BILL REQ. #:  H-5324.1 

READ FIRST TIME 02/05/08.   

     AN ACT Relating to residential mortgage loans; and adding a new chapter to Title 19 RCW.

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) "Adjustable rate mortgage" or "ARM" means a payment option ARM or a hybrid ARM (commonly known as a 2/28 or 3/27 loan).
     (2) "Borrower" means any person who consults with or retains a person subject to this chapter in an effort to seek information about obtaining a residential mortgage loan, regardless of whether that person actually obtains such a loan.
     (3) "Department" means the department of financial institutions.
     (4) "Director" means the director of the department of financial institutions.
     (5) "Financial institution" means commercial banks and alien banks subject to regulation under Title 30 RCW, savings banks subject to regulation under Title 32 RCW, savings associations subject to regulation under Title 33 RCW, credit unions subject to regulation under chapter 31.12 RCW, consumer loan companies subject to regulation under chapter 31.04 RCW, and mortgage brokers and lenders subject to regulation under chapter 19.146 RCW.
     (6) "Residential mortgage loan" means an extension of credit secured by residential real property located in this state upon which is constructed or intended to be constructed, a single-family dwelling or multiple-family dwelling of four or less units. It does not include a reverse mortgage or a borrower credit transaction that is secured by rental property. It does not include a bridge loan. It does not include loans to individuals making or acquiring a residential mortgage loan solely with his or her own funds for his or her own investment. For purposes of this subsection, a "bridge loan" is any temporary loan, having a maturity of one year or less, for the purpose of acquisition or construction of a dwelling intended to become the borrower's principal dwelling.

NEW SECTION.  Sec. 2   A mortgage broker, designated broker, loan originator, and other persons working with or for mortgage brokers must act in the utmost good faith toward the borrower, and shall not compromise a borrower's right or interest. A mortgage broker, designated broker, loan originator, and other persons working with or for mortgage brokers shall not accept, provide, or charge any undisclosed compensation.

NEW SECTION.  Sec. 3   Financial institutions subject to this chapter must use sound underwriting principles. The department shall adopt rules to develop standards for sound underwriting principles.

NEW SECTION.  Sec. 4   A financial institution may not make or facilitate the origination of a residential mortgage loan that includes a prepayment penalty or fee that extends beyond:
     (1) Sixty days prior to the initial reset period of an adjustable rate mortgage; or
     (2) Three years after the date of the closing of the loan.

NEW SECTION.  Sec. 5   Sections 1 through 4 of this act are codified in chapter 19.--- RCW (the new chapter created in House Bill No. 2770 or Senate Bill No. 6728.) If neither bill is enacted, sections 1 through 4 of this act constitute a new chapter in Title 19 RCW.