BILL REQ. #:  S-0510.1 

Read first time 01/19/11.   Referred to Committee on Financial Institutions, Housing & Insurance.

     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.
     (4))) 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.
     (((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]

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.