SENATE BILL REPORT

SSB 5790

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

Senate Hearing Date(s):February 24, 1989

Majority Report:  That Substitute Senate Bill No. 5790 be substituted therefor and the substitute bill do pass.

      Signed by Senators von Reichbauer, Chairman; Johnson, Vice Chairman; McCaslin, Moore, Rasmussen, Smitherman, West.

Senate Staff:Benson Porter (786-7470)

                  April 10, 1989

House Committe on Financial Institutions & Insurance

AS PASSED SENATE, MARCH 9, 1989

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.

A lender must disclose at the time of loan closing whether or not the servicing for that loan is subject to sale.  This disclosure must be made for loans used to finance a one to four family owner occupied residence in the state.  If 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 also 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 the mortgage escrow accounts or servicing requirements must be included in the notice.

If the ownership or control changes and the original lender has not provided the disclosure, the new or acquiring lender must provide such disclosure within 30 days of the change in control or ownership.

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.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Effective Date:January 1, 1990

Senate Committee - Testified: Don Brazier, Washington Savings League (pro); Larry Shannon, Washington Mortgage Bankers Association

HOUSE AMENDMENT:

If the servicing of a loan is subject to sale, the lender must disclose this fact in writing to the borrower.  In addition, the disclosure also must inform the borrower that the loan servicer will notify the borrower if the servicing of the loan is sold.  Several other clarifying amendments are made.