SENATE BILL REPORT
SB 5154
BYSenator Owen
Governing the use of security protection provisions with respect to real estate loan agreements.
Senate Committee on Financial Institutions
Senate Hearing Date(s):January 20, 1987; February 5, 1987
Majority Report: That Substitute Senate Bill No. 5154 be substituted therefor, and the substitute bill do pass.
Signed by Senators Moore, Chairman; Bender, Vice Chairman; Bottiger, Fleming, Metcalf, von Reichbauer.
Senate Staff:Stephanie Yates (786-7416)
February 5, 1987
AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS, FEBRUARY 5, 1987
BACKGROUND:
In a real estate loan agreement, a lender may require a security protection provision (reserve account) for the payment of property taxes and insurance premiums on property that is security for the real estate loan. Generally, a portion of each loan payment is placed in the account.
SUMMARY:
If a lender requires a security protection provision for the payment of property taxes and insurance premiums, the lender must make timely payments of those property taxes and insurance premiums. Failure to make timely payments when the borrower has sufficient funds in the account gives the borrower a cause of action for actual damages or $1,000 per occurrence, whichever is greater.
EFFECT OF PROPOSED SUBSTITUTE:
A provision is added to specify that if there is a shortage of funds in the reserve account, and the lender does not intend to advance payment of property taxes and insurance premiums, the lender must notify the borrower of the shortage not fewer than 15 days in advance of the due dates for payment.
The provision allowing for recovery of $1,000 as liquidated damages if the lender fails to make timely payments of property taxes and insurance premiums is deleted.
Fiscal Note: none requested
Senate Committee - Testified: Don Brazier, Washington Savings League; Cindy Manning, Aide to Senator Owen; Storm Johnsen, self; Larry Shannon, Washington Mortgage Bankers Association; Keith Hopper, Washington Bankers Association