FINAL BILL REPORT

SSB 5790

                              C 98 L 89

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

Regulating the sale of loan servicing.

Senate Committee on Financial Institutions & Insurance

House Committe on Financial Institutions & Insurance

SYNOPSIS AS ENACTED

BACKGROUND:

Servicing of a residential mortgage loan may be included in the sale of the loan or may be retained separately from a sold loan.  Typically the purchaser of loan servicing is another financial institution, someone within the secondary market, or some other investor. 

A substantial portion of the secondary market is comprised of the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac).  Ginnie Mae, Fannie Mae and Freddie Mac each utilize varying systems of approved lenders.  If loan servicing is sold to Ginnie Mae, Fannie Mae or Freddie Mac, each requires any new purchaser of this servicing to be approved by that particular organization.

Some concern has been expressed that individuals whose loan servicing is sold may experience difficulty obtaining information with regards to that loan.

SUMMARY:

The Legislature recognizes the importance of an individual having access to timely information concerning his or her residential mortgage loan.

If the servicing of a loan is subject to sale, the lender must disclose this fact in writing to the borrower on or prior to the time of loan closing.  The disclosure also must inform the borrower that the purchasing loan servicer will notify the borrower if the servicing of the loan is sold.  These disclosures must be made for loans used to finance a one to four family owner occupied residence in the state.

When the servicing for a loan is sold, the purchaser must notify a mortgagor at least 30 days prior to the first payment's due date.  The notification must contain the name, address, and telephone number of the division from which the mortgagor can obtain information pertaining to the loan.  Any changes regarding servicing requirements must be included in the notice.

If the original lender is a party in an acquisition, consolidation, or merger and the original lender has not provided the disclosure, the lender must provide such disclosure within 30 days of the acquisition, consolidation or merger.

The purchasing lender must respond to a written inquiry from the mortgagor within 15 business days upon receipt of such request.

A person injured by a violation of this act may recover for actual damages, reasonable attorneys' fees, and court costs.

VOTES ON FINAL PASSAGE:

     Senate   45    0

     House 98  0 (House amended)

     Senate   44    0 (Senate concurred)

EFFECTIVE:January 1, 1990