AN ACT Relating to the housing trust fund; amending RCW 18.44.070, 59.18.270, and 18.85.310; adding a new chapter to Title 43 RCW; and providing an effective date.

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

NEW SECTION. Sec. 1. The legislature finds that current economic conditions, federal housing policies and declining resources at the federal, state, and local level adversely affect the ability of low and very low-income persons to obtain safe, decent, and affordable housing.

The legislature further finds that members of over one hundred twenty thousand households live in housing units which are overcrowded, lack plumbing, are otherwise threatening to health and safety, and have rents and utility payments which exceed thirty percent of their income.

The legislature further finds that minorities, rural households, and migrant farm workers require housing assistance at a rate which significantly exceeds their proportion of the general population.

The legislature further finds that one of the most dramatic housing needs is that of persons needing special housing-related services, such as the mentally ill, recovering alcoholics, frail elderly persons, and single parents. These services include medical assistance, counseling, chore services, and child care.

The legislature declares that it is in the public interest to establish a continuously renewable resource known as a housing trust fund to assist low and very low-income citizens in meeting their basic housing needs.

NEW SECTION. Sec. 2. There is hereby created a fund in the office of the treasurer known as the Washington housing trust fund. The treasurer shall serve as the trustee thereof and shall make disbursements therefrom as directed by this chapter. The housing trust fund shall include revenue from the sources established by this chapter, appropriations by the legislature, private contributions, and all other sources.

NEW SECTION. Sec. 3. (1) For the purposes of this chapter:

(a) "Borrower" means a person who becomes obligated on a real estate loan agreement, either directly or indirectly, and includes, but is not limited to, mortgagors, grantors under trust deeds, vendees under conditional land sales contracts, and persons who purchase real property securing a real estate loan agreement, whether the person assumes the loan or purchases the property subject to the loan.

(b) "Lender" means a person who makes, extends, or holds a real estate loan agreement and includes, but is not limited to, mortgagees, beneficiaries under trust deeds, and vendors under conditional land sales contracts.

(c) "Lender's security protection provision" means a provision which is a part of a real estate loan agreement, whether incorporated into the agreement or as part of a separately executed document, whereby the borrower prepays, pledges or otherwise commits cash or other assets owned by the borrower in advance of due dates for payments of property taxes, insurance premiums and similar charges relating to the property securing the loan in order to assure timely payment of the charges and protect the lender's security interest in the property, and includes, but is not limited to, escrow accounts, direct reduction provisions, capitalization provisions, and pledges of savings accounts.

(d) "Real estate loan agreement" or "real estate loan" means an agreement providing for a loan on residential property, including multi-family, mobile homes, and manufactured housing, occupied by the borrower, secured in whole or in part by real property, a mobile home, or manufactured housing, or any interest therein, located in this state, and includes, but is not limited to, mortgages, trust deeds and conditional land sales contracts.

(2) Except as provided in subsection (3) of this section, if a lender's security protection provision requires borrowers to make deposits into any account, the lender shall pay to the state treasurer for deposit into the housing trust fund at least forty percent of all interest earned on such accounts. The remainder of interest earned may be retained by the lender to cover administrative costs of maintaining the account and making the interest remittances.

(3) This section does not apply to a real estate loan agreement for which federal law or regulation prohibits the payment of interest on deposits under a lender's security protection provision.

(4) This section does not apply to a real estate loan agreement made by the state of Washington or made, or held, for sale to, or sold to, the state of Washington.

(5) This section shall take effect July 1, 1987.

NEW SECTION. Sec. 4. "Department" means the department of community development. "Director" means the director of the department of community development.

NEW SECTION. Sec. 5. The treasurer shall transfer to the department upon the request of the director such funds as may be immediately necessary to implement the purposes of this chapter. Such transfers shall be made from the housing trust fund established by section 2 of this act.

NEW SECTION. Sec. 6. The treasurer, as trustee, shall invest housing trust fund revenues in investment instruments as part of the portfolio it manages for state funds.

NEW SECTION. Sec. 7. (1) The department shall use funds from the housing trust fund to finance in whole or in part any loans or grant projects that will provide housing for persons and families with special housing needs and with incomes at or below fifty percent of the median family income. Not less than thirty percent of such funds used in any given biennium shall be for the benefit of projects located in rural areas.

(2) Projects eligible for assistance include, but are not limited to:

(a) New construction or rehabilitation of single room occupancy units;

(b) Rent subsidies in new construction or rehabilitated multifamily units;

(c) Matching funds for social services directly related to providing housing for special-need tenants in assisted projects;

(d) Technical assistance, design and finance services and consultation, and administrative costs for eligible nonprofit community or neighborhood-based organizations;

(e) Administrative costs for housing assistance groups or organizations when such grant or loan will substantially increase the recipient's access to housing funds other than those available under this chapter;

(f) Shelters and related services for the homeless;

(g) Mortgage subsidies for new construction or rehabilitation of eligible multifamily units; and

(h) Mortgage insurance guarantee or payments for eligible projects.

NEW SECTION. Sec. 8. Organizations that may receive assistance from the department under this chapter are local governments, local housing authorities, nonprofit community or neighborhood-based organizations, and regional or state-wide nonprofit housing assistance organizations.

NEW SECTION. Sec. 9. (1) During each calendar year in which funds are available for use by the department from the housing trust fund, as prescribed in section 2 of this act, the department shall announce to all known interested parties, and through major media throughout the state, a grant and loan application period of at least sixty days' duration. This announcement shall be made as often as the director deems appropriate for proper utilization of resources, but at least once annually. The department shall then promptly grant as many applications as will utilize available funds less appropriate administrative costs of the department and the treasurer, not to exceed five percent of annual revenues to the fund.

(2) The department shall give preference for applications based on the following criteria:

(a) The degree of leveraging of other funds that will occur;

(b) Recipient contributions to total project costs, including allied contributions from other sources such as professional, craft and trade services, and lender interest rate subsidies;

(d) Projects that encourage ownership, management, and other project-related responsibility opportunities; and

(e) Projects that provide housing for persons and families with the lowest incomes.

NEW SECTION. Sec. 10. (1) The department may use moneys from the housing trust fund to provide preconstruction technical assistance to eligible recipients seeking to construct, rehabilitate, or finance housing-related services for very low and low-income persons. The department shall emphasize providing preconstruction technical assistance services to rural areas and small cities and towns. The department may contract with nonprofit organizations to provide this technical assistance. The department may contract for any of the following services:

(a) Financial planning and packaging for housing projects, including alternative ownership programs, such as limited equity partnerships and syndications;

(b) Project design, architectural planning, and siting;

(d) Securing matching resources for project development;

(e) Maximizing local government contributions to project development in the form of land donations, infrastructure improvements, waivers of development fees, locally and state-managed funds, zoning variances, or creative local planning;

(f) Coordination with local planning, economic development, and environmental, social service, and recreational activities;

(g) Construction and materials management; and

(h) Project maintenance and management.

(2) The department shall publish requests for proposals which specify contract performance standards, award criteria, and contractor requirements. In evaluating proposals, the department shall consider the ability of the contractor to provide technical assistance to low and very low-income persons and to persons with special housing needs.

NEW SECTION. Sec. 11. The director shall monitor the activities of recipients of grants and loans under this chapter to determine compliance with the terms and conditions set forth in its application or stated by the department in connection with the grant or loan.

NEW SECTION. Sec. 12. The director shall compile a report to the legislature each biennium describing the program and activity of the department in furtherance of the purpose and goals of this chapter, including a description of the grants and loans made from the housing trust fund and the projects and programs thus generated.

NEW SECTION. Sec. 13. The department shall have the authority to promulgate rules pursuant to chapter 34.04 RCW, regarding the grant and loan process, and the substance of eligible projects, consistent with this chapter.

Sec. 14. Section 7, chapter 153, Laws of 1965 as amended by section 6, chapter 156, Laws of 1977 ex. sess. and RCW 18.44.070 are each amended to read as follows:

(1) Every certificated escrow agent shall keep adequate records of all transactions handled by or through him including itemization of all receipts and disbursements of each transaction, which records shall be open to inspection by the director or his authorized representatives.

(2) Every certificated agent shall keep a separate interest-bearing escrow fund account in a recognized Washington state depositary authorized to receive funds, in which shall be kept separate and apart and segregated from the agent's own funds, all funds or moneys of clients which are being held by the agent pending the closing of a transaction and such funds shall be deposited not later than the first banking day following receipt thereof.

(3) Separate accounts required to be maintained under this section shall be interest-bearing accounts from which withdrawals or transfers can be made without delay, subject only to the notice period which the depository institution is required to reserve by law or regulation.

(4) Every certificated agent shall maintain a pooled interest-bearing escrow account for deposit of client funds that are nominal in amount or expected to be held for a short period of time. The interest accruing on this account, net of any transaction costs, shall be paid to the state treasurer for deposit in the Washington housing trust fund created by section 2 of this 1986 act. An agent may, but shall not be required to, notify the client of the intended use of such funds.

(5) All client funds shall be deposited in the account specified in subsection (4) of this section unless they are deposited in:

(a) A separate interest-bearing trust account for the particular client or client's matter on which the interest will be paid to the client; or

(b) A pooled interest-bearing trust account with subaccounting that will provide for computation of interest earned by each client's funds and the payment thereof to the client.

(6) In determining whether to use the account specified in subsection (4) of this section or an account specified in subsection (5) of this section, an agent shall consider only whether the funds to be invested could be utilized to provide a positive net return to the client, as determined by taking into consideration the following factors:

(a) The amount of interest that the funds would earn during the period they are expected to be deposited;

(b) The cost of establishing and administering the account, including the cost of the agent's services; and

(7) As to accounts created under subsection (4) of this section, agents shall direct the depository institution to remit interest or dividends, net of any service charges or fees, on the average monthly balance in the account, or as otherwise computed in accordance with an institution's standard accounting practice, at least quarterly, to the state treasurer for deposit in the housing trust fund created by section 2 of this 1986 act.

Violation of this section shall constitute grounds for suspension or revocation of the registration or license of any person under this chapter and such additional penalties as may be prescribed in Title 9A RCW.

Sec. 15. Section 27, chapter 207, Laws of 1973 1st ex. sess. as amended by section 1, chapter 233, Laws of 1975 1st ex. sess. and RCW 59.18.270 are each amended to read as follows:

All moneys paid to the landlord by the tenant as a deposit as security for performance of the tenant's obligations in a lease or rental agreement shall promptly be deposited by the landlord in a trust account, maintained by the landlord for the purpose of holding such security deposits for tenants of the landlord, in a bank, savings and loan association, mutual savings bank, or licensed escrow agent located in Washington. ((~~Unless otherwise agreed in writing, the landlord shall be entitled to receipt of interest paid on such trust account deposits.~~)) In the case of landlords who maintain ten or fewer residential rental units within the state the landlord shall be entitled to receipt of the interest paid on such trust account deposits. All other landlords shall direct the depository institution to pay the interest on such trust accounts to the state treasurer to be placed in the housing trust fund established by section 2 of this 1986 act. The landlord shall provide the tenant with a written receipt for the deposit and shall provide written notice of the name and address and location of the depository and any subsequent change thereof. If during a tenancy the status of landlord is transferred to another, any sums in the deposit trust account affected by such transfer shall simultaneously be transferred to an equivalent trust account of the successor landlord, and the successor landlord shall promptly notify the tenant of the transfer and of the name, address and location of the new depository. The tenant's claim to any moneys paid under this section shall be prior to that of any creditor of the landlord, including a trustee in bankruptcy or receiver, even if such moneys are commingled.

Sec. 16. Section 19, chapter 222, Laws of 1951 as last amended by section 44, chapter 52, Laws of 1957 and RCW 18.85.310 are each amended to read as follows:

(1) Every licensed real estate broker shall keep adequate records of all real estate transactions handled by or through him. The records shall include, but are not limited to, a copy of the earnest money receipt, and an itemization of the broker's receipts and disbursements with each transaction. These records and all other records hereinafter specified shall be open to inspection by the director or his authorized representatives.

(2) Every real estate broker shall also deliver or cause to be delivered to all parties signing the same, at the time of signing, conformed copies of all earnest money receipts, listing agreements and all other like or similar instruments signed by the parties, including the closing statement.

(3) Every real estate broker shall also keep separate real estate fund accounts in a recognized Washington state depositary authorized to receive funds in which shall be kept separate and apart and physically segregated from licensee broker's own funds, all funds or moneys of clients which are being held by such licensee broker pending the closing of a real estate sale or transaction, or which have been collected for said client and are being held for disbursement for or to said client and such funds shall be deposited not later than the first banking day following receipt thereof.

(4) Separate accounts comprised of clients funds required to be maintained under this section shall be interest-bearing accounts from which withdrawals or transfers can be made without delay, subject only to the notice period which the depository institution is required to reserve by law or regulation.

(5) Every real estate broker shall maintain a pooled interest-bearing escrow account for deposit of client funds that are nominal in amount or expected to be held for a short period of time. The interest accruing on this account, net of any transaction costs, shall be paid to the state treasurer for deposit in the Washington housing trust fund created by section 2 of this 1986 act. An agent may, but shall not be required to, notify the client of the intended use of such funds.

(6) All client funds shall be deposited in the account specified in subsection (5) of this section unless they are deposited in:

(a) A separate interest-bearing trust account for the particular client or client's matter on which the interest will be paid to the client; or

(b) A pooled interest-bearing trust account with subaccounting that will provide for computation of interest earned by each client's funds and the payment thereof to the client.

(7) In determining whether to use the account specified in subsection (5) of this section or an account specified in subsection (6) of this section, an agent shall consider only whether the funds to be invested could be utilized to provide a positive net return to the client, as determined by taking into consideration the following factors:

(a) The amount of interest that the funds would earn during the period they are expected to be deposited;

(b) The cost of establishing and administering the account, including the cost of the real estate broker's services; and

(8) As to accounts created under subsection (5) of this section, agents shall direct the depository institution to remit interest or dividends, net of any service charges or fees, on the average monthly balance in the account, or as otherwise computed in accordance with an institution's standard accounting practice, at least quarterly, to the state treasurer for deposit in the housing trust fund created by section 2 of this 1986 act.

(9) Any violation by a real estate broker of any of the provisions of this section, or RCW 18.85.230, shall be grounds for revocation of the licenses issued to the broker.

NEW SECTION. Sec. 17. Sections 1 through 13 of this act shall constitute a new chapter in Title 43 RCW.