SENATE BILL 6620
State of Washington 57th Legislature 2002 Regular Session
By Senators Gardner, Winsley, Kline and Keiser
Read first time 01/23/2002. Referred to Committee on Labor, Commerce & Financial Institutions.
AN ACT Relating to local development; adding a new section to chapter 42.17 RCW; and adding a new chapter to Title 43 RCW.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1. The legislature finds that low and moderate-income homebuyers may not be eligible for loans under traditional standards used by banks and often borrow from subprime lenders at terms that are disadvantageous to them and are not justified by the slight increase in risk they might represent to a lender. It is the intent of this chapter to assist low and moderate-income borrowers in obtaining loans from standard or prime lenders by encouraging these lenders to conduct outreach and offer technical assistance to homebuyers in low and moderate-income communities and make mortgage loans that they might not otherwise make.
NEW SECTION. Sec. 2. As used in this chapter, the term:
(1) "Lender participant" means financial institutions and credit unions as are approved by the director to make loans under this chapter.
(2) "Eligible loan" means a loan to a person under the conditions set forth in this chapter.
(3) "Amount of loss" means an amount equal to the unpaid balance of the principal amount, less any amounts realized by perfecting rights under a security agreement, together with interest as the director allows, to the maximum allowed by rule. The amount of loss is subject to the limitations contained in section 9(2)(c) of this act.
(4) "Default" includes only defaults as have existed for at least ninety days.
(5) "Premium charge" means the percent of the loan which shall be deposited in the housing loan reserve fund by the lender and the borrower on loans made pursuant to this chapter.
(6) "Director" means the director of financial institutions.
(7) "Fund" means the housing loan reserve fund.
(8) "State match" means the percent of the loan which shall be deposited in the housing loan reserve fund by the state on loans made pursuant to this chapter.
NEW SECTION. Sec. 3. (1) There is created in the department of financial institutions a housing loan reserve program.
(2) In addition to the powers and duties prescribed under this chapter, the director may exercise all the powers necessary or convenient for the administration and enforcement of this chapter. The director may adopt rules he or she finds necessary or appropriate in carrying out this chapter after consultation with representatives of housing advocates and lender participants. The director may examine the loans made under this chapter by lender participants to ascertain compliance with this chapter and any rules adopted under this chapter, and to ascertain whether a lender participant is exercising reasonable care and diligence in the making and collection of loans made under this chapter.
The director may employ employees needed to carry out the powers and duties imposed under this chapter.
The director shall report to the governor and the legislature by December 1st of each year on the operation of the housing loan reserve program and the condition of the housing loan reserve fund.
NEW SECTION. Sec. 4. (1) The housing loan reserve fund is hereby established in the custody of the state treasurer. The fund shall consist of appropriations made to the fund and any other public or private money received under this chapter. Moneys in the fund may be used only to secure loans made under this chapter. Disbursements from the fund shall be on authorization of the director, or the director's designee. The fund is subject to the allotment procedure provided under chapter 43.88 RCW, but no appropriation is required for disbursements.
(2) The state shall not be liable or obligated for any amount exceeding its appropriations to the housing loan reserve fund.
(3) Funds held in the housing loan reserve fund which are attributable to the lender participant's portion of the premium charge shall be accounted for on a lender-by-lender basis and shall include the matching premium charge paid by the borrowers and the state match paid by the state.
(4) Upon authorization by the director, disbursements from the housing loan reserve fund shall be made to lender participants by the state treasurer in warrants drawn by the controller pursuant to this chapter.
(5) Funds in the housing loan reserve fund shall be invested in time certificates of deposit with lender participants in proportion to each lender participant's participation in the housing loan reserve program. Funds shall be offered on a right of first refusal to lender participants. Should a lender participant refuse to receive funds for investment, the funds shall then be offered to other lender participants in proportion to their participation in the housing loan reserve program.
NEW SECTION. Sec. 5. (1) All income from funds invested pursuant to section 4 of this act shall be deposited in the housing loan reserve fund, and shall be used exclusively for the support of the housing loan reserve program.
(2) Whenever the director determines that the income from funds invested pursuant to section 4 of this act exceeds amounts necessary to support the housing loan reserve program pursuant to subsection (1) of this section, the director may order any excess funds transferred into the general fund, but not to exceed the amount appropriated to the housing loan reserve fund.
NEW SECTION. Sec. 6. (1) The director shall certify those financial institutions and credit unions whose experience, financial capability, and other criteria the director may establish under rules adopted under this chapter that qualify them to participate in the housing loan reserve program.
(2) Any lender participant may be disqualified from further participation in the housing loan reserve program on a finding, by the director, as specified by rule, that the participant has violated any provision of this chapter, or any rule adopted under this chapter, or that the participant is insolvent.
(3) A loan made by a lender participant shall be recorded under this section if made to an individual or a nonprofit organization purchasing housing in Washington.
(4) The director shall adopt by rule eligibility criteria for loans made under this chapter. The criteria shall be consistent with the intent of this chapter to assist low and moderate-income borrowers in obtaining loans from standard or prime lenders and shall include requirements that:
(a) Lenders make particular efforts to inform low and moderate-income borrowers of the availability of mortgage loans from the lenders; and
(b) Lenders offer technical assistance to low and moderate-income homebuyers in the mortgage loan application process.
NEW SECTION. Sec. 7. The lender and borrower shall negotiate the premium charge for each loan made pursuant to this chapter. The charge shall not exceed six percent of the loan. The lender and borrower shall contribute an equal amount to the premium charge. The state match made under this chapter shall be equal in amount to the premium charge. When a loan is participated in by two or more lender participants, the premium charge shall be a single rate, applicable to the entire loan. The lender's portion of the premium charge shall be apportioned among the lenders in proportion to each lender's participation in the loan.
NEW SECTION. Sec. 8. (1)(a) An application to record a loan made under this chapter shall be made by an eligible lender on a form or forms the director may require. The application shall set forth the amount of the loan, its maturity, interest rate, and amortization. In addition, the director may require other information relating to loan terms.
(b) If, upon application by a lender participant, the director finds that the lender has made an eligible loan, the director shall cause the loan to be recorded.
(2)(a) The lender shall submit, together with the application under subsection (1) of this section, the following premium charges determined by the lender under section 7 of this act: (i) The percent premium charge payable by the lender; and (ii) the percent premium charge payable by the borrower.
(b) Premium charges collected under this section shall be deposited in the housing loan reserve fund.
(c) Upon recording a loan, the director shall allocate, from appropriated funds, the state match payable by the state in the housing loan reserve fund.
(3) All loans made under this chapter shall be recorded in a register to be maintained by the director. The registration shall set forth the information contained in the application.
(4) At least annually, and more frequently at the direction of the director, a summary of the information contained in the register maintained pursuant to subsection (3) of this section shall be provided to each lender participant.
NEW SECTION. Sec. 9. (1) Upon default by the borrower on any loan made under this chapter, the lender, if a secured party, shall take steps, and avail itself of rights and remedies as may be provided for in the security agreement and by virtue of chapter 62A.9A RCW except when, in the determination of the director, special circumstances exist which do not warrant taking such action.
(2)(a) Upon default by the borrower on any loan made under this chapter, the lender shall promptly notify the director, and the director shall, if requested, either at that time, or after further collection efforts, pay to the lender the amount of the loss, subject to the limitation contained in (c) of this subsection, sustained by the lender.
(b) In addition to the amount of loss, the lender may claim five hundred dollars for collection expenses incurred in the attempted collection of the loan. The collection expense shall be a charge against that portion of the housing loan reserve fund attributable to the lender who made the loan, and shall be subject to the limitation contained in (c) of this subsection.
(c) Payments made to a lender pursuant to this section shall not exceed the amount retained in the housing loan reserve fund attributable to the lender who made the loan.
(3) Amounts recovered by a lender's collection efforts subsequent to presenting a claim for loss pursuant to this section shall first be paid into the housing loan reserve fund to the credit of the lender to reimburse the fund for amounts paid to the lender pursuant to subsection (2)(a) of this section.
(4) Nothing in this section may be construed to excuse the lender from exercising reasonable care and diligence in the making and collection of loans under this chapter.
If the director, after reasonable notice and opportunity for hearing to an eligible lender, finds that it has substantially failed to exercise the care and diligence required under this section, the director shall disqualify that lender for further loans under this chapter until the director is satisfied that its failure has ceased and finds that there is reasonable assurance that the lender will in the future exercise necessary care and diligence.
NEW SECTION. Sec. 10. A new section is added to chapter 42.17 RCW to read as follows:
Notwithstanding the provisions of RCW 42.17.260 through 42.17.340, no application to record a loan or the register of loans under chapter 43.-- RCW (sections 1 through 9 of this act) may be made available to the public.
NEW SECTION. Sec. 11. Sections 1 through 9 of this act shall constitute a new chapter in Title 43 RCW.
NEW SECTION. Sec. 12. 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.
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