HOUSE BILL REPORT

EHB 2606

BYRepresentatives Ferguson, Beck, Haugen, Ballard, Jones, Chandler, Nutley, Winsley, Anderson, Miller, Van Luven, Holland, Nealey, Fuhrman, Forner, Raiter, Wolfe, Doty, Wood, Cooper, Tate, Youngsman, Zellinsky, D. Sommers, Nelson, Sayan, Wineberry, K. Wilson, Phillips, Belcher, Dorn, Day, Crane, Baugher, Wang, Dellwo, Jacobsen, Rector, Kremen, Padden, Smith, Horn, Betrozoff, Moyer, Scott, Bowman, Hankins and Schoon

Requiring disclosure of the right to cancel mortgage insurance.

House Committe on Financial Institutions & Insurance

Majority Report:  Do pass.  (13)

      Signed by Representatives Dellwo, Chair; Zellinsky, Vice Chair; Chandler, Ranking Republican Member; Anderson, Baugher, Beck, Crane, Day, Dorn, Inslee, Nutley, K. Wilson and Winsley.

House Staff:John Conniff (786-7119)

AS PASSED HOUSE FEBRUARY 8, 1990

BACKGROUND:

When a borrower seeks a home mortgage loan, the lender requires the borrower to meet certain financial standards. Among these standards is the requirement that the borrower be able to make a downpayment for a certain percentage of the purchase price of the home.  This percentage can vary from 0 to 10 percent depending upon the type of mortgage loan being granted, i.e. VA, FHA, or conventional loan.  Until the borrower's equity in the home reaches a certain percentage (e.g. 20-25 percent), the borrower may be required to pay for mortgage insurance that protects the lender from borrower default on the loan.  Some loan programs permit the borrower to cancel the mortgage insurance when the borrower's equity reaches the required level.  Other loan programs require mortgage insurance for the full loan term.

SUMMARY:

If mortgage insurance is required for a residential mortgage loan, the lender must advise the borrower whether or not the borrower has the right to cancel the mortgage insurance.  If the borrower has such a right, the lender must provide written notification at loan closing time of the procedures and conditions that must be met by the borrower to cancel the insurance.

Upon request of a loan applicant, a lender shall provide copies of all closing documents to the applicant at least 24 hours prior to loan closing.  Each lender must advise a loan applicant at the time of application that the applicant has the right to request and receive copies of closing documents prior to loan closing.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    No one.

House Committee - Testified Against:      Don Brazier, Washington Savings League and Larry Shannon, Washington Mutual Bankers Association.

House Committee - Testimony For:    None.

House Committee - Testimony Against:      While we do not particularly oppose this legislation and agree with its intent, we question the need for the legislation.  Requiring another disclosure simply adds to the paperwork already required to close a mortgage transaction.