HOUSE BILL REPORT

SB 5771

BYSenator Nelson

Clarifying the process for perfecting interests in the assignment of rents.

House Committe on Judiciary

Majority Report:  Do pass.  (17)

      Signed by Representatives Appelwick, Chair; Crane, Vice Chair; Padden, Ranking Republican Member; Belcher, Brough, Dellwo, Hargrove, Inslee, P. King, R. Meyers, Moyer, H. Myers, Patrick, Schmidt, Scott, D. Sommers and Tate.

House Staff:Bill Perry (786-7123)

AS PASSED HOUSE APRIL 3, 1989

BACKGROUND:

Federal bankruptcy courts must apply state law in deciding cases involving the validity of a mortgagee's security interest.

The Bankruptcy Court for the Western District of Washington recently held a Washington statute to mean that an assignment of rents taken as security for a loan is an unperfected lien which is not perfected until the lender takes possession of the rents or has a receiver appointed.

SUMMARY:

The assignment, mortgaging, or pledging of rents as security for a loan is perfected as of the time of recording and no further action by the holder of the security interest is required to perfect the security interest.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Larry Shannon, Washington Mortgage Bankers Association.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The bill corrects a misinterpretation of Washington law by a federal court.

House Committee - Testimony Against:      None Presented.