S-3559               _______________________________________________

                                                   SENATE BILL NO. 4602

                        _______________________________________________

State of Washington                              49th Legislature                              1986 Regular Session

By Senators Williams, Moore, Metcalf, Johnson, Bottiger, Bender and Rasmussen

Read first time 1/17/86 and referred to Committee on Financial Institutions.

AN ACT Relating to financial institutions; and adding new sections to chapter 30.04 RCW.

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

NEW SECTION. Sec. 1.  A new section is added to chapter 30.04 RCW to read as follows:

          (1) If a lender has a requirement that the borrower pay funds into a lender's security protection provision for the payment of property taxes on property that is the security for the real estate loan agreement, insurance premiums, and similar charges, and there are funds in the account, the lender shall pay the taxes or the amount in the account if less than the taxes due and all other charges on or before the due dates for payments.

          (2) (a) If the lender fails to make a first semiannual payment of property taxes permitted by RCW 84.56.020, resulting in a requirement that all taxes be paid immediately, the lender shall pay the entire tax and any delinquency charges.  The lender may not charge the account for the second semiannual installment until the date it would ordinarily be due.  The lender is responsible for any delinquency charges, including interest which accrues as a result of its failure to pay in a timely manner.

          (b) If upon discovery of the failure to pay taxes, the lender fails to credit the lender's security protection provision  required by subsection (2)(a) of this section, the borrower shall have a cause of action against the lender to recover an amount equal to actual damages or one thousand dollars as liquidated damages, whichever is greater.  For the purposes of this section "actual damages" includes damage to credit rating.  Any borrower recovering damages under this section is entitled to reasonable attorneys' fees at trial and on appeal if the borrower prevails on appeal, in addition to costs and necessary disbursements.

          (3) For the purposes of this section:

          (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 provisions" 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 in the amount of one hundred fifty thousand dollars or less, 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.

NEW SECTION. Sec. 2.  A new section is added to chapter 30.04 RCW to read as follows:

          A violation of section 1 of this act by a lender renders the lender's security protection provision voidable at the option of the borrower.  A violation of section 1 of this act by a lender is an unfair business practice under chapter 19.86 RCW.