When a county auditor records a document, certain fees and surcharges are collected to support various governmental purposes depending on the type of document recorded. These surcharges include a $1 surcharge collected at the time of recording each deed of trust. The $1 surcharge does not apply to assignments or substitutions of previously recorded deeds of trust. The county auditor may retain up to 5 percent of the $1 surcharge for costs to administer the surcharge. The remaining revenues are deposited into the Mortgage Lending Fraud Prosecution Account (Account), which is a nonappropriated account administered by the Department of Financial Institutions (DFI). The DFI may use expenditures from the Account for criminal prosecution of fraudulent activities related to mortgage lending fraud crimes. Both the $1 surcharge and the Account are set to expire June 30, 2027.
The surcharge collected on deeds of trust for deposit into the Account is increased from $1 to $5. The sunset provisions for both the surcharge and the Account are removed.
(In support) This bill is key to sustaining and expanding resources for mortgage fraud prosecution. These cases are complex and impact both vulnerable consumers and large lenders. The losses to victims can be significant, sometimes in the millions of dollars. The original surcharge passed in 2003 was intended to generate revenue for these resources. However, the surcharge has not been adjusted since then, creating a gap in program funding. While funding in 2011 was sufficient to support several prosecutors and an investigator in King County, it now can only partially support staff. The surcharge is a part of transactions that often have a high dollar value. Increasing the surcharge will not make a meaningful difference to those involved in those transactions, but the increase in the aggregate will make a significant difference in supporting mortgage fraud prosecution activities.
(Opposed) None.
(Other) There is support for the prosecution of mortgage fraud and an understanding that the surcharge is deposited into a specialty account to fund important work. However, there is concern that the Governor's budget proposes sweeping funds from the DFI's general account and using it to support the State General Fund. It does not make sense to sweep the DFI's funding on one hand and increase fees for a specialty account on the other. It would be better to keep funding at the DFI to support these kinds of activities.
(In support) Patrick Hinds, King County Prosecuting Attorney's Office; and Hugo Torres, King County Prosecuting Attorney's Office.