Important changes to foreclosure law headed to governor’s desk

Important changes to foreclosure law headed to governor’s desk
April 9, 2009

OLYMPIA – A bill that aims to increase consumer protection in the area of housing, as well as protection of tenants and homeowners, has passed the Legislature and is now on its way to Gov. Gregoire for her signature.

The legislation (ESB 5810) would give owners and tenants more notice with foreclosures on deeds of trust; it would require lenders to contact homeowners prior to issuing a notice of default; and it would also give tenants more time to move after a foreclosure sale.

“One component critical to helping the economy is to stabilize the housing market. Washington state is still struggling as housing prices and home sales have declined along with an 83 percent rise in foreclosures,” said Rep. Tina Orwall (D-Normandy Park) who sponsored the companion bill in the House. “But we can help the housing market by addressing the issue of foreclosure and making sure that families with the ability to receive assistance to keep their homes do, in fact, get the help they need.”

Deeds of trust are security interests in real property. The Deeds of Trust Act establishes procedures for non-judicial foreclosure in which the homeowner grants a deed creating a lien on the real property for an obligation due to the lender.

Most foreclosures in Washington state are known as non-judicial foreclosures because they don't involve the courts. When homeowners fall behind in their mortgage payments, they receive a notice of default informing them that the foreclosure process has begun.

The bill puts in place a meet and confer requirement, which essentially involves the mortgagee contacting the borrower, assessing his or her financial situation and exploring alternatives to foreclosure, all before issuing a notice of default. This requirement does not apply when the beneficiary is a homeowners or condominium association.

Renters benefit as well under this bill. Additional sections of the bill provide them with notice regarding the foreclosure process, which is not currently required because they do not own the property where they live. Not only do they now get notice, but they also get a 60-day notice of eviction, instead of the 20 days required by current law. This allows them to have greater success in finding a new place to live, and also prevents an eviction notice on their record, which could hinder their finding future rental housing.

“A lot of work was put into this legislation to include important consumer protections so that families actually have the time and resources they need to remain in their homes when possible, and renters –who are often victims in these situations-- have more time to find housing if their homes are foreclosed,” added Orwall.

ESB 5810 also provides that a homeowner can bring an action after the foreclosure sale if there were irregularities in the process, such as fraud or misrepresentation. That section of the bill also:

adds to the list of nonwaived claims a violation of Title 19 RCW (regulations of businesses, including the Consumer Protection Act);
clarifies that the relief is for money damages; and
clarifies that the nonwaived claims must be brought within two years of the foreclosure sale or within the applicable statute of limitation for the claim, whichever is earlier.