AN ACT Relating to the foreclosure prevention fee;
Summary
SB 5938 creates and regulates a "foreclosure prevention fee" tied to residential mortgage loans secured by property in Washington. The bill requires a $80 fee to be assessed at closing for each covered residential mortgage loan, with the fee paid into the foreclosure fairness account. The fee may be financed in the loan or paid from borrower cash at closing, and the Department of Financial Institutions is given authority to administer the fee, including setting policies, procedures, and rules for collection, remittance, and management.
The bill includes several exemptions and special rules. Reverse mortgages made to borrowers age 62 or older are exempt, as are chattel loans or retail installment contracts for dwellings secured as personal property. For certain state-administered or state-supported homeownership programs, the fee may be collected only on the first lien residential mortgage loan. The bill also requires disclosure of the fee under federal and state law, allows the fee to be excluded from the finance charge calculation, and mandates that borrowers receive notice of the fee and its purpose at or before closing, including toll-free foreclosure hotline information.
Impact
The bill amends Washington law governing residential mortgage lending and foreclosure-related fees by establishing a new mandatory closing fee for most residential mortgage loans and directing the proceeds to a state foreclosure fairness account. It expands the Department of Financial Institutions' administrative role by authorizing rulemaking, guidance, and individualized agreements for efficient fee collection and remittance. Lenders, escrow agents, settlement agents, and closing agents would need to incorporate the new fee and notice requirements into closing practices, while certain borrowers and loan products would be exempt or treated differently.
Sentiment
The available voting history suggests broad support for the bill overall, with unanimous or near-unanimous committee approval in the Senate and strong Senate final passage. The House committee also approved the bill, though the House floor vote was more divided, indicating some reservations about the measure or its details. The Senate later concurred with the House-amended version by a wide margin, showing that the bill retained substantial support through final enactment.
Contention
The main points of contention appear to center on the policy choice to impose a new fee on residential mortgage closings and how broadly it should apply. Exemptions for reverse mortgages, certain personal-property dwelling loans, and some state housing programs suggest concern about protecting seniors, manufactured-home borrowers, and first-time or subsidized homebuyers from added costs. The House floor split indicates that some lawmakers may have questioned the fee's burden on borrowers, its administration, or whether foreclosure prevention should be funded through a mandatory closing charge rather than another mechanism.