HOUSE BILL REPORT

SSB 5790

As Amended by the House

BYSenate Committee on Financial Institutions & Insurance (originally sponsored by Senators von Reichbauer, Fleming, Johnson, McCaslin and McMullen)

Regulating the sale of loan servicing.

House Committe on Financial Institutions & Insurance

Majority Report:  Do pass with amendments.  (14)

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

House Staff:John Conniff (786-7119)

AS PASSED HOUSE APRIL 4, 1989

BACKGROUND:

When a lender makes a home loan, the lender may either retain the loan or sell the loan. If the lender wishes to retain the loan but does not want to service the loan, the lender may sell the rights to service the loan in which case the borrower is required to send payments to the loan servicer who forwards the payment to the lender less servicing costs. If the loan or loan servicing rights are sold more than once, a borrower may encounter difficulty in obtaining information regarding the loan and may become confused as to who is entitled to payment.

SUMMARY:

Whenever a lender grants a loan secured by a one to four family, owner occupied residence located in this state, the lender must inform the borrower whether servicing of the loan is subject to sale, transfer, or assignment and must inform the borrower that the new servicer will notify the borrower.  If the loan servicing is subject to sale, transfer, or assignment, the lender must provide written notice of this fact prior to loan closing and if the ownership of the lending institution changes and the lender has not provided this notice, the new owner of the lender must provide the notice.

Whenever loan servicing is sold, transferred, or assigned, the new servicer must give the borrower a new payment book, if one is used, must tell the borrower the name, address, and phone number of the servicer, and must tell the borrower of any changes regarding the loan or loan payments. If the borrower requests information about the loan in writing, the servicer must respond within 15 days and must give the borrower the phone number of the person who can assist the borrower.

Any person injured by violation of the act may sue for actual damages, attorneys' fees, and costs.

Fiscal Note:      Not Requested.

Effective Date:The bill takes effect on January 1, 1990.

House Committee ‑ Testified For:    Keith Hopper, Washington Banker's Association (in part); and Larry Shannon, Washington Mortgage Bankers (in part).

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    Many lenders and servicers provide the information required by this act.  The information that loan servicers must give borrowers will help borrowers who wish to contact the loan servicer.

House Committee - Testimony Against:      None Presented.