This is the fourth of five blog posts I'll make today regarding the 15 bills I've prime-sponsored that have passed out of committee. A few of them have already passed the Senate; others are lined up for a possible vote on the Senate floor.
SB 6070 would assist people facing foreclosure. This bill is one of a number of bills I’ve sponsored to assist Washingtonians who are faced with possible foreclosure. In real estate, a deed of trust is a document that embodies the agreement between a lender and a borrower to transfer an interest in the borrower's land to a neutral third party, a trustee, to secure the payment of a debt by the borrower. The act of recording provides constructive notice to the world that the property has been encumbered, and provides evidence of and security for the debt. Currently, our state Deeds of Trust Act requires that a deed is recorded in the county where the land is situated before a foreclosure can be initiated. The original version of this bill required that every assignment and transfer of the mortgage also be recorded.
I heard from constituents, attorneys and housing advocates regarding how difficult it is to find the actual lien holder of a piece of property when a homeowner is facing foreclosure. This is in large part due to the Mortgage Electronic Registry System (MERS), created by banks in 1995 to digitize and centralize the paperwork surrounding the dividing, bundling, and selling of a mortgage. MERS members include most of the large banks in the mortgage industry. More than 70 million mortgages are registered in the MERS system.
Banks support MERS because it assists them to rapidly buy, sell, divide, and repackage parts of a mortgage, so that at any given time, several banks may own a part of your mortgage. But this makes it very difficult for folks who are trying to find out who actually owns their property at any given time.
The Senate Committee on Financial Institutions, Housing and Insurance passed SB 6070 out of committee in a much different form than I originally intended. Instead of changing current practice, they decided to set up a task force to study the issue. I’m hoping to restore the bill to its original form when it’s brought up on the floor of the Senate for a vote. This is a long-shot, and if I fail, I’m willing settle for a task force in order to bring some light to this issue.
My bid to restore the bill to its original form is supported by the fact that the Attorney General of New York recently sued MERS and some of the nation's biggest banks, accusing them of unlawful and deceptive practices for relying on MERS. The Attorney General says that the banks created the electronic registry as an "end-run" around the public property recording system to help them more quickly buy and sell parts of mortgages. He said the system helped banks create "deceptive and fraudulent court submissions" and improperly foreclose on homeowners.
The New York suit alleges that MERS was used by the big banks to transfer ownership of mortgage debt without paying government registration fees and properly recording the transactions. The suit also claims that the system concealed the identities of the holders of mortgage debt from borrowers.
I think this bill would mean a lot to the several thousand Washington homeowners who are currently in foreclosure on mortgages based on loans issued recklessly in the period before the housing bubble burst. No doubt some folks bought more house than their incomes warranted, but the greater fault lies with the much more sophisticated parties to these transactions, the large banks who ought to have known better than to lend so freely and loosely, and whose lack of business judgment caused the bubble to burst.
Senate Bill 6515 would prevent erroneous foreclosures. This is another bill aimed at making things a bit easier for folks facing the loss of their home to foreclosure. This bill would authorize a trustee, beneficiary, or agent for a beneficiary, up to the eleventh day following the trustee's foreclosure sale, to declare the trustee's sale and deed void for certain reasons. This bill helps when a home that is in foreclosure is sold in error. There may have been an error on the bid price, the borrower could be involved in loss mitigation, or the borrower could have reinstated the loan.