BP BHEAD INT H

AN ACT Relating to title insurance policies; adding a new chapter to Title 61 RCW; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. LEGISLATIVE FINDINGS AND INTENT. The legislature finds that the purpose of title insurance is to indemnify the insured from loss caused by a defective title to real property. Generally, there are two types of policies available in the marketplace: A lender's policy and an owner's policy. Lenders typically require the borrower/owner to purchase title insurance protecting the lender from loss due to a defective title. However, in many cases the owner is not aware that the owner's interest in the property is not protected by the lender's policy, and that an owner's policy is available for an additional fee that usually is relatively small. The purpose of this chapter is to ensure that borrowers are made aware of the availability of an owner's title insurance policy when financing a mortgage.

NEW SECTION. Sec. 2. DISCLOSURE OF AVAILABILITY OF OWNER'S POLICY. Every lender that accepts an application from a borrower for a residential mortgage loan, at the time of application and in conjunction with other disclosures required by federal or state law, shall provide the borrower with a written disclosure that an owner's title insurance policy is available to protect the owner from a defective title. The lender shall assist the borrower with questions or requests for information related to the disclosure required in this section by obtaining the necessary information for the borrower or by referring the borrower to a local title company. The disclosure substantively shall be as follows: "This is to give you notice that if the residential mortgage loan for which you are applying is made, you will have to provide the lender with a title insurance policy protecting the lender from loss from a defective title and that, for an additional fee, you can receive a title insurance policy that protects your interest as well. The fee for an owner's title insurance policy generally is significantly smaller than the fee you must pay for the lender's policy. If you would like additional information on the cost or the protection provided by title insurance, the lender will assist you."

NEW SECTION. Sec. 3. DEFINITIONS. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Borrower" means any person who applies for a residential mortgage loan.

(2) "Lender" means any person, corporation, association, partnership, or trust authorized under federal or state law to accept applications for residential mortgage loans including, but not limited to, banks, savings banks, savings and loan associations, credit unions, mortgage brokers, consumer finance companies, and insurance companies.

(3) "Owner" means any person who has or will acquire an ownership interest in real property which secures a residential mortgage loan.

(4) "Person" means an individual or individuals.

(5) "Residential mortgage loan" means a loan primarily for personal, family, or household use secured by a mortgage or deed of trust on real property upon which is constructed or intended to be constructed a single-family dwelling or multiple-family dwelling of four units or less. "Residential mortgage loan" includes a loan secured by real property on which one manufactured home is or will be permanently affixed.

NEW SECTION. Sec. 4. SEVERABILITY CLAUSE. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 5. EFFECTIVE DATE. This act shall take effect July 1, 1994.

NEW SECTION. Sec. 6. CAPTIONS. Captions used in this act do not constitute any part of the law.

NEW SECTION. Sec. 7. CODIFICATION. Sections 1 through 6 of this act shall constitute a new chapter in Title 61 RCW.