BILL REQ. #: H-0583.2
State of Washington | 62nd Legislature | 2011 Regular Session |
Read first time 01/19/11. Referred to Committee on Judiciary.
AN ACT Relating to protecting and assisting homeowners from unnecessary foreclosures; amending RCW 61.24.030, 61.24.031, 61.24.040, 61.24.135, and 82.45.010; reenacting and amending RCW 61.24.005; adding new sections to chapter 61.24 RCW; adding a new section to chapter 36.22 RCW; creating new sections; and repealing 2009 c 292 s 13 (uncodified).
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1 The legislature finds and declares that:
(1) The rate of home foreclosures continues to rise to
unprecedented levels, both for prime and subprime loans;
(2) A new wave of foreclosures have occurred due to rising
unemployment, job loss, and higher adjustable loan payments;
(3) Foreclosures contribute to the decline in the state's housing
market, loss of property values, and other loss of revenue to the
state;
(4) The nonjudicial foreclosure process in Washington does not have
any mechanism for homeowners to readily access an impartial decision
maker in order to save the home;
(5) Several jurisdictions across the nation have foreclosure
mediation programs that aim to provide a cost-effective process to let
the homeowner and lender, with the assistance of a trained mediator,
reach a mutually acceptable resolution that avoids foreclosure; and
(6) Foreclosure mediation programs have proven to be the best
practice in preventing foreclosures and allowing the parties to agree
upon a modification that is sustainable for the homeowner and nets the
lender greater value than the lender can expect from proceeding with
foreclosure.
NEW SECTION. Sec. 2 This act may be known and cited as the
foreclosure fairness act.
Sec. 3 RCW 61.24.005 and 2009 c 292 s 1 are each reenacted and
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) "Department" means the department of commerce or its designee.
(6) "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))) (7) "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))) (8) "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))) (9) "Owner-occupied" means property that is the principal
residence of the borrower.
(((9))) (10) "Person" means any natural person, or legal or
governmental entity.
(((10))) (11) "Record" and "recorded" includes the appropriate
registration proceedings, in the instance of registered land.
(((11))) (12) "Residential real property" means property consisting
solely of a single-family residence, a residential condominium unit, or
a residential cooperative unit.
(((12))) (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.
Sec. 4 RCW 61.24.030 and 2009 c 292 s 8 are each amended to read
as follows:
It shall be requisite to a trustee's sale:
(1) That the deed of trust contains a power of sale;
(2) That the deed of trust contains a statement that the real
property conveyed is not used principally for agricultural purposes;
provided, if the statement is false on the date the deed of trust was
granted or amended to include that statement, and false on the date of
the trustee's sale, then the deed of trust must be foreclosed
judicially. Real property is used for agricultural purposes if it is
used in an operation that produces crops, livestock, or aquatic goods;
(3) That a default has occurred in the obligation secured or a
covenant of the grantor, which by the terms of the deed of trust makes
operative the power to sell;
(4) That no action commenced by the beneficiary of the deed of
trust is now pending to seek satisfaction of an obligation secured by
the deed of trust in any court by reason of the grantor's default on
the obligation secured: PROVIDED, That (a) the seeking of the
appointment of a receiver shall not constitute an action for purposes
of this chapter; and (b) if a receiver is appointed, the grantor shall
be entitled to any rents or profits derived from property subject to a
homestead as defined in RCW 6.13.010. If the deed of trust was granted
to secure a commercial loan, this subsection shall not apply to actions
brought to enforce any other lien or security interest granted to
secure the obligation secured by the deed of trust being foreclosed;
(5) That the deed of trust has been recorded in each county in
which the land or some part thereof is situated;
(6) That prior to the date of the notice of trustee's sale and
continuing thereafter through the date of the trustee's sale, the
trustee must maintain a street address in this state where personal
service of process may be made, and the trustee must maintain a
physical presence and have telephone service at such address;
(7)(a) That, for residential real property, before the notice of
trustee's sale is recorded, transmitted, or served, the trustee shall
have proof that the beneficiary is the owner of any promissory note or
other obligation secured by the deed of trust. A declaration by the
beneficiary made under the penalty of perjury stating that the
beneficiary is the actual holder of the promissory note or other
obligation secured by the deed of trust shall be sufficient proof as
required under this subsection.
(b) Unless the trustee has violated his or her duty under RCW
61.24.010(4), the trustee is entitled to rely on the beneficiary's
declaration as evidence of proof required under this subsection.
(c) This subsection (7) does not apply to association beneficiaries
subject to chapter 64.32, 64.34, or 64.38 RCW; ((and))
(8) That at least thirty days before notice of sale shall be
recorded, transmitted or served, written notice of default shall be
transmitted by the beneficiary or trustee to the borrower and grantor
at their last known addresses by both first-class and either registered
or certified mail, return receipt requested, and the beneficiary or
trustee shall cause to be posted in a conspicuous place on the
premises, a copy of the notice, or personally served on the borrower
and grantor. This notice shall contain the following information:
(a) A description of the property which is then subject to the deed
of trust;
(b) A statement identifying each county in which the deed of trust
is recorded and the document number given to the deed of trust upon
recording by each county auditor or recording officer;
(c) A statement that the beneficiary has declared the borrower or
grantor to be in default, and a concise statement of the default
alleged;
(d) An itemized account of the amount or amounts in arrears if the
default alleged is failure to make payments;
(e) An itemized account of all other specific charges, costs, or
fees that the borrower, grantor, or any guarantor is or may be obliged
to pay to reinstate the deed of trust before the recording of the
notice of sale;
(f) A statement showing the total of (d) and (e) of this
subsection, designated clearly and conspicuously as the amount
necessary to reinstate the note and deed of trust before the recording
of the notice of sale;
(g) A statement that failure to cure the alleged default within
thirty days of the date of mailing of the notice, or if personally
served, within thirty days of the date of personal service thereof, may
lead to recordation, transmittal, and publication of a notice of sale,
and that the property described in (a) of this subsection may be sold
at public auction at a date no less than one hundred twenty days in the
future;
(h) A statement that the effect of the recordation, transmittal,
and publication of a notice of sale will be to (i) increase the costs
and fees and (ii) publicize the default and advertise the grantor's
property for sale;
(i) A statement that the effect of the sale of the grantor's
property by the trustee will be to deprive the grantor of all their
interest in the property described in (a) of this subsection;
(j) A statement that the borrower, grantor, and any guarantor has
recourse to the courts pursuant to RCW 61.24.130 to contest the alleged
default on any proper ground;
(k) In the event the property secured by the deed of trust is
owner-occupied residential real property, a statement, prominently set
out at the beginning of the notice, which shall state as follows:
"You should take care to protect your interest in your home. This
notice of default (your failure to pay) is the first step in a process
that could result in you losing your home. You should carefully review
your options. For example:
Can you pay and stop the foreclosure process?
Do you dispute the failure to pay?
Can you sell your property to preserve your equity?
Are you able to refinance this loan or obligation with a new loan
or obligation from another lender with payments, terms, and fees that
are more affordable?
Do you qualify for any government or private homeowner assistance
programs?
Do you know if filing for bankruptcy is an option? What are the
pros and cons of doing so?
Do not ignore this notice; because if you do nothing, you could
lose your home at a foreclosure sale. (No foreclosure sale can be held
any sooner than ninety days after a notice of sale is issued and a
notice of sale cannot be issued until thirty days after this notice.)
Also, if you do nothing to pay what you owe, be careful of people who
claim they can help you. There are many individuals and businesses
that watch for the notices of sale in order to unfairly profit as a
result of borrowers' distress.
You may feel you need help understanding what to do. There are a
number of professional resources available, including home loan
counselors and attorneys, who may assist you. Many legal services are
lower-cost or even free, depending on your ability to pay. If you
desire legal help in understanding your options or handling this
default, you may obtain a referral (at no charge) by contacting the
county bar association in the county where your home is located. These
legal referral services also provide information about lower-cost or
free legal services for those who qualify. You may contact the
Department of Financial Institutions or the statewide civil legal aid
hotline for possible assistance or referrals"; and
(l) In the event the property secured by the deed of trust is
residential real property, the name and address of the owner of any
promissory notes or other obligations secured by the deed of trust and
the name, address, and telephone number of a party acting as a servicer
of the obligations secured by the deed of trust; and
(9) That, for residential real property, before the notice of the
trustee's sale is recorded, transmitted, or served, the beneficiary has
complied with RCW 61.24.031 and section 6 of this act.(("))
Sec. 5 RCW 61.24.031 and 2009 c 292 s 2 are each amended to read
as follows:
(1)(a) A trustee, beneficiary, or authorized agent may not issue a
notice of default under RCW 61.24.030(8) until thirty days after
initial contact with the borrower is made as required under (b) of this
subsection or thirty days after satisfying the due diligence
requirements as described in subsection (((5))) (4) of this section.
(b) A beneficiary or authorized agent shall contact the borrower by
letter and by telephone in order to assess the borrower's financial
ability to pay the debt secured by the deed of trust and explore
options for the borrower to avoid foreclosure. The letter required
under this subsection must be mailed in accordance with subsection
(((5))) (4)(a) of this section and must include the information
described in subsection (((5))) (4)(a) and (e)(i) through (iv) of this
section.
(c) During the initial contact, the beneficiary or authorized agent
shall advise the borrower that he or she has the right to request a
subsequent meeting and, if requested, the beneficiary or authorized
agent shall schedule the meeting to occur within fourteen days of the
request. The assessment of the borrower's financial ability to repay
the debt and a discussion of options ((may)) must occur during the
((initial contact or at a)) subsequent meeting scheduled for that
purpose. At the initial contact, the borrower must be provided the
toll-free telephone number made available by the ((department to find
a department-certified housing counseling agency)) United States
department of housing and urban development to find a department-certified housing counseling agency and the toll-free numbers for the
department of financial institutions and the statewide civil legal aid
hotline for possible assistance and referrals.
(d) ((Any meeting under this section may occur telephonically)) The
subsequent meeting scheduled to assess the borrower's financial ability
to repay the debt and discuss options to avoid foreclosure must be in
person, unless the requirement to meet in person is waived in writing
by the borrower or the borrower's representative.
(2) A notice of default issued under RCW 61.24.030(8) must include
a declaration, as provided in subsection (((9))) (8) of this section,
from the beneficiary or authorized agent that it has contacted the
borrower as provided in subsection (1)(((b))) of this section, it has
tried with due diligence to contact the borrower under subsection
(((5))) (4) of this section, or the borrower has surrendered the
property to the trustee, beneficiary, or authorized agent. Unless the
trustee has violated his or her duty under RCW 61.24.010(4), the
trustee is entitled to rely on the declaration as evidence that the
requirements of this section have been satisfied, and the trustee is
not liable for the beneficiary's or its authorized agent's failure to
comply with the requirements of this section.
(3) ((A beneficiary's or authorized agent's loss mitigation
personnel may participate by telephone during any contact required
under this section.)) Within fourteen days after the initial contact under
subsection (1) of this section, if a borrower has designated a
department-certified housing counseling agency, attorney, or other
advisor to discuss with the beneficiary or authorized agent, on the
borrower's behalf, options for the borrower to avoid foreclosure, the
borrower shall inform the beneficiary or authorized agent and provide
the contact information. The beneficiary or authorized agent shall
contact the designated representative for the borrower for the
discussion within fourteen days after the representative is designated
by the borrower. Any deed of trust modification or workout plan
offered at the meeting with the borrower's designated representative by
the beneficiary or authorized agent is subject to approval by the
borrower.
(4)
(((5))) (4) A notice of default may be issued under RCW
61.24.030(8) if a beneficiary or authorized agent has not contacted a
borrower as required under subsection (1)(b) of this section and the
failure to contact the borrower occurred despite the due diligence of
the beneficiary or authorized agent. Due diligence requires the
following:
(a) A beneficiary or authorized agent shall first attempt to
contact a borrower by sending a first-class letter to the address in
the beneficiary's records for sending account statements to the
borrower and to the address of the property encumbered by the deed of
trust. The letter must include the toll-free telephone number made
available by the ((department to find a department-certified housing
counseling agency)) United States department of housing and urban
development to find a department-certified housing counseling agency,
and the following information:
"You may contact the Department of Financial Institutions((, the
Washington State Bar Association,)) or the statewide civil legal aid
hotline for possible assistance or referrals."
(b)(i) After the letter has been sent, the beneficiary or
authorized agent shall attempt to contact the borrower by telephone at
least three times at different hours and on different days. Telephone
calls must be made to the primary and secondary telephone numbers on
file with the beneficiary or authorized agent.
(ii) A beneficiary or authorized agent may attempt to contact a
borrower using an automated system to dial borrowers if the telephone
call, when answered, is connected to a live representative of the
beneficiary or authorized agent.
(iii) A beneficiary or authorized agent satisfies the telephone
contact requirements of this subsection (((5))) (4)(b) if the
beneficiary or authorized agent determines, after attempting contact
under this subsection (((5))) (4)(b), that the borrower's primary
telephone number and secondary telephone number or numbers on file, if
any, have been disconnected or are not good contact numbers for the
borrower.
(c) If the borrower does not respond within fourteen days after the
telephone call requirements of (b) of this subsection have been
satisfied, the beneficiary or authorized agent shall send a certified
letter, with return receipt requested, to the borrower at the address
in the beneficiary's records for sending account statements to the
borrower and to the address of the property encumbered by the deed of
trust. The letter must include the information described in (e)(i)
through (iv) of this subsection.
(d) The beneficiary or authorized agent shall provide a means for
the borrower to contact the beneficiary or authorized agent in a timely
manner, including a toll-free telephone number or charge-free
equivalent that will provide access to a live representative during
business hours.
(e) The beneficiary or authorized agent shall post a link on the
home page of the beneficiary's or authorized agent's internet web site,
if any, to the following information:
(i) Options that may be available to borrowers who are unable to
afford their mortgage payments and who wish to avoid foreclosure, and
instructions to borrowers advising them on steps to take to explore
those options;
(ii) A list of financial documents borrowers should collect and be
prepared to present to the beneficiary or authorized agent when
discussing options for avoiding foreclosure;
(iii) A toll-free telephone number or charge-free equivalent for
borrowers who wish to discuss options for avoiding foreclosure with
their beneficiary or authorized agent; and
(iv) The toll-free telephone number or charge-free equivalent made
available by the department to find a department-certified housing
counseling agency.
(((6))) (5) Subsections (1) and (((5))) (4) of this section do not
apply if any of the following occurs:
(a) The borrower has surrendered the property as evidenced by
either a letter confirming the surrender or delivery of the keys to the
property to the trustee, beneficiary, or authorized agent; or
(b) The borrower has filed for bankruptcy, and the bankruptcy stay
remains in place, or the borrower has filed for bankruptcy and the
bankruptcy court has granted relief from the bankruptcy stay allowing
enforcement of the deed of trust.
(((7))) (6)(a) This section applies only to deeds of trust ((made
from January 1, 2003, to December 31, 2007, inclusive,)) that are
recorded against owner-occupied residential real property. 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 association beneficiaries
subject to chapter 64.32, 64.34, or 64.38 RCW.
(((8))) (7) As used in this section:
(a) "Department" means the United States department of housing and
urban development.
(b) "Seller-financed sale" means a residential real property
transaction where the seller finances all or part of the purchase
price, and that financed amount is secured by a deed of trust against
the subject residential real property.
(((9))) (8) The form of declaration to be provided by the
beneficiary or authorized agent as required under subsection (2) of
this section must be in substantially the following form:
NEW SECTION. Sec. 6 A new section is added to chapter 61.24 RCW
to read as follows:
(1)(a) At any time after a notice of default has been issued to the
borrower, but before the recording of a notice of sale pursuant to RCW
61.24.040 on owner-occupied residential real property, the beneficiary
or authorized agent must conduct a good faith review of the borrower's
financial situation and, if the borrower is eligible, must offer a loan
modification or other option to assist the borrower in avoiding
foreclosure.
(b) The requirement under this section is in addition to the
requirements under RCW 61.24.031.
(2) A good faith review of the borrower's financial situation means
the beneficiary or authorized agent:
(a) Evaluates the borrower's eligibility for all loan modification
programs established by the federal government or mortgage industry;
and
(b) Participates in the foreclosure mediation program established
under this section, if the borrower elects mediation.
(3) Failure of the beneficiary or authorized agent to conduct a
good faith review of the borrower's financial situation constitutes a
defense to foreclosure.
(4)(a) Prior to the recording of a notice of sale pursuant to RCW
61.24.040, a trustee, beneficiary, or authorized agent shall provide a
notice to the borrower and to the department by first-class mail,
return receipt requested, containing the following:
(i) The name, address, telephone number, and email address of a
person with authority to negotiate a loan modification on behalf of the
beneficiary of the deed of trust;
(ii) The toll-free telephone number made available by the United
States department of housing and urban development to find a
department-certified housing counseling agency to assist homeowners in
the state in avoiding foreclosure; and
(iii) The form notice explaining the availability of the
foreclosure mediation program.
(b) The department must create the form notice to be used. At a
minimum, the form notice must contain:
(i) An option for the borrower to indicate his or her election to
enter into foreclosure mediation or to waive mediation;
(ii) A statement encouraging the borrower to meet with a housing
counselor or an attorney prior to mediation; and
(iii) A statement informing the borrower that the form must be
returned to the department within thirty days or the borrower will
waive his or her right to foreclosure mediation and the beneficiary
will be able to proceed with the foreclosure.
(5) A trustee may not record a notice of sale under RCW 61.24.040
until the trustee has received a waiver of foreclosure mediation as
provided in subsection (7) of this section or the certification as
provided in subsection (13) of this section.
(6) If the borrower returns the form to the department within the
required time and indicates on the form his or her election to enter
into mediation, the department must notify the trustee, beneficiary,
and authorized agent by mail that the borrower has elected to enter
into mediation.
(7) If the borrower indicates on the form his or her election to
waive mediation or fails to return the form to the department as
required, the department must notify the trustee, beneficiary, and
authorized agent that the borrower has waived his or her right to
mediation.
(8) Within five business days from the date the borrower returns
the form indicating an election for mediation, the department must
select a mediator and notify the parties of the selection.
(9)(a) The foreclosure mediator may schedule phone conferences,
consultations with the parties individually, and other communications
to ensure that the parties have all the necessary information to engage
in a productive foreclosure mediation. The foreclosure mediator must
convene a foreclosure mediation session within forty-five days after
receiving a referral from the department, unless the parties agree in
writing to extend the time in which to schedule a mediation session.
(b) The foreclosure mediator must send written notice of the time,
date, and location of the foreclosure mediation session to the
borrower, the beneficiary, and the department at least fifteen days
prior to the foreclosure mediation session. At a minimum, the notice
must contain:
(i) A statement that the borrower may be represented in the
foreclosure mediation session by an attorney or other advocate;
(ii) A statement that a person with authority to agree to a
proposed settlement, loan modification, and dismissal or continuation
of the foreclosure proceeding must be present at the foreclosure
mediation;
(iii) A complete list of documents and calculations that the
parties must provide to the mediator and the deadlines for providing
the documents and calculations. The list must include the documents
and calculations as required under subsection (11)(b) and (c) of this
section; and
(iv) A statement that the parties have an obligation to mediate in
good faith and a statement providing the sanctions for failing to
mediate in good faith.
(c) The department may create the format of this notice by rule.
(d) The borrower, the beneficiary or agent or representative, and
the mediator must meet in person for the mediation session.
(10) The participants in a foreclosure mediation must address the
issues of foreclosure that will enable the borrower and the beneficiary
to avoid foreclosure, including but not limited to reinstatement,
modification of the loan, or restructuring of the debt. To assist the
parties in addressing issues of foreclosure, the mediator must require
the participants to consider the following:
(a) The borrower's current circumstances, including the borrower's
current and future income, debts, and obligations;
(b) The net present value of receiving payments pursuant to a
modified mortgage loan as compared to the anticipated net recovery
following foreclosure;
(c) Any affordable loan modification calculation and net present
value calculation when required under any federal mortgage relief
program, including the home affordable modification program (HAMP) as
applicable to government-sponsored enterprise and nongovernment-sponsored enterprise loans and any HAMP-related modification program
applicable to loans insured by the federal housing administration, the
veterans administration, and the rural housing service. If such a
calculation is not required, then the beneficiary must use the current
calculations, assumptions, and forms that are established by the
federal deposit insurance corporation and published in the federal
deposit insurance corporation loan modification program guide; and
(d) Any other loss mitigation guidelines applicable to loans
insured by the federal housing administration, the veterans
administration, and the rural housing service.
(11) The parties have the duty to act in good faith. Sharing
information, negotiating willingly, cooperating with the mediator, and
keeping any agreements made in mediation are indications of whether a
party acted in good faith. A violation of the obligation of good faith
includes, but is not limited to:
(a) Failure to timely participate in mediation without good cause;
(b) Failure of the beneficiary to provide the following
documentation to the borrower and mediator at least ten days before the
foreclosure mediation:
(i) An accurate statement containing the balance of the loan;
(ii) Copies of original loan documents;
(iii) Proof that the entity claiming to be the beneficiary is the
owner of any promissory note or obligation secured by the deed of
trust, including proof that the entity seeking to foreclose is the
current assignee of the deed of trust;
(iv) The amount of any arrearage and an itemized statement of the
arrearages;
(v) An itemized list of fees and charges outstanding;
(vi) The payment history and schedule, including a breakdown of all
fees and charges claimed;
(vii) An affordable loan modification calculation;
(viii) A net present value calculation showing all inputs and the
outcome of the net present value test expressed in a dollar amount
including all worksheets, spreadsheets, inputs, numerical assumptions,
and results;
(ix) The most recently available appraisal;
(x) A copy of the pooling and servicing agreement if the
beneficiary claims it cannot implement a modification due to
limitations in a pooling and servicing agreement, and documentation
showing the efforts of the beneficiary to obtain a waiver of the
pooling and servicing agreement provisions; and
(xi) Any other relevant information as determined by the mediator;
(c) Failure of the borrower to provide documentation to the
beneficiary and mediator at least ten days before the foreclosure
mediation showing the borrower's current and future income, debts and
obligations, and tax returns for the past two years;
(d) Failure of a party to designate a representative with adequate
authority to fully settle, compromise, or otherwise mediate the matter;
(e) A request by a beneficiary that the borrower waive other rights
or claims he or she may have in connection with the deed of trust, as
a condition of agreeing to a modification; and
(f) Failure of a beneficiary to agree to a modification where the
net present value of the modified loan exceeds the anticipated net
recovery at foreclosure.
(12) Within seven business days after the conclusion of a
foreclosure mediation session, the foreclosure mediator must make a
written certification to the department and send copies to the parties
of:
(a) The date, time, and location of the mediation session;
(b) The names of all persons in attendance at the mediation
session;
(c) Whether the default was cured by reinstatement, modification,
or restructuring of the debt;
(d) Whether the parties participated in the foreclosure mediation
in good faith; and
(e) A description of the net present value test used, along with a
copy of the calculation and inputs, including the result of the net
present value test expressed in a dollar amount.
(13) If the parties are unable to reach a mediation agreement and
the mediator certifies that the parties acted in good faith, the
beneficiary may proceed with the foreclosure.
(14)(a) The foreclosure mediator's certification that the
beneficiary failed to act in good faith in mediation constitutes a
defense to a foreclosure action.
(b) If a mediation agreement was not reached and the report of the
mediator indicates that the calculations showed the net present value
of the modified loan exceeds the anticipated net recovery at
foreclosure, the report's finding shall constitute a basis for the
borrower to enjoin the foreclosure.
(15) The foreclosure mediator's certification that the borrower
failed to act in good faith in mediation authorizes the beneficiary to
proceed with the foreclosure.
(16) A foreclosure mediator may charge reasonable fees as
authorized by this subsection and by the department. Unless the fee is
waived or the parties agree otherwise, a foreclosure mediator's fee may
not exceed four hundred dollars for a foreclosure mediation session
lasting between one hour and three hours. For a mediation session
exceeding three hours, the foreclosure mediator may charge a reasonable
fee, as authorized by the department. Payment of the mediator's fee
must be divided equally between the beneficiary and the borrower. The
beneficiary and the borrower must tender the loan mediator's fee
pursuant to the mediator's instructions.
(17) This section applies only to deeds of trust that are recorded
against owner-occupied residential real property. This section does
not apply to deeds of trust:
(a) Securing a commercial loan;
(b) Securing obligations of a grantor who is not the borrower or a
guarantor; or
(c) Securing a purchaser's obligations under a seller-financed
sale.
(18) Beginning December 1, 2012, and every year thereafter, the
department shall report annually to the legislature on:
(a) The performance of the program, including the numbers of
borrowers who are notified of mediation and who attend mediation;
(b) The results of the mediation program, including the numbers of
loans restructured or modified, the change in the borrower's monthly
payment for principal and interest, the number of principal write-downs
and interest rate reductions, and, to the extent practical, the number
of borrowers who default within a year of restructuring or
modification; and
(c) Any recommendations for changes to the statutes regarding the
mediation program.
NEW SECTION. Sec. 7 A new section is added to chapter 61.24 RCW
to read as follows:
(1) For the purposes of section 6 of this act, the department must
maintain a list of approved foreclosure mediators. The department may
approve the following persons to serve as foreclosure mediators under
this section:
(a) Attorneys who are active members of the Washington state bar
association;
(b) Employees of United States department of housing and urban
development-certified housing counseling agencies;
(c) Employees or volunteers of dispute resolution centers under
chapter 7.75 RCW;
(d) Retired judges of Washington courts;
(e) Other statewide organizations that provide mediation services;
and
(f) Any other persons authorized by the department.
(2) The department may establish a required training program for
foreclosure mediators and may require mediators to acquire training
before being approved. The mediators must be familiar with relevant
aspects of the law, have knowledge of community-based resources and
mortgage assistance programs, and refer borrowers to these programs
where appropriate.
(3) The department may remove any mediator from the approved list
of mediators.
Sec. 8 RCW 61.24.040 and 2009 c 292 s 9 are each amended to read
as follows:
A deed of trust foreclosed under this chapter shall be foreclosed
as follows:
(1) At least ninety days before the sale, the trustee shall:
(a) Record a notice in the form described in (f) of this subsection
in the office of the auditor in each county in which the deed of trust
is recorded;
(b) To the extent the trustee elects to foreclose its lien or
interest, or the beneficiary elects to preserve its right to seek a
deficiency judgment against a borrower or grantor under RCW
61.24.100(3)(a), and if their addresses are stated in a recorded
instrument evidencing their interest, lien, or claim of lien, or an
amendment thereto, or are otherwise known to the trustee, cause a copy
of the notice of sale described in (f) of this subsection to be
transmitted by both first-class and either certified or registered
mail, return receipt requested, to the following persons or their legal
representatives, if any, at such address:
(i) The borrower and grantor;
(ii) The beneficiary of any deed of trust or mortgagee of any
mortgage, or any person who has a lien or claim of lien against the
property, that was recorded subsequent to the recordation of the deed
of trust being foreclosed and before the recordation of the notice of
sale;
(iii) The vendee in any real estate contract, the lessee in any
lease, or the holder of any conveyances of any interest or estate in
any portion or all of the property described in such notice, if that
contract, lease, or conveyance of such interest or estate, or a
memorandum or other notice thereof, was recorded after the recordation
of the deed of trust being foreclosed and before the recordation of the
notice of sale;
(iv) The last holder of record of any other lien against or
interest in the property that is subject to a subordination to the deed
of trust being foreclosed that was recorded before the recordation of
the notice of sale;
(v) The last holder of record of the lien of any judgment
subordinate to the deed of trust being foreclosed; and
(vi) The occupants of property consisting solely of a single-family
residence, or a condominium, cooperative, or other dwelling unit in a
multiplex or other building containing fewer than five residential
units, whether or not the occupant's rental agreement is recorded,
which notice may be a single notice addressed to "occupants" for each
unit known to the trustee or beneficiary;
(c) Cause a copy of the notice of sale described in (f) of this
subsection to be transmitted by both first-class and either certified
or registered mail, return receipt requested, to the plaintiff or the
plaintiff's attorney of record, in any court action to foreclose a lien
or other encumbrance on all or any part of the property, provided a
court action is pending and a lis pendens in connection therewith is
recorded in the office of the auditor of any county in which all or
part of the property is located on the date the notice is recorded;
(d) Cause a copy of the notice of sale described in (f) of this
subsection to be transmitted by both first-class and either certified
or registered mail, return receipt requested, to any person who has
recorded a request for notice in accordance with RCW 61.24.045, at the
address specified in such person's most recently recorded request for
notice;
(e) Cause a copy of the notice of sale described in (f) of this
subsection to be posted in a conspicuous place on the property, or in
lieu of posting, cause a copy of said notice to be served upon any
occupant of the property;
(f) The notice shall be in substantially the following form:
[If any personal property is to be included in the trustee's sale, include a description that reasonably identifies such personal property]
[If there is another action pending to foreclose other security for all or part of the same debt, qualify the statement and identify the action.]
[If default is for other than payment of money, set forth the particulars]
. . . . . . . . . . . . | |
. . . . . . . . . . . . | |
. . . . . . . . . . . . |
Estimated amount | |||
Currently due | that will be due | ||
to reinstate | to reinstate | ||
on. . . . . | on. . . . . | ||
. . . . . . | . . . . . . | ||
(11 days before | |||
the date set | |||
for sale) | |||
Delinquent payments | |||
from. . . . . . , | |||
. . . , in the | |||
amount of | |||
$. . . . /mo.: | $. . . . | $. . . . | |
Late charges in | |||
the total | |||
amount of: | $. . . . | $. . . . | |
Estimated | |||
Amounts | |||
Attorneys' fees: | $. . . . | $. . . . | |
Trustee's fee: | $. . . . | $. . . . | |
Trustee's expenses: | |||
(Itemization) | |||
Title report | $. . . . | $. . . . | |
Recording fees | $. . . . | $. . . . | |
Service/Posting of Notices | $. . . . | $. . . . | |
Postage/Copying expense | $. . . . | $. . . . | |
Publication | $. . . . | $. . . . | |
Telephone charges | $. . . . | $. . . . | |
Inspection fees | $. . . . | $. . . . | |
. . . . . . | $. . . . | $. . . . | |
. . . . . . | $. . . . | $. . . . | |
TOTALS | $. . . . | $. . . . |
NEW SECTION. Sec. 9 A new section is added to chapter 61.24 RCW
to read as follows:
The provisions for foreclosure mediation under section 6 of this
act do not apply to community banks and credit unions organized under
the laws of this state.
NEW SECTION. Sec. 10 A new section is added to chapter 61.24 RCW
to read as follows:
(1) Any duty that servicers may have to maximize net present value
under their pooling and servicing agreements is owed to all parties in
a deed of trust pool, not to any particular parties, and a servicer
acts in the best interests of all parties if it agrees to or implements
a modification or workout plan when both of the following apply:
(a) The deed of trust is in payment default, or payment default is
reasonably foreseeable; and
(b) Anticipated recovery under a modification or workout plan
exceeds the anticipated recovery through foreclosure on a net present
value basis.
(2) The mortgagee, beneficiary, or authorized agent shall offer the
borrower a modification or workout plan unless the beneficiary has
produced evidence establishing that the modification or workout plan is
prohibited by express terms of a pooling and servicing agreement and
those terms cannot be waived.
NEW SECTION. Sec. 11 A new section is added to chapter 36.22 RCW
to read as follows:
(1) In addition to any other fees authorized by statute or other
law, the county auditor shall collect a thirty dollar surcharge at the
time of recording a notice of trustee's sale on owner-occupied
residential real property under RCW 61.24.040.
(2) The county auditor may retain up to two percent of the funds
collected to administer collection. The county auditor must transmit,
on a monthly basis, the remaining funds to the director of the
department of commerce to be used solely to fund housing counselors who
advise and represent borrowers in achieving workouts, modifications,
and other results that keep borrowers in their homes and avoid
foreclosure. The department may enter into an interagency agreement
with the Washington state housing finance commission to administer the
funds collected under this section.
Sec. 12 RCW 61.24.135 and 2008 c 153 s 6 are each amended to read
as follows:
(1) It is an unfair or deceptive act or practice under the consumer
protection act, chapter 19.86 RCW, for any person, acting alone or in
concert with others, to offer, or offer to accept or accept from
another, any consideration of any type not to bid, or to reduce a bid,
at a sale of property conducted pursuant to a power of sale in a deed
of trust. The trustee may decline to complete a sale or deliver the
trustee's deed and refund the purchase price, if it appears that the
bidding has been collusive or defective, or that the sale might have
been void. However, it is not an unfair or deceptive act or practice
for any person, including a trustee, to state that a property subject
to a recorded notice of trustee's sale or subject to a sale conducted
pursuant to this chapter is being sold in an "as-is" condition, or for
the beneficiary to arrange to provide financing for a particular bidder
or to reach any good faith agreement with the borrower, grantor, any
guarantor, or any junior lienholder.
(2) It is an unfair or deceptive act in trade or commerce and an
unfair method of competition in violation of the consumer protection
act, chapter 19.86 RCW, for any person to violate the duty of good
faith under section 6 of this act or for any person to fail to comply
with the requirements under RCW 61.24.031.
Sec. 13 RCW 82.45.010 and 2010 1st sp.s. c 23 s 207 are each
amended to read as follows:
(1) As used in this chapter, the term "sale" has its ordinary
meaning and includes any conveyance, grant, assignment, quitclaim, or
transfer of the ownership of or title to real property, including
standing timber, or any estate or interest therein for a valuable
consideration, and any contract for such conveyance, grant, assignment,
quitclaim, or transfer, and any lease with an option to purchase real
property, including standing timber, or any estate or interest therein
or other contract under which possession of the property is given to
the purchaser, or any other person at the purchaser's direction, and
title to the property is retained by the vendor as security for the
payment of the purchase price. The term also includes the grant,
assignment, quitclaim, sale, or transfer of improvements constructed
upon leased land.
(2)(a) The term "sale" also includes the transfer or acquisition
within any twelve-month period of a controlling interest in any entity
with an interest in real property located in this state for a valuable
consideration.
(b) For the sole purpose of determining whether, pursuant to the
exercise of an option, a controlling interest was transferred or
acquired within a twelve-month period, the date that the option
agreement was executed is the date on which the transfer or acquisition
of the controlling interest is deemed to occur. For all other purposes
under this chapter, the date upon which the option is exercised is the
date of the transfer or acquisition of the controlling interest.
(c) For purposes of this subsection, all acquisitions of persons
acting in concert must be aggregated for purposes of determining
whether a transfer or acquisition of a controlling interest has taken
place. The department must adopt standards by rule to determine when
persons are acting in concert. In adopting a rule for this purpose,
the department must consider the following:
(i) Persons must be treated as acting in concert when they have a
relationship with each other such that one person influences or
controls the actions of another through common ownership; and
(ii) When persons are not commonly owned or controlled, they must
be treated as acting in concert only when the unity with which the
purchasers have negotiated and will consummate the transfer of
ownership interests supports a finding that they are acting as a single
entity. If the acquisitions are completely independent, with each
purchaser buying without regard to the identity of the other
purchasers, then the acquisitions are considered separate acquisitions.
(3) The term "sale" does not include:
(a) A transfer by gift, devise, or inheritance.
(b) A transfer of any leasehold interest other than of the type
mentioned above.
(c) A cancellation or forfeiture of a vendee's interest in a
contract for the sale of real property, whether or not such contract
contains a forfeiture clause, or deed in lieu of foreclosure of a
mortgage.
(d) The partition of property by tenants in common by agreement or
as the result of a court decree.
(e) The assignment of property or interest in property from one
spouse or one domestic partner to the other spouse or other domestic
partner in accordance with the terms of a decree of dissolution of
marriage or state registered domestic partnership or in fulfillment of
a property settlement agreement.
(f) The assignment or other transfer of a vendor's interest in a
contract for the sale of real property, even though accompanied by a
conveyance of the vendor's interest in the real property involved.
(g) Transfers by appropriation or decree in condemnation
proceedings brought by the United States, the state or any political
subdivision thereof, or a municipal corporation.
(h) A mortgage or other transfer of an interest in real property
merely to secure a debt, or the assignment thereof.
(i) Any transfer or conveyance made pursuant to a deed of trust or
an order of sale by the court in any mortgage, deed of trust, or lien
foreclosure proceeding or upon execution of a judgment, or deed in lieu
of foreclosure to satisfy a mortgage or deed of trust. If a transfer
or conveyance made pursuant to a deed in lieu of foreclosure to satisfy
a deed of trust includes providing the transferor or conveyor a nominal
sum of funds to assist the transferor or conveyor with relocating, the
transfer or conveyance is not a sale for the purposes of this chapter.
(j) A conveyance to the federal housing administration or veterans
administration by an authorized mortgagee made pursuant to a contract
of insurance or guaranty with the federal housing administration or
veterans administration.
(k) A transfer in compliance with the terms of any lease or
contract upon which the tax as imposed by this chapter has been paid or
where the lease or contract was entered into prior to the date this tax
was first imposed.
(l) The sale of any grave or lot in an established cemetery.
(m) A sale by the United States, this state or any political
subdivision thereof, or a municipal corporation of this state.
(n) A sale to a regional transit authority or public corporation
under RCW 81.112.320 under a sale/leaseback agreement under RCW
81.112.300.
(o) A transfer of real property, however effected, if it consists
of a mere change in identity or form of ownership of an entity where
there is no change in the beneficial ownership. These include
transfers to a corporation or partnership which is wholly owned by the
transferor and/or the transferor's spouse or domestic partner or
children of the transferor or the transferor's spouse or domestic
partner. However, if thereafter such transferee corporation or
partnership voluntarily transfers such real property, or such
transferor, spouse or domestic partner, or children of the transferor
or the transferor's spouse or domestic partner voluntarily transfer
stock in the transferee corporation or interest in the transferee
partnership capital, as the case may be, to other than (i) the
transferor and/or the transferor's spouse or domestic partner or
children of the transferor or the transferor's spouse or domestic
partner, (ii) a trust having the transferor and/or the transferor's
spouse or domestic partner or children of the transferor or the
transferor's spouse or domestic partner as the only beneficiaries at
the time of the transfer to the trust, or (iii) a corporation or
partnership wholly owned by the original transferor and/or the
transferor's spouse or domestic partner or children of the transferor
or the transferor's spouse or domestic partner, within three years of
the original transfer to which this exemption applies, and the tax on
the subsequent transfer has not been paid within sixty days of becoming
due, excise taxes become due and payable on the original transfer as
otherwise provided by law.
(p)(i) A transfer that for federal income tax purposes does not
involve the recognition of gain or loss for entity formation,
liquidation or dissolution, and reorganization, including but not
limited to nonrecognition of gain or loss because of application of 26
U.S.C. Sec. 332, 337, 351, 368(a)(1), 721, or 731 of the internal
revenue code of 1986, as amended.
(ii) However, the transfer described in (p)(i) of this subsection
cannot be preceded or followed within a twelve-month period by another
transfer or series of transfers, that, when combined with the otherwise
exempt transfer or transfers described in (p)(i) of this subsection,
results in the transfer of a controlling interest in the entity for
valuable consideration, and in which one or more persons previously
holding a controlling interest in the entity receive cash or property
in exchange for any interest the person or persons acting in concert
hold in the entity. This subsection (3)(p)(ii) does not apply to that
part of the transfer involving property received that is the real
property interest that the person or persons originally contributed to
the entity or when one or more persons who did not contribute real
property or belong to the entity at a time when real property was
purchased receive cash or personal property in exchange for that person
or persons' interest in the entity. The real estate excise tax under
this subsection (3)(p)(ii) is imposed upon the person or persons who
previously held a controlling interest in the entity.
(q) A qualified sale of a manufactured/mobile home community, as
defined in RCW 59.20.030, that takes place on or after June 12, 2008,
but before December 31, 2018.
NEW SECTION. Sec. 14 2009 c 292 s 13 (uncodified) is repealed.
NEW SECTION. Sec. 15 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.