SENATE BILL REPORT

SB 6033

As of February 16, 2009

Title: An act relating to creating the prevent or reduce owner-occupied foreclosure program.

Brief Description: Creating the prevent or reduce owner-occupied foreclosure program.

Sponsors: Senators Berkey, Fairley, Kauffman, McAuliffe, Tom, Marr, Prentice, Shin, Fraser, Kohl-Welles, Eide, McDermott, Jarrett, Regala, Hobbs, Kline, Jacobsen, Murray, Franklin, Hatfield, Kilmer, Haugen, Hargrove and Sheldon.

Brief History:

Committee Activity: Financial Institutions, Housing & Insurance: 2/18/09.

Staff: Diane Smith (786-7410)

Background: In September 2007 the Governor established the Task Force for Homeowner Security (Task Force) to evaluate instability in the mortgage market and minimize its then impending impact in Washington. Since that time, the instability in the mortgage market and its economic consequences have made a significant impact on both the residential housing market and the economy in this state.

The Smart Homeownership Choices Program, enacted and funded early in 2008, addresses the Task Force's recommendation to provide grants or loans to assist qualifying low-income and moderate-income homeowners who are delinquent on their mortgage payments.

Under this program, the Department of Financial Institutions (DFI) funds the Washington State Housing Finance Commission (Commission), as needed, to implement and operate the program for the sole purpose of preventing foreclosures.The Commission assists homeowners who are delinquent on their mortgage payments in bringing their mortgage payments current so they may refinance the purchase of their homes. The Commission determines the terms and conditions of the assistance. Financial assistance received by homeowners must be repaid at the time of refinancing. Homeowners receiving financial assistance must agree to participate in a Residential Mortgage Counseling Program.

Not more than 4 percent of the total appropriation for the program may be used for administrative expenses of the DFI and the Commission. The Commission must also establish and report upon measures to gauge program's efficiency and effectiveness and customer satisfaction.

The monies appropriated for the Smart Homeownership Choices Program remain largely unspent.

A Financial Literacy and Education Program, enacted and funded early in 2008 and implementing another recommendation of the Task Force, provides counseling and education to prospective homeowners and homeowners facing foreclosure. This program is provided through DFI contracts with counselors certified either by the federal Department of Housing and Urban Development (HUD) or certified by DFI itself.

Summary of Bill: The monies remaining unspent for the Smart Homeownership Choices Program are made available to the Prevent or Reduce Owner-Occupied Foreclosure Program (PROOF). The Smart Homeownership Choices Program is replaced by PROOF. This program is created in DFI to assist borrowers facing foreclosure in achieving work-outs. Qualifying borrowers are those with incomes up to and including the county median income level.

PROOF provides a pool of unpaid volunteers from relevant professions, such as certified public accountants, bankers, and attorneys, who provide advice to borrowers in the work-out process. The Commission implements the program by which volunteers and borrowers are paired in the most productive manner.

Not more than 4 percent of the total appropriation for PROOF may be used for administrative expenses of DFI and the Commission. The Commission must also establish and report upon measures to gauge the program's efficiency and effectiveness and customer satisfaction.

Appropriation: None.

Fiscal Note: Requested on February 16, 2009.

Committee/Commission/Task Force Created: No.

Effective Date: Ninety days after adjournment of session in which bill is passed.