SENATE BILL REPORT
SSB 5500
BYSenate Committee on Law & Justice (originally sponsored by Senators Talmadge, Hayner, Lee and Rasmussen)
Changing provisions relating to valuation of homestead or agricultural property for foreclosure purposes.
Senate Committee on Law & Justice
Senate Hearing Date(s):February 16, 1987; February 17, 1987; January 25, 1988; January 26, 1988
Majority Report: That Substitute Senate Bill No. 5500 be substituted therefor, and the substitute bill do pass.
Signed by Senators Pullen, Chairman; McCaslin, Vice Chairman; Halsan, Hayner, Madsen, Newhouse, Niemi, Talmadge.
Senate Staff:Dick Armstrong (786-7460)
February 9, 1988
AS PASSED SENATE, FEBRUARY 8, 1988
BACKGROUND:
When ordering a foreclosure sale, the court may, in its discretion, fix a minimum or upset price to which the mortgaged premises must be bid or sold before confirmation of the sale. The original intention of the statute was to protect homeowners and farmers from deficiency judgments in times of economic depression. However, in current practice it appears that the upset price eliminates competition from the bidding process and deprives the judgment debtor of the most favorable bids.
In addition, the statute can be used by commercial borrowers to avoid a deficiency judgment despite the fact that the borrower's credit, independent of the security, is the basis for the loan. It is suggested that the upset price language be eliminated and that the court establish the fair market value for homesteaded and farming property when requested to do so by the judgment debtor.
SUMMARY:
If the property that is to be sold at a foreclosure sale is homesteaded or agriculture property, the court may establish the fair value of the property and require that the fair value be credited upon the foreclosure judgment. If the fair value discharges the debt, no deficiency judgment may be granted.
Appropriation: none
Revenue: none
Fiscal Note: none requested
Senate Committee - Testified: John Gose, attorney