S-3757               _______________________________________________

                                                   SENATE BILL NO. 6096

                        _______________________________________________

State of Washington                              50th Legislature                              1988 Regular Session

By Senators von Reichbauer, Smitherman, Moore, Gaspard, Johnson and Rasmussen

Prefiled with Secretary of the Senate 1/04/88.  Read first time 1/11/88 and referred to Committee on Financial Institutions & Insurance.

AN ACT Relating to real estate loans made by financial institutions; adding a new chapter to Title 61 RCW; and prescribing penalties.

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

NEW SECTION. Sec. 1.     Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

          (1) An "act of equity skimming" means:

          (a) (i) Purchasing a dwelling by assuming the obligation to make payments on existing mortgages, deeds of trust, or real estate contracts secured by and pertaining to the dwelling, or by representing that such obligation will be assumed; and

          (ii) Failing to make payments under any or all of the mortgages, deeds of trust, or real estate contracts as the payments become due, within two years subsequent to the purchase; and

          (iii) Either (A) applying or authorizing the application of rents from the dwelling for one's own benefit or use, (B) obtaining anything of value from the sale or lease with option to purchase of the dwelling for one's own benefit or use, or (C) removing or obtaining appliances, fixtures, furnishings, or parts of such dwellings or appurtenances for one's own benefit or use without replacing the removed items with items of equal or greater value; or

          (b) (i) Purchasing a dwelling in a transaction in which all or part of the purchase price is financed by the seller and is (A) secured by a lien which is inferior in priority or subordinated to a lien placed on the dwelling by the purchaser, or (B) secured by a lien on other real or personal property, or (C) without any security; and

          (ii) Obtaining a superior priority loan which either (A) is secured by a lien on the dwelling which is superior in priority to the lien of the seller, but not including a bona fide assumption by the purchaser of a loan existing prior to the time of purchase, or (B) creating any lien or encumbrance on the dwelling when the seller does not hold a lien on the dwelling; and

          (iii) Failing to make payments or defaulting on such superior priority loan within two years subsequent to the purchase; and

          (iv) Applying or authorizing any part of the proceeds from such superior priority loan for one's own benefit or use.

          (2) "Dwelling" means a single, duplex, triplex, or four unit family residential building.

          (3) "Pattern of equity skimming" means engaging in at least three acts of equity skimming within any three-year period, with at least one act occurring after the effective date of this act.

          (4) "Person" includes any natural person, corporation, joint stock association, or unincorporated association.

NEW SECTION. Sec. 2.     Any person who wilfully engages in a pattern of equity skimming is guilty of a class B felony under RCW 9A.20.021.  Equity skimming shall be classified as a seriousness level II offense under chapter 9.94A RCW, and each act of equity skimming included in the pattern of equity skimming for which a defendant is convicted or to which a defendant pleads guilty shall be considered a current offense under RCW 9.94A.400.

NEW SECTION. Sec. 3.     In addition to the criminal penalties provided in section 2 of this act, the legislature finds and declares that equity skimming substantially affects the public interest.  The commission by any person of a single act of equity skimming or a pattern of equity skimming is an unfair or deceptive act or practice and unfair method of competition in the conduct of trade or commerce in violation of RCW 19.86.020.

NEW SECTION. Sec. 4.     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.     Sections 1 through 3 of this act shall constitute a new chapter in Title 61 RCW.