weekend session before January.

Over the coming months, the United Trustees Association will be busy in Washington State working on both the deceased borrower issue and potential legislation for non-monitory interest. This will take negotiations from all parties to put this bill together. Additionally, UTA will continue to monitor the Hirst issue as an interested party concerned with property values and its impact on construction of homes in Washington.


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