5590-S AMH JUDI TANG 106

SSB 5590 - H COMM AMD

By Committee on Judiciary

ADOPTED 04/05/2011

    Strike everything after the enacting clause and insert the following:

    "NEW SECTION. Sec. 1.  A new section is added to chapter 61.24 RCW to read as follows:

    (1) Whenever (a) consummation of a written agreement for the purchase and sale of owner-occupied residential real property would result in contractual sale proceeds that are insufficient to pay in full the obligation owed to a senior beneficiary of a deed of trust encumbering the residential real property; and (b) the seller makes a written offer to the senior beneficiary to accept the entire net proceeds of the sale in order to facilitate closing of the purchase and sale; then the senior beneficiary must, within one hundred twenty days after the receipt of the written offer, deliver to the seller, in writing, an acceptance, rejection, or counter-offer of the seller's written offer.  The senior beneficiary may determine, in its sole discretion, whether to accept, reject, or counter-offer the seller's written offer.

    (2) This section applies only when the written offer to the senior beneficiary is received by the senior beneficiary prior to the issuance of a notice of default.  The offer must include a copy of the purchase and sale agreement.  The offer must be sent to the address of the senior beneficiary or the address of a party acting as a servicer of the obligation secured by the deed of trust. 

    (3) A seller has a right of action for actual monetary damages incurred as a result of the senior beneficiary's failure to comply with the requirements of subsection (1) of this section.

    (4) A senior beneficiary is not liable for the actions or inactions of any other lien holder.

    (5)(a) This section does not apply to deeds of trust: (i) securing a commercial loan; (ii) securing obligations of a grantor who is not the borrower or a guarantor; or (iii) securing a purchaser's obligations under a seller-financed sale.

    (b) This section does not apply to beneficiaries that are exempt from section 7, chapter ___ (2SHB 1362), laws of 2011, if enacted, or if not enacted, to beneficiaries that conduct fewer than two hundred fifty trustee sales per year.

    (6) This section does not alter a beneficiary's right to issue a notice of default and does not lengthen or shorten any time period imposed or required under this chapter.

Sec. 2. RCW 61.24.127 and 2009 c 292 s 6 are each amended to read as follows:

    (1) The failure of the borrower or grantor to bring a civil action to enjoin a foreclosure sale under this chapter may not be deemed a waiver of a claim for damages asserting:

    (a) Common law fraud or misrepresentation;

    (b) A violation of Title 19 RCW; ((or))

    (c) Failure of the trustee to materially comply with the provisions of this chapter; or
(d) A violation of section 1 of this act.

    (2) The nonwaived claims listed under subsection (1) of this section are subject to the following limitations:

    (a) The claim must be asserted or brought within two years from the date of the foreclosure sale or within the applicable statute of limitations for such claim, whichever expires earlier;

    (b) The claim may not seek any remedy at law or in equity other than monetary damages;

    (c) The claim may not affect in any way the validity or finality of the foreclosure sale or a subsequent transfer of the property;

    (d) A borrower or grantor who files such a claim is prohibited from recording a lis pendens or any other document purporting to create a similar effect, related to the real property foreclosed upon;

    (e) The claim may not operate in any way to encumber or cloud the title to the property that was subject to the foreclosure sale, except to the extent that a judgment on the claim in favor of the borrower or grantor may, consistent with RCW 4.56.190, become a judgment lien on real property then owned by the judgment debtor; and

    (f) The relief that may be granted for judgment upon the claim is limited to actual damages.  However, if the borrower or grantor brings in the same civil action a claim for violation of chapter 19.86 RCW, arising out of the same alleged facts, relief under chapter 19.86 RCW is limited to actual damages, treble damages as provided for in RCW 19.86.090, and the costs of suit, including a reasonable attorney's fee.

    (((4) [(3)])) (3) This section applies only to foreclosures of owner-occupied residential real property.

    (((5) [(4)])) (4) This section does not apply to the foreclosure of a deed of trust used to secure a commercial loan.

Sec. 3. RCW 61.24.005 and 2009 c 292 s 1 are each amended to read as follows:

    The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

    (1) "Affiliate of beneficiary" means any entity which controls, is controlled by, or is under common control with a beneficiary.

    (2) "Beneficiary" means the holder of the instrument or document evidencing the obligations secured by the deed of trust, excluding persons holding the same as security for a different obligation.

    (3) "Borrower" means a person or a general partner in a partnership, including a joint venture, that is liable for all or part of the obligations secured by the deed of trust under the instrument or other document that is the principal evidence of such obligations, or the person's successors if they are liable for those obligations under a written agreement with the beneficiary.

    (4) "Commercial loan" means a loan that is not made primarily for personal, family, or household purposes.

    (5) "Fair value" means the value of the property encumbered by a deed of trust that is sold pursuant to a trustee's sale.  This value shall be determined by the court or other appropriate adjudicator by reference to the most probable price, as of the date of the trustee's sale, which would be paid in cash or other immediately available funds, after deduction of prior liens and encumbrances with interest to the date of the trustee's sale, for which the property would sell on such date after reasonable exposure in the market under conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under duress.

    (6) "Grantor" means a person, or its successors, who executes a deed of trust to encumber the person's interest in property as security for the performance of all or part of the borrower's obligations.

    (7) "Guarantor" means any person and its successors who is not a borrower and who guarantees any of the obligations secured by a deed of trust in any written agreement other than the deed of trust.

    (8) "Owner-occupied" means property that is the principal residence of the borrower.

    (9) "Person" means any natural person, or legal or governmental entity.

    (10) "Record" and "recorded" includes the appropriate registration proceedings, in the instance of registered land.

    (11) "Residential real property" means property consisting solely of a single-family residence, a residential condominium unit, or a residential cooperative unit.

    (12) "Senior beneficiary" means the beneficiary of a deed of trust that has priority over any other deeds of trust encumbering the same residential real property."

(13) "Tenant-occupied property" means property consisting solely of residential real property that is the principal residence of a tenant subject to chapter 59.18 RCW or other building with four or fewer residential units that is the principal residence of a tenant subject to chapter 59.18 RCW. 

    (((13))) (14) "Trustee" means the person designated as the trustee in the deed of trust or appointed under RCW 61.24.010(2).

    (((14))) (15) "Trustee's sale" means a nonjudicial sale under a deed of trust undertaken pursuant to this chapter."

    Correct the title.

EFFECT:   Provides that the requirement for a beneficiary to respond to a short sale offer within 120 days applies to senior beneficiaries of deeds of trusts (as opposed to lien holders of mortgages and real estate contracts).  Provides that the requirement applies only when an offer is sent to the senior beneficiary before a notice of default is issued.  Requires that the offer include the purchase and sale agreement and be sent to the beneficiary's or servicer's address. 

Exempts from the requirement: (a) beneficiaries that do fewer than 250 foreclosures per year; and (b) deeds of trust securing commercial loans, securing obligations of a grantor who is not the borrower or a guarantor, or securing a purchaser's obligations under a seller-financed sale.

Removes the provision making a violation of the bill a Consumer Protection Act violation.  Removes the "in good faith" language. Explicitly states that the requirement does not alter a beneficiary's right to issue a notice of default and does not lengthen or shorten any time period imposed by the Deeds of Trust Act.  Changes terms to be consistent with terms in the Deeds of Trust Act.

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