BILL REQ. #:  Z-0673.3 

Read first time 01/16/08.   Referred to Committee on Judiciary.

     AN ACT Relating to distressed property conveyances; adding a new chapter to Title 64 RCW; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Distressed property" means real property that is (a) the primary residence of the owner and (b) in foreclosure, at risk of loss due to the nonpayment of taxes, or the owner of which is more than ninety days delinquent on any loan that is secured by the property.
     (2) "Distressed property conveyance" means a transaction in which: A foreclosed homeowner transfers an interest in the distressed property to a distressed property purchaser; the distressed property purchaser allows the foreclosed homeowner to occupy the distressed property; and the distressed property purchaser or a person acting in participation with the distressed property purchaser conveys or promises to convey the distressed property to the foreclosed homeowner, provides the foreclosed homeowner with an option to purchase the distressed property at a later date, or promises the foreclosed homeowner an interest in, or portion of, the proceeds of any resale of the distressed property.
     (3) "Distressed property purchaser" means any person who acquires an interest in distressed property under a distressed property conveyance. "Distressed property purchaser" includes a person who acts in joint venture or joint enterprise with one or more distressed property purchasers in a distressed property conveyance. A federal or state chartered bank, savings bank, thrift, or credit union is not a distressed property purchaser.
     (4) "Foreclosed homeowner" means an owner of distressed property.
     (5) "Resale" means a bona fide market sale of the distressed property subject to the distressed property conveyance by the distressed property purchaser to an unaffiliated third party.
     (6) "Resale price" means the gross sale price of the distressed property on resale.

NEW SECTION.  Sec. 2   A distressed property purchaser shall enter into a distressed property reconveyance in the form of a written contract. The contract must be written in at least twelve-point boldface type in the same language principally used by the distressed property purchaser and foreclosed homeowner to negotiate the sale of the distressed property, and must be fully completed, signed, and dated by the foreclosed homeowner and distressed property purchaser before the execution of any instrument of conveyance of the distressed property.

NEW SECTION.  Sec. 3   The contract required in section 2 of this act must contain the entire agreement of the parties and must include the following:
     (1) The name, business address, and telephone number of the distressed property purchaser;
     (2) The address of the distressed property;
     (3) The total consideration to be provided by the distressed property purchaser in connection with or incident to the sale;
     (4) A complete description of the terms of payment or other consideration including, but not limited to, any services of any nature that the distressed property purchaser represents that he or she will perform for the foreclosed homeowner before or after the sale;
     (5) The time at which possession is to be transferred to the distressed property purchaser;
     (6) A complete description of the terms of any related agreement designed to allow the foreclosed homeowner to remain in the home, such as a rental agreement, repurchase agreement, or lease with option to buy;
     (7) A complete description of the interest, if any, the foreclosed homeowner maintains in the proceeds of, or consideration to be paid upon, the resale of the distressed property;
     (8) A notice of cancellation as provided in section 5 of this act; and
     (9) The following notice in at least fourteen-point boldface type if the contract is printed, or in capital letters if the contract is typed, and completed with the name of the distressed property purchaser, immediately above the statement required in section 5 of this act;

NEW SECTION.  Sec. 4   (1) In addition to any other right of rescission, a foreclosed homeowner has the right to cancel any contract with a distressed property purchaser until midnight of the fifth business day following the day on which the foreclosed homeowner signs a contract that complies with this chapter or until 8:00 a.m. on the last day of the period during which the foreclosed homeowner has a right of redemption, whichever occurs first.
     (2) Cancellation occurs when the foreclosed homeowner delivers to the distressed property purchaser, by any means, a written notice of cancellation to the address specified in the contract.
     (3) A notice of cancellation provided by the foreclosed homeowner is not required to take the particular form as provided with the contract.
     (4) Within ten days following the receipt of a notice of cancellation under this section, the distressed property purchaser shall return without condition any original contract and any other documents signed by the foreclosed homeowner.

NEW SECTION.  Sec. 5   (1) The contract required in section 2 of this act must contain, in immediate proximity to the space reserved for the foreclosed homeowner's signature, the following conspicuous statement in at least fourteen-point boldface type if the contract is printed, or in capital letters if the contract is typed:

"You may cancel this contract for the sale of your house without any penalty or obligation at any time before

NEW SECTION.  Sec. 6   Any waiver of the provisions of this chapter is void and unenforceable as contrary to public policy, except that a consumer may waive the five-business-day right to cancel provided in section 4 of this act if the distressed property is subject to a foreclosure sale within the five business days and the foreclosed homeowner agrees to waive his or her right to cancel in a handwritten statement signed by all parties holding title to the distressed property.

NEW SECTION.  Sec. 7   (1) Any provision in a contract that attempts or purports to require arbitration of any dispute arising under this chapter is void at the option of the foreclosed homeowner.
     (2) This section applies to any contract entered into on or after the effective date of this act.

NEW SECTION.  Sec. 8   A distressed property purchaser shall not:
     (1) Enter into, or attempt to enter into, a distressed property conveyance with a foreclosed homeowner unless the distressed property purchaser verifies and can demonstrate that the foreclosed homeowner has a reasonable ability to pay for the subsequent conveyance of an interest back to the foreclosed homeowner. In the case of a lease with an option to purchase, payment ability also includes the reasonable ability to make the lease payments and purchase the property within the term of the option to purchase. An evaluation of a foreclosed homeowner's reasonable ability to pay includes debt to income ratios, fair market value of the distressed property, and the foreclosed homeowner's payment and credit history. There is a rebuttable presumption that the distressed property purchaser has not verified a foreclosed homeowner's reasonable ability to pay if the distressed property purchaser has not obtained documentation of assets, liabilities, and income, other than an undocumented statement, of the foreclosed homeowner;
     (2) Fail to either:
     (a) Ensure that title to the distressed property has been reconveyed to the foreclosed homeowner; or
     (b) Make payment to the foreclosed homeowner so that the foreclosed homeowner has received consideration in an amount of at least eighty-two percent of the fair market value of the property as of the date of the eviction or voluntary relinquishment of possession of the distressed property by the foreclosed homeowner. For the purposes of this subsection (2)(b), the following applies:
     (i) There is a rebuttable presumption that an appraisal by a person licensed or certified by an agency of the federal government or this state to appraise real estate constitutes the fair market value of the property;
     (ii) "Consideration" means any payment or thing of value provided to the foreclosed homeowner, including unpaid rent owed by the foreclosed homeowner before the date of eviction or voluntary relinquishment of the property, reasonable costs paid to independent third parties necessary to complete the distressed property conveyance transaction, the payment of money to satisfy a debt or legal obligation of the foreclosed homeowner, or the reasonable cost of repairs for damage to the distressed property caused by the foreclosed homeowner. "Consideration" does not include amounts imputed as a down payment or fee to the distressed property purchaser or a person acting in participation with the distressed property purchaser;
     (3) Enter into repurchase or lease terms as part of the distressed property conveyance that are unfair or commercially unreasonable, or engage in any other unfair or deceptive acts or practices;
     (4) Represent, directly or indirectly, that (a) the distressed property purchaser is acting as an advisor or consultant, (b) the distressed property purchaser is acting on behalf of or in the interests of the foreclosed homeowner, or (c) the distressed property purchaser is assisting the foreclosed homeowner to save the home, buy time, or use other substantially similar language;
     (5) Misrepresent the distressed property purchaser's status as to licensure or certification;
     (6) Perform any of the following until after the time during which the foreclosed homeowner may cancel the transaction has expired:
     (a) Accept from any foreclosed homeowner an execution of, or induce any foreclosed homeowner to execute, any instrument of conveyance of any interest in the distressed property;
     (b) Record with the county auditor any document, including any instrument of conveyance, signed by the foreclosed homeowner; or
     (c) Transfer or encumber or purport to transfer or encumber any interest in the distressed property;
     (7) Fail to reconvey title to the distressed property when the terms of the distressed property conveyance contract have been fulfilled;
     (8) Enter into a distressed property conveyance where any party to the transaction is represented by a power of attorney;
     (9) Fail to extinguish or assume all liens encumbering the distressed property immediately following the conveyance of the distressed property;
     (10) Fail to close a distressed property conveyance in person before an independent third party who is authorized to conduct real estate closings within the state.

NEW SECTION.  Sec. 9   (1) A violation of this chapter is considered a per se violation of chapter 19.86 RCW, and all remedies of chapter 19.86 RCW are available for such an action. A private right of action under chapter 19.86 RCW by a foreclosed homeowner is in the public interest.
     (2) An action may not be brought on the basis of a violation of this chapter except by a foreclosed homeowner against whom the violation was committed or by the attorney general. This limitation does not apply to administrative action by any state regulatory agency.
     (3) In a private right of action under chapter 19.86 RCW for a violation of this chapter, the court may double or triple the award of damages pursuant to RCW 19.86.090, subject to the statutory limit. If, however, the court determines that the defendant acted in bad faith, the limit for doubling or tripling the award of damages may be increased, but shall not exceed one hundred thousand dollars. Any claim for damages brought under this section must be commenced within four years after the date of the alleged violation.
     (4) The remedies provided in this section are cumulative and do not restrict any remedy that is otherwise available. The provisions of this chapter are not exclusive and are in addition to any other requirements, rights, remedies, and penalties provided by law. An action under this section shall not affect the rights in the distressed property held by a distressed property purchaser for value under this chapter or other applicable law.

NEW SECTION.  Sec. 10   Sections 1 through 9 of this act constitute a new chapter in Title 64 RCW.