S-1551               _______________________________________________

                                         SUBSTITUTE SENATE BILL NO. 5154

                        _______________________________________________

State of Washington                              50th Legislature                              1987 Regular Session

By Senate Committee on Financial Institutions (originally sponsored by Senator Owen)

Read first time 2/9/87.

AN ACT Relating to financial institutions; and adding new sections to chapter 19.62 RCW.

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

NEW SECTION. Sec. 1.  A new section is added to chapter 19.62 RCW to read as follows:

          For the purposes of sections 1 and 2 of this act:

          (1) "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.

          (2) "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.

          (3) "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 payment of property taxes, insurance premiums, and other 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.

          (4) "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,  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 19.62 RCW to read as follows:

          (1) Any lender who has a requirement that the borrower pay funds into a lender's security protection provision for the payment of property taxes, insurance premiums, and other charges on property that is the security for the real estate loan agreement, shall pay such taxes, insurance premiums, and other charges on or before the due dates for payment:  PROVIDED, That funds paid into the account by the borrower are sufficient for such payments:  PROVIDED FURTHER, That if there is a shortage of funds and if the lender does not intend to advance sufficient funds, the lender shall notify the borrower of the shortage not fewer than fifteen days in advance of the due dates for payment.

          (2) If the lender fails to make timely payments, when the borrower has paid sufficient funds into the security protection provision, the borrower shall have a cause of action against the lender to recover actual damages, including any delinquency charges.  Any borrower recovering damages under this section is entitled to reasonable attorneys' fees at trial and on appeal if the borrower prevails, in addition to costs and necessary disbursements.