Foreclosure mediation prg.

AN ACT Relating to expanding and funding the foreclosure 1
mediation program; amending RCW 61.24.005, 61.24.160, 61.24.163, 2
61.24.165, 61.24.165, 61.24.005, 61.24.160, and 61.24.172; adding a 3
new section to chapter 31.04 RCW; providing effective dates; and 4
providing an expiration date. 5
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:6
Sec. 1. RCW 61.24.005 and 2021 c 151 s 2 are each amended to 7
read as follows: 8
The definitions in this section apply throughout this chapter 9
unless the context clearly requires otherwise. 10
(1) "Affiliate of beneficiary" means any entity which controls, 11
is controlled by, or is under common control with a beneficiary.12
(2) "Association" means an association subject to chapter 64.32, 13
64.34, 64.38, or 64.90 RCW.14
(3) "Beneficiary" means the holder of the instrument or document 15
evidencing the obligations secured by the deed of trust, excluding 16
persons holding the same as security for a different obligation.17
(((3))) (4) "Borrower" means a person or a general partner in a 18
partnership, including a joint venture, that is liable for all or 19
part of the obligations secured by the deed of trust under the 20
instrument or other document that is the principal evidence of such 21
S-1167.2
SENATE BILL 5686
State of Washington 69th Legislature 2025 Regular Session
By Senators Orwall, Frame, Hasegawa, and Nobles
Read first time 02/06/25. Referred to Committee on Housing.
p. 1 SB 5686
obligations, or the person's successors if they are liable for those 1
obligations under a written agreement with the beneficiary.2
(((4))) (5) "Commercial loan" means a loan that is not made 3
primarily for personal, family, or household purposes.4
(((5))) (6) "Department" means the department of commerce or its 5
designee. 6
(((6))) (7) "Fair value" means the value of the property 7
encumbered by a deed of trust that is sold pursuant to a trustee's 8
sale. This value shall be determined by the court or other 9
appropriate adjudicator by reference to the most probable price, as 10
of the date of the trustee's sale, which would be paid in cash or 11
other immediately available funds, after deduction of prior liens and 12
encumbrances with interest to the date of the trustee's sale, for 13
which the property would sell on such date after reasonable exposure 14
in the market under conditions requisite to a fair sale, with the 15
buyer and seller each acting prudently, knowledgeably, and for self-16
interest, and assuming that neither is under duress.17
(((7))) (8) "Grantor" means a person, or its successors, who 18
executes a deed of trust to encumber the person's interest in 19
property as security for the performance of all or part of the 20
borrower's obligations. 21
(((8))) (9) "Guarantor" means any person and its successors who 22
is not a borrower and who guarantees any of the obligations secured 23
by a deed of trust in any written agreement other than the deed of 24
trust. 25
(((9))) (10) "Housing counselor" means a housing counselor that 26
has been approved by the United States department of housing and 27
urban development or approved by the Washington state housing finance 28
commission. 29
(((10))) (11) "Owner-occupied" means property that is the 30
principal residence of the borrower. 31
(((11))) (12) "Person" means any natural person, or legal or 32
governmental entity. 33
(((12))) (13) "Record" and "recorded" includes the appropriate 34
registration proceedings, in the instance of registered land.35
(((13))) (14) "Residential real property" means property 36
consisting solely of a single-family residence, a residential 37
condominium unit, or a residential cooperative unit. For the purposes 38
of the application of RCW 61.24.163, residential real property 39
includes residential real property of up to four units.40
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(((14))) (15) "Senior beneficiary" means the beneficiary of a 1
deed of trust that has priority over any other deeds of trust 2
encumbering the same residential real property. 3
(((15))) (16) "Tenant-occupied property" means property 4
consisting solely of residential real property that is the principal 5
residence of a tenant subject to chapter 59.18 RCW or other building 6
with four or fewer residential units that is the principal residence 7
of a tenant subject to chapter 59.18 RCW. 8
(((16))) (17) "Trustee" means the person designated as the 9
trustee in the deed of trust or appointed under RCW 61.24.010(2).10
(((17))) (18) "Trustee's sale" means a nonjudicial sale under a 11
deed of trust undertaken pursuant to this chapter.12
(19) "Unit owner" means an owner of an apartment, unit, or lot in 13
an association subject to chapter 64.32, 64.34, 64.38, or 64.90 RCW.14
Sec. 2. RCW 61.24.160 and 2023 c 206 s 4 are each amended to 15
read as follows: 16
(1)(a) A housing counselor who is contacted by a borrower under 17
RCW 61.24.031 or a unit owner, has a duty to act in good faith to 18
attempt to reach a resolution with the beneficiary on behalf of the 19
borrower, or with the association on behalf of the unit owner, within 20
the 90 days provided from the date the beneficiary or association 21
initiates contact with the borrower or unit owner and the date the 22
notice of default or notice of delinquency for past due assessments 23
is issued. A resolution may include, but is not limited to, 24
modification of the loan, an agreement to conduct a short sale, a 25
deed in lieu of foreclosure transaction, a delinquent assessment 26
payment plan, or some other workout plan. 27
(b) Nothing in RCW 61.24.031 or this section precludes a meeting 28
or negotiations between the housing counselor, borrower, and 29
beneficiary at any time, including after the issuance of the notice 30
of default. Nothing in RCW 64.32.200, 64.34.364, 64.38.100, 31
64.90.485, or this section precludes a meeting or negotiations 32
between the housing counselor, unit owner, and association at any 33
time, including after the issuance of the notice of delinquency for 34
past due assessments.35
(c) A borrower who is contacted under RCW 61.24.031 or a unit 36
owner, may seek the assistance of a housing counselor or attorney at 37
any time. 38
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(2) Housing counselors have a duty to act in good faith to assist 1
borrowers or unit owners by: 2
(a) Preparing the borrower for meetings with the beneficiary;3
(b) Advising the borrower or unit owner about what documents the 4
borrower or unit owner must have to seek a loan modification or other 5
resolution; 6
(c) Informing the borrower or unit owner about the alternatives 7
to foreclosure, including loan modifications or other possible 8
resolutions; and 9
(d) Providing other guidance, advice, and education as the 10
housing counselor considers necessary. 11
(3) A housing counselor or attorney assisting a borrower or unit 12
owner may refer the borrower or unit owner to mediation, pursuant to 13
RCW 61.24.163, if the housing counselor or attorney determines that 14
mediation is appropriate based on the individual circumstances and 15
the borrower or unit owner has received a notice of default. The 16
referral to mediation may be made any time after a notice of default 17
or notice of delinquency for past due assessments has been issued but 18
no later than 90 days prior to the date of sale listed in the notice 19
of trustee's sale. If an amended notice of trustee's sale is recorded 20
after the trustee sale has been stayed pursuant to RCW 61.24.130, the 21
borrower or unit owner may be referred to mediation no later than 25 22
days prior to the date of sale listed in the amended notice of 23
trustee's sale. 24
(4) For borrowers who have received a letter under RCW 61.24.031 25
before June 7, 2012, a referral to mediation by a housing counselor 26
or attorney does not preclude a trustee issuing a notice of default 27
if the requirements of RCW 61.24.031 have been met.28
(5) Housing counselors providing assistance to borrowers under 29
RCW 61.24.031 or unit owners, are not liable for civil damages 30
resulting from any acts or omissions in providing assistance, unless 31
the acts or omissions constitute gross negligence or willful or 32
wanton misconduct. 33
(6) Housing counselors shall provide information to the 34
department to assist the department in its annual report to the 35
legislature as required under RCW 61.24.163(((18))) (19). The 36
information provided to the department by the housing counselors 37
should include outcomes of foreclosures and be similar to the 38
information requested in the national foreclosure mortgage counseling 39
client level foreclosure outcomes report form. 40
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Sec. 3. RCW 61.24.163 and 2023 c 206 s 5 are each amended to 1
read as follows: 2
(1) The foreclosure mediation program established in this section 3
applies only to borrowers or unit owners who have been referred to 4
mediation by a housing counselor or attorney. The referral to 5
mediation may be made any time after a notice of default or notice of 6
delinquency for past due assessments has been issued but no later 7
than 90 days prior to the date of sale listed in the notice of 8
trustee's sale. If an amended notice of trustee's sale is recorded 9
after the trustee sale has been stayed pursuant to RCW 61.24.130, the 10
borrower or unit owner may be referred to mediation no later than 25 11
days prior to the date of sale listed in the amended notice of 12
trustee's sale. If the borrower has failed to elect to mediate within 13
the applicable time frame, the borrower and the beneficiary may, but 14
are under no duty to, agree in writing to enter the foreclosure 15
mediation program. The mediation program under this section is not 16
governed by chapter 7.07 RCW and does not preclude mediation required 17
by a court or other provision of law. 18
(2) A housing counselor or attorney referring a borrower or unit 19
owner to mediation shall send a notice to the borrower or unit owner 20
and the department, stating that mediation is appropriate.21
(3) Within 10 days of receiving the notice, the department shall:22
(a) Send a notice to the beneficiary or association, the borrower 23
or unit owner , the housing counselor or attorney who referred the 24
borrower, and the trustee stating that the parties have been referred 25
to mediation. The notice must include the statements and list of 26
documents and information described in subsections (4) and (5) of 27
this section and a statement explaining each party's responsibility 28
to pay the mediator's fee; and 29
(b) Select a mediator and notify the parties of the selection.30
(4) ((Within)) For a mediation related to a notice of default 31
within 23 days of the department's notice that the parties have been 32
referred to mediation, the borrower shall transmit the documents 33
required for mediation to the mediator and the beneficiary. The 34
required documents include an initial homeowner financial information 35
worksheet as required by the department. The worksheet must include, 36
at a minimum, the following information: 37
(a) The borrower's current and future income; 38
(b) Debts and obligations; 39
(c) Assets; 40
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(d) Expenses; 1
(e) Tax returns for the previous two years; 2
(f) Hardship information; 3
(g) Other applicable information commonly required by any 4
applicable federal mortgage relief program. 5
(5) Within 20 days of the beneficiary's receipt of the borrower's 6
documents under subsection (4) of this section, the beneficiary shall 7
transmit the documents required for mediation to the mediator and the 8
borrower. The required documents include: 9
(a) An accurate statement containing the balance of the loan 10
within 30 days of the date on which the beneficiary's documents are 11
due to the parties; 12
(b) Copies of the note and deed of trust; 13
(c) Proof that the entity claiming to be the beneficiary is the 14
owner of any promissory note or obligation secured by the deed of 15
trust. Sufficient proof may be a copy of the declaration described in 16
RCW 61.24.030(7)(a); 17
(d) The best estimate of any arrearage and an itemized statement 18
of the arrearages; 19
(e) An itemized list of the best estimate of fees and charges 20
outstanding; 21
(f) The payment history and schedule for the preceding twelve 22
months, or since default, whichever is longer, including a breakdown 23
of all fees and charges claimed; 24
(g) All borrower-related and mortgage -related input data used in 25
any net present values analysis. If no net present values analysis is 26
required by the applicable federal mortgage relief program, then the 27
input data required under the federal deposit insurance corporation 28
and published in the federal deposit insurance corporation loan 29
modification program guide, or if that calculation becomes 30
unavailable, substantially similar input data as determined by the 31
department; 32
(h) An explanation regarding any denial for a loan modification, 33
forbearance, or other alternative to foreclosure in sufficient detail 34
for a reasonable person to understand why the decision was made;35
(i) Appraisal or other broker price opinion most recently relied 36
upon by the beneficiary not more than 90 days old at the time of the 37
scheduled mediation; and 38
(j) The portion or excerpt of the pooling and servicing agreement 39
or other investor restriction that prohibits the beneficiary from 40
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implementing a modification, if the beneficiary claims it cannot 1
implement a modification due to limitations in a pooling and 2
servicing agreement or other investor restriction, and documentation 3
or a statement detailing the efforts of the beneficiary to obtain a 4
waiver of the pooling and servicing agreement or other investor 5
restriction provisions. 6
(6) If the mediation is related to a notice of delinquency for 7
past due assessments, within 23 days of the department's notice that 8
the parties have been referred to mediation, the parties shall 9
transmit the documents required for mediation to the mediator. The 10
documents shall be kept confidential by the mediator.11
(a) The required documents to be submitted by the unit owner 12
includes the following information:13
(i) The unit owner's current and future income;14
(ii) Debts and obligations;15
(iii) Assets;16
(iv) Expenses; and17
(v) Hardship information.18
(b) The required documents to be submitted by the association 19
includes the following information:20
(i) An itemized statement containing the balance of the past due 21
assessments, fees or charges, or other financial obligations related 22
to the assessments;23
(ii) Copies of the association's lien and deed of trust;24
(iii) Proof that the entity claiming to be the association is the 25
holder of any lien secured by the deed of trust;26
(iv) The payment history and schedule for the preceding 12 27
months, or since the assessments became past due, whichever is 28
longer, including a breakdown of all fees, charges, or other 29
financial obligations related to the assessments claimed; and30
(v) An explanation regarding any denial for a modification, 31
forbearance, or other alternative to foreclosure on the delinquent 32
assessments, fees, charges, or other financial obligations related to 33
the assessments claimed in sufficient detail for a reasonable person 34
to understand why the decision was made.35
(7) Within 70 days of receiving the referral from the department, 36
the mediator shall convene a mediation session in the county where 37
the property is located, unless the parties agree on another 38
location. The parties may agree to extend the time in which to 39
schedule the mediation session. If the parties agree to extend the 40
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time, the beneficiary or association shall notify the trustee of the 1
extension and the date the mediator is expected to issue the 2
mediator's certification. 3
(((7))) (8)(a) The mediator may schedule phone conferences, 4
consultations with the parties individually, and other communications 5
to ensure that the parties have all the necessary information and 6
documents to engage in a productive mediation. 7
(b) The mediator must send written notice of the time, date, and 8
location of the mediation session to the borrower or unit owner , the 9
beneficiary or association, and the department at least 30 days prior 10
to the mediation session. At a minimum, the notice must contain:11
(i) A statement that the borrower or unit owner may be 12
represented in the mediation session by an attorney or other 13
advocate; 14
(ii) A statement that a person with authority to agree to a 15
resolution, including a proposed settlement, loan modification, 16
modification of obligations related to the payment of assessments, or 17
dismissal or continuation of the foreclosure proceeding, must be 18
present either in person or on the telephone or videoconference 19
during the mediation session; and 20
(iii) A statement that the parties have a duty to mediate in good 21
faith and that failure to mediate in good faith may impair the 22
beneficiary's or association's ability to foreclose on the property 23
or the borrower's or unit owner's ability to modify the loan , modify 24
obligations relating to the payment of assessments, or take advantage 25
of other alternatives to foreclosure. 26
(((8))) (9)(a) The borrower or unit owner , the beneficiary or 27
association or authorized agent, and the mediator must meet in person 28
for the mediation session. However, a person with authority to agree 29
to a resolution on behalf of the beneficiary or association may be 30
present over the telephone or videoconference during the mediation 31
session. 32
(b) After the mediation session commences, the mediator may 33
continue the mediation session once, and any further continuances 34
must be with the consent of the parties. 35
(((9))) (10) The participants in mediation must address the 36
issues of foreclosure that may enable the borrower or unit owner and 37
the beneficiary or association to reach a resolution, including but 38
not limited to reinstatement, modification of the loan, restructuring 39
of the debt, modification of a delinquent assessment, modification of 40
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late fees or charges associated with a delinquent assessment, or some 1
other workout plan. To assist the parties in addressing issues of 2
foreclosure, the mediator may require the participants to consider 3
the following: 4
(a) The borrower's or unit owner's current and future economic 5
circumstances, including the borrower's or unit owner's current and 6
future income, debts, and obligations for the previous 60 days or 7
greater time period as determined by the mediator; 8
(b) The net present value of receiving payments pursuant to a 9
modified mortgage loan as compared to the anticipated net recovery 10
following foreclosure; 11
(c) Any affordable loan modification calculation and net present 12
value calculation when required under any federal mortgage relief 13
program and any modification program related to loans insured by the 14
federal housing administration, the veterans administration, and the 15
rural housing service , if applicable . If such a calculation is not 16
provided or required, then the beneficiary must provide the net 17
present value data inputs established by the federal deposit 18
insurance corporation and published in the federal deposit insurance 19
corporation loan modification program guide or other net present 20
value data inputs as designated by the department. The mediator may 21
run the calculation in order for a productive mediation to occur and 22
to comply with the mediator certification requirement; and23
(d) Any other loss mitigation guidelines to loans insured by the 24
federal housing administration, the veterans administration, and the 25
rural housing service, if applicable. 26
(((10))) (11) A violation of the duty to mediate in good faith as 27
required under this section may include: 28
(a) Failure to timely participate in mediation without good 29
cause; 30
(b) Failure of the borrower ((or)), the unit owner, the 31
beneficiary, or the association to provide the documentation required 32
before mediation or pursuant to the mediator's instructions;33
(c) Failure of a party to designate representatives with adequate 34
authority to fully settle, compromise, or otherwise reach resolution 35
with the borrower or unit owner in mediation; and 36
(d) A request by a beneficiary or association that the borrower 37
or unit owner waive future claims he or she may have in connection 38
with the deed of trust, as a condition of agreeing to a modification, 39
except for rescission claims under the federal truth in lending act. 40
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Nothing in this section precludes a beneficiary or association from 1
requesting that a borrower or unit owner dismiss with prejudice any 2
pending claims against the beneficiary or association , its agents, 3
loan servicer, or trustee, arising from the underlying deed of trust, 4
as a condition of modification. 5
(((11))) (12) If the mediator reasonably believes a borrower or 6
unit owner will not attend a mediation session based on the 7
borrower's or unit owner's conduct, such as the lack of response to 8
the mediator's communications, the mediator may cancel a scheduled 9
mediation session and send a written cancellation to the department 10
and the trustee and send copies to the parties. The beneficiary or 11
association may proceed with the foreclosure after receipt of the 12
mediator's written confirmation of cancellation. 13
(((12))) (13) Within seven business days after the conclusion of 14
the mediation session, the mediator must send a written certification 15
to the department and the trustee and send copies to the parties of:16
(a) The date, time, and location of the mediation session;17
(b) The names of all persons attending in person and by telephone 18
or videoconference, at the mediation session; 19
(c) Whether a resolution was reached by the parties, including 20
whether the default or delinquency was cured by reinstatement, 21
modification, or restructuring of the debt, or some other alternative 22
to foreclosure was agreed upon by the parties; 23
(d) Whether the parties participated in the mediation in good 24
faith; and 25
(e) If a written agreement was not reached, a description of any 26
net present value test used, along with a copy of the inputs, 27
including the result of any net present value test expressed in a 28
dollar amount. 29
(((13))) (14) If the parties are unable to reach an agreement, 30
the beneficiary or association may proceed with the foreclosure after 31
receipt of the mediator's written certification. 32
(((14))) (15)(a) The mediator's certification that the 33
beneficiary or association failed to act in good faith in mediation 34
constitutes a defense to the nonjudicial foreclosure action that was 35
the basis for initiating the mediation. In any action to enjoin the 36
foreclosure, the beneficiary is entitled to rebut the allegation that 37
it failed to act in good faith. 38
(b) The mediator's certification that the beneficiary or 39
association failed to act in good faith during mediation does not 40
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constitute a defense to a judicial foreclosure or a future 1
nonjudicial foreclosure action if a modification of the loan or 2
modification of obligations related to the payment of assessments is 3
agreed upon and the borrower subsequently defaults.4
(c) If an affordable loan modification or modification of 5
obligations related to the payment of assessments is not offered in 6
the mediation or a written agreement was not reached and the 7
mediator's certification shows that the net present value of the 8
modified loan or the obligations related to the payment of delinquent 9
assessments including late fees and charges, exceeds the anticipated 10
net recovery at foreclosure, that showing in the certification 11
constitutes a basis for the borrower or unit owner to enjoin the 12
foreclosure. 13
(((15))) (16) The mediator's certification that the borrower or 14
unit owner failed to act in good faith in mediation authorizes the 15
beneficiary or association to proceed with the foreclosure.16
(((16))) (17)(a) If a borrower or unit owner has been referred to 17
mediation before a notice of trustee sale has been recorded, a 18
trustee may not record the notice of sale until the trustee receives 19
the mediator's certification stating that the mediation has been 20
completed. If the trustee does not receive the mediator's 21
certification, the trustee may record the notice of sale after 10 22
days from the date the certification to the trustee was due. If, 23
after a notice of sale is recorded under this subsection (((16))) 24
(17)(a), the mediator subsequently issues a certification finding 25
that the beneficiary or association violated the duty of good faith, 26
the certification constitutes a basis for the borrower or unit owner 27
to enjoin the foreclosure. 28
(b) If a borrower or unit owner has been referred to mediation 29
after the notice of sale was recorded, the sale may not occur until 30
the trustee receives the mediator's certification stating that the 31
mediation has been completed. 32
(((17))) (18) A mediator may charge reasonable fees as authorized 33
by this subsection or as authorized by the department. Unless the fee 34
is waived, the parties agree otherwise, or the department otherwise 35
authorizes, a foreclosure mediator's fee may not exceed $400 for 36
preparing, scheduling, and conducting a mediation session lasting 37
between one hour and three hours. For a mediation session exceeding 38
three hours, the foreclosure mediator may charge a reasonable fee, as 39
authorized by the department. The mediator must provide an estimated 40
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fee before the mediation, and payment of the mediator's fee must be 1
divided equally between the beneficiary and the borrower , or between 2
the association and the unit owner . The beneficiary and the borrower , 3
or the association and the unit owner, must tender the loan 4
mediator's fee within 30 calendar days from receipt of the 5
department's letter referring the parties to mediation or pursuant to 6
the mediator's instructions. 7
(((18))) (19) Beginning December 1, 2012, and every year 8
thereafter, the department shall report annually to the legislature 9
on: 10
(a) The performance of the program, including the number ((s)) of 11
borrowers who are referred to mediation by a housing counselor or 12
attorney. Beginning December 1, 2026, the report must also include 13
the number of unit owners who are referred to mediation by a housing 14
counselor or attorney; 15
(b) The results of the mediation program, including the number of 16
mediations requested by housing counselors and attorneys, the number 17
of certifications of good faith issued, the number of borrowers and 18
beneficiaries who failed to mediate in good faith, and the reasons 19
for the failure to mediate in good faith, if known, the numbers of 20
loans restructured or modified, the change in the borrower's monthly 21
payment for principal and interest and the number of principal write-22
downs and interest rate reductions, and, to the extent practical, the 23
number of borrowers who report a default within a year of 24
restructuring or modification. Beginning December 1, 2026, the report 25
must also include the number of unit owners and associations who 26
failed to mediate in good faith, and the reasons for the failure to 27
mediate in good faith, if known, the number of debts for delinquent 28
assessments restructured or modified, the change in the unit owner's 29
periodic assessment payments including any reductions in late charges 30
or interest rates, and, to the extent practical, the number of unit 31
owners who report a delinquency within a year of restructuring or 32
modification; 33
(c) The information received by housing counselors regarding 34
outcomes of foreclosures; and 35
(d) Any recommendations for changes to the statutes regarding the 36
mediation program. 37
(((19))) (20) This section does not apply to certain federally 38
insured depository institutions, as specified in RCW 61.24.166.39
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Sec. 4. RCW 61.24.165 and 2023 c 206 s 6 are each amended to 1
read as follows: 2
(1) RCW 61.24.163 applies only to deeds of trust that are 3
recorded against residential real property of up to four units.4
(2) RCW 61.24.163 does not apply to deeds of trust:5
(a) Securing a commercial loan; 6
(b) Securing obligations of a grantor who is not the borrower or 7
a guarantor; 8
(c) Securing a purchaser's obligations under a seller-financed 9
sale; or 10
(d) Where the grantor is a partnership, corporation, or limited 11
liability company, or where the property is vested in a partnership, 12
corporation, or limited liability company at the time the notice of 13
default is issued. 14
(3) ((RCW 61.24.163 does not apply to association beneficiaries 15
subject to chapter 64.32, 64.34, or 64.38 RCW.16
(4))) For purposes of referral and mediation under RCW 61.24.163, 17
a person may be referred to mediation if the borrower is deceased and 18
the person is a successor in interest of the deceased borrower. The 19
referring counselor or attorney must determine a person's eligibility 20
under this section and indicate the grounds for eligibility on the 21
referral to mediation submitted to the department. For the purposes 22
of mediation under RCW 61.24.163, the person must be treated as a 23
"borrower." This subsection does not impose an affirmative duty on 24
the beneficiary to accept an assumption of the loan.25
(((5))) (4) For purposes of referral and mediation under RCW 26
61.24.163, a person may be referred to mediation if the person has 27
been awarded title to the property in a proceeding for dissolution or 28
legal separation. The referring counselor or attorney must determine 29
the person's eligibility under this section and indicate the grounds 30
for eligibility on the referral to mediation submitted to the 31
department. For the purposes of mediation under RCW 61.24.163, the 32
person must be treated as a "borrower." This subsection does not 33
impose an affirmative duty on the beneficiary to accept an assumption 34
of the loan. 35
Sec. 5. RCW 61.24.165 and 2024 c 321 s 413 are each amended to 36
read as follows: 37
(1) RCW 61.24.163 applies only to deeds of trust that are 38
recorded against residential real property of up to four units.39
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(2) RCW 61.24.163 does not apply to deeds of trust:1
(a) Securing a commercial loan; 2
(b) Securing obligations of a grantor who is not the borrower or 3
a guarantor; 4
(c) Securing a purchaser's obligations under a seller-financed 5
sale; or 6
(d) Where the grantor is a partnership, corporation, or limited 7
liability company, or where the property is vested in a partnership, 8
corporation, or limited liability company at the time the notice of 9
default is issued. 10
(3) ((RCW 61.24.163 does not apply to association beneficiaries 11
subject to chapter 64.90 RCW.12
(4))) For purposes of referral and mediation under RCW 61.24.163, 13
a person may be referred to mediation if the borrower is deceased and 14
the person is a successor in interest of the deceased borrower. The 15
referring counselor or attorney must determine a person's eligibility 16
under this section and indicate the grounds for eligibility on the 17
referral to mediation submitted to the department. For the purposes 18
of mediation under RCW 61.24.163, the person must be treated as a 19
"borrower." This subsection does not impose an affirmative duty on 20
the beneficiary to accept an assumption of the loan.21
(((5))) (4) For purposes of referral and mediation under RCW 22
61.24.163, a person may be referred to mediation if the person has 23
been awarded title to the property in a proceeding for dissolution or 24
legal separation. The referring counselor or attorney must determine 25
the person's eligibility under this section and indicate the grounds 26
for eligibility on the referral to mediation submitted to the 27
department. For the purposes of mediation under RCW 61.24.163, the 28
person must be treated as a "borrower." This subsection does not 29
impose an affirmative duty on the beneficiary to accept an assumption 30
of the loan. 31
Sec. 6. RCW 61.24.005 and 2021 c 151 s 2 are each amended to 32
read as follows: 33
The definitions in this section apply throughout this chapter 34
unless the context clearly requires otherwise. 35
(1) "Affiliate of beneficiary" means any entity which controls, 36
is controlled by, or is under common control with a beneficiary.37
(2) "Association" means an association subject to chapter 64.90 38
RCW.39
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(3) "Beneficiary" means the holder of the instrument or document 1
evidencing the obligations secured by the deed of trust, excluding 2
persons holding the same as security for a different obligation.3
(((3))) (4) "Borrower" means a person or a general partner in a 4
partnership, including a joint venture, that is liable for all or 5
part of the obligations secured by the deed of trust under the 6
instrument or other document that is the principal evidence of such 7
obligations, or the person's successors if they are liable for those 8
obligations under a written agreement with the beneficiary.9
(((4))) (5) "Commercial loan" means a loan that is not made 10
primarily for personal, family, or household purposes.11
(((5))) (6) "Department" means the department of commerce or its 12
designee. 13
(((6))) (7) "Fair value" means the value of the property 14
encumbered by a deed of trust that is sold pursuant to a trustee's 15
sale. This value shall be determined by the court or other 16
appropriate adjudicator by reference to the most probable price, as 17
of the date of the trustee's sale, which would be paid in cash or 18
other immediately available funds, after deduction of prior liens and 19
encumbrances with interest to the date of the trustee's sale, for 20
which the property would sell on such date after reasonable exposure 21
in the market under conditions requisite to a fair sale, with the 22
buyer and seller each acting prudently, knowledgeably, and for self-23
interest, and assuming that neither is under duress.24
(((7))) (8) "Grantor" means a person, or its successors, who 25
executes a deed of trust to encumber the person's interest in 26
property as security for the performance of all or part of the 27
borrower's obligations. 28
(((8))) (9) "Guarantor" means any person and its successors who 29
is not a borrower and who guarantees any of the obligations secured 30
by a deed of trust in any written agreement other than the deed of 31
trust. 32
(((9))) (10) "Housing counselor" means a housing counselor that 33
has been approved by the United States department of housing and 34
urban development or approved by the Washington state housing finance 35
commission. 36
(((10))) (11) "Owner-occupied" means property that is the 37
principal residence of the borrower. 38
(((11))) (12) "Person" means any natural person, or legal or 39
governmental entity. 40
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(((12))) (13) "Record" and "recorded" includes the appropriate 1
registration proceedings, in the instance of registered land.2
(((13))) (14) "Residential real property" means property 3
consisting solely of a single-family residence, a residential 4
condominium unit, or a residential cooperative unit. For the purposes 5
of the application of RCW 61.24.163, residential real property 6
includes residential real property of up to four units.7
(((14))) (15) "Senior beneficiary" means the beneficiary of a 8
deed of trust that has priority over any other deeds of trust 9
encumbering the same residential real property. 10
(((15))) (16) "Tenant-occupied property" means property 11
consisting solely of residential real property that is the principal 12
residence of a tenant subject to chapter 59.18 RCW or other building 13
with four or fewer residential units that is the principal residence 14
of a tenant subject to chapter 59.18 RCW. 15
(((16))) (17) "Trustee" means the person designated as the 16
trustee in the deed of trust or appointed under RCW 61.24.010(2).17
(((17))) (18) "Trustee's sale" means a nonjudicial sale under a 18
deed of trust undertaken pursuant to this chapter.19
(19) "Unit owner" means an owner of an apartment, unit, or lot in 20
an association subject to chapter 64.90 RCW.21
Sec. 7. RCW 61.24.160 and 2023 c 206 s 4 are each amended to 22
read as follows: 23
(1)(a) A housing counselor who is contacted by a borrower under 24
RCW 61.24.031 or a unit owner, has a duty to act in good faith to 25
attempt to reach a resolution with the beneficiary on behalf of the 26
borrower, or with the association on behalf of the unit owner, within 27
the 90 days provided from the date the beneficiary or association 28
initiates contact with the borrower or unit owner and the date the 29
notice of default or notice of delinquency for past due assessments 30
is issued. A resolution may include, but is not limited to, 31
modification of the loan, an agreement to conduct a short sale, a 32
deed in lieu of foreclosure transaction, a delinquent assessment 33
payment plan, or some other workout plan. 34
(b) Nothing in RCW 61.24.031 or this section precludes a meeting 35
or negotiations between the housing counselor, borrower, and 36
beneficiary at any time, including after the issuance of the notice 37
of default. Nothing in RCW 64.90.485 or this section precludes a 38
meeting or negotiations between the housing counselor, unit owner, 39
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and association at any time, including after the issuance of the 1
notice of delinquency for past due assessments. 2
(c) A borrower who is contacted under RCW 61.24.031 or a unit 3
owner, may seek the assistance of a housing counselor or attorney at 4
any time. 5
(2) Housing counselors have a duty to act in good faith to assist 6
borrowers or unit owners by: 7
(a) Preparing the borrower for meetings with the beneficiary;8
(b) Advising the borrower or unit owner about what documents the 9
borrower or unit owner must have to seek a loan modification or other 10
resolution; 11
(c) Informing the borrower or unit owner about the alternatives 12
to foreclosure, including loan modifications or other possible 13
resolutions; and 14
(d) Providing other guidance, advice, and education as the 15
housing counselor considers necessary. 16
(3) A housing counselor or attorney assisting a borrower or unit 17
owner may refer the borrower or unit owner to mediation, pursuant to 18
RCW 61.24.163, if the housing counselor or attorney determines that 19
mediation is appropriate based on the individual circumstances and 20
the borrower or unit owner has received a notice of default. The 21
referral to mediation may be made any time after a notice of default 22
or notice of delinquency for past due assessments has been issued but 23
no later than 90 days prior to the date of sale listed in the notice 24
of trustee's sale. If an amended notice of trustee's sale is recorded 25
after the trustee sale has been stayed pursuant to RCW 61.24.130, the 26
borrower or unit owner may be referred to mediation no later than 25 27
days prior to the date of sale listed in the amended notice of 28
trustee's sale. 29
(4) For borrowers who have received a letter under RCW 61.24.031 30
before June 7, 2012, a referral to mediation by a housing counselor 31
or attorney does not preclude a trustee issuing a notice of default 32
if the requirements of RCW 61.24.031 have been met.33
(5) Housing counselors providing assistance to borrowers under 34
RCW 61.24.031 or unit owners, are not liable for civil damages 35
resulting from any acts or omissions in providing assistance, unless 36
the acts or omissions constitute gross negligence or willful or 37
wanton misconduct. 38
(6) Housing counselors shall provide information to the 39
department to assist the department in its annual report to the 40
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legislature as required under RCW 61.24.163(((18))) (19). The 1
information provided to the department by the housing counselors 2
should include outcomes of foreclosures and be similar to the 3
information requested in the national foreclosure mortgage counseling 4
client level foreclosure outcomes report form. 5
NEW SECTION. Sec. 8. A new section is added to chapter 31.04 6
RCW to read as follows: 7
For each residential mortgage loan originated, excepting only 8
reverse mortgage loans issued to seniors over the age of 61, a 9
foreclosure prevention fee of $80 shall be assessed and remitted at 10
the time of closing by the escrow company processing the loan closing 11
into the foreclosure fairness account created under RCW 61.24.172. 12
This foreclosure prevention fee may be financed in the loan and paid 13
from the loan proceeds or from any borrower cash contribution at the 14
time of closing. 15
Sec. 9. RCW 61.24.172 and 2021 c 151 s 9 are each amended to 16
read as follows: 17
The foreclosure fairness account is created in the custody of the 18
state treasurer. All receipts received under RCW 61.24.174, as it 19
existed prior to July 1, 2016, 61.24.173, ((and)) 61.24.190, and 20
section 8 of this act must be deposited into the account. Only the 21
director of the department of commerce or the director's designee may 22
authorize expenditures from the account. Funding to agencies and 23
organizations under this section must be provided by the department 24
through an interagency agreement or other applicable contract 25
instrument. The account is subject to allotment procedures under 26
chapter 43.88 RCW, but an appropriation is not required for 27
expenditures. ((Biennial expenditures from the account must be used 28
as follows: Four hundred thousand dollars to fund the counselor 29
referral hotline. )) The ((remaining)) funds shall be distributed as 30
follows: (1) ((Sixty-nine)) 50 percent for the purposes of providing 31
housing counseling activities to benefit borrowers; (2) eight percent 32
to the office of the attorney general to be used by the consumer 33
protection division to enforce this chapter; (3) ((six)) 16.5 percent 34
to the office of civil legal aid to be used for the purpose of 35
contracting with qualified legal aid programs for legal 36
representation of homeowners in matters relating to foreclosure ; (4) 37
15 percent to fund the foreclosure prevention hotline; (5) 0.5 38
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percent to fund outreach; and (6) 10 percent to the department to be 1
used for implementation and operation of the foreclosure fairness 2
act. Funds provided under ((this)) subsection (3) of this section 3
must be used to supplement, not supplant, other federal, state, and 4
local funds((; and (4) seventeen percent to the department to be used 5
for implementation and operation of the foreclosure fairness act )). 6
If the program needs do not require the full use of the allocation as 7
set forth in this section, the department may reallocate those funds 8
to increase the percentage allocated to another agency or 9
organization authorized to receive those funds by this section.10
The department shall enter into interagency agreements to 11
contract with the Washington state housing finance commission and 12
other appropriate entities to implement the foreclosure fairness act.13
NEW SECTION. Sec. 10. (1) Sections 1 through 4 of this act take 14
effect January 1, 2026. 15
(2) Sections 5 through 7 of this act take effect January 1, 2028.16
NEW SECTION. Sec. 11. Sections 1, 2, and 4 of this act expire 17
January 1, 2028.18
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