FINAL BILL REPORT

ESB 6033

PARTIAL VETO

C 386 L 09

Synopsis as Enacted

Brief Description: Creating the prevent or reduce owner-occupied foreclosure program.

Sponsors: Senators Berkey, Fairley, Kauffman, McAuliffe, Tom, Marr, Prentice, Shin, Fraser, Kohl-Welles, Eide, McDermott, Jarrett, Regala, Hobbs, Kline, Jacobsen, Murray, Franklin, Hatfield, Kilmer, Haugen, Hargrove and Sheldon.

Senate Committee on Financial Institutions, Housing & Insurance

House Committee on Financial Institutions & Insurance

Background: In September 2007 the Governor established the Task Force for Homeowner Security (Task Force) to evaluate instability in the mortgage market and minimize its then impending impact in Washington. Since that time, the instability in the mortgage market and its economic consequences have made a significant impact on both the residential housing market and the economy in this state.

The Smart Homeownership Choices Program, enacted and funded early in 2008, addresses the Task Force's recommendation to provide grants or loans to assist qualifying low-income and moderate-income homeowners who are delinquent on their mortgage payments.

Under this program, the Department of Financial Institutions (DFI) funds the Washington State Housing Finance Commission (Commission), as needed, to implement and operate the program for the sole purpose of preventing foreclosures.The Commission assists homeowners who are delinquent on their mortgage payments in bringing their mortgage payments current so they may refinance the purchase of their homes. The Commission determines the terms and conditions of the assistance. Financial assistance received by homeowners must be repaid at the time of refinancing. Homeowners receiving financial assistance must agree to participate in a Residential Mortgage Counseling Program.

Not more than 4 percent of the total appropriation for the program may be used for administrative expenses of the DFI and the Commission. The Commission must also establish and report upon measures to gauge program's efficiency and effectiveness and customer satisfaction.

The monies appropriated for the Smart Homeownership Choices Program remain largely unspent.

A Financial Literacy and Education Program, enacted and funded early in 2008 and implementing another recommendation of the Task Force, provides counseling and education to prospective homeowners and homeowners facing foreclosure. This program is provided through DFI contracts with counselors certified either by the federal Department of Housing and Urban Development (HUD) or certified by DFI itself.

Summary: The monies remaining unspent for the Smart Homeownership Choices Program are made available to the Prevent or Reduce Owner-Occupied Foreclosure Program (PROOF). The Smart Homeownership Choices Program is replaced by PROOF. This program is created to assist borrowers facing foreclosure in achieving results that keep borrowers in their homes. Qualifying borrowers are those who live in Washington State with emphasis on those with incomes up to and including 140 percent of the county median income level.

PROOF provides a pool of unpaid volunteers from relevant professions, such as accountants, bankers, and attorneys, who provide advice to borrowers in the work-out process. The Commission implements the program by which volunteers and borrowers are paired in the most productive manner.

Not more than 4 percent of the total appropriation for PROOF may be used for administrative expenses of DFI and the Commission. The Commission must also establish and report upon measures to gauge the program's efficiency and effectiveness and customer satisfaction.

The Housing Finance Commission must establish an oversight committee to serve as the principal advisory body to the commission for PROOF. The 14-member committee is comprised of two members of the Senate, two members of the House of Representatives, the Director of the Department of Financial Institutions, the Executive Director of the Housing Finance Commission, the Office of Civil Legal Aid, the Washington Bankers' Association, the State Board of Accountancy, the Washington State Bar Association, representatives of community banks, mortgage brokers, housing counselors, and credit unions. All members serve without compensation.

The committee must evaluate PROOF's success, maintain an inventory of state and federal housing assistance programs, and coordinate the efforts of PROOF.

The act is repealed on June 30, 2011.

Votes on Final Passage:

Partial Veto Summary: The Governor vetoed the requirement that the Housing Finance Commission establish an oversight committee.