OLYMPIA—Struggling homeowners will get much needed help from the state in a measure passed by the Legislature earlier this week. House Bill 2614, sponsored by State Rep. Phyllis Gutiérrez Kenney (D-Seattle) will bring clarity to the short-sale process so that homeowners have all the information they need if they chose this alternative to foreclosure.
“Imagine you can’t make your house payments and, to avoid foreclosure, you decide to go for a short-sale where you’ll bring in less than the amount you owe. Since the bank agrees, you think that it’s over and you can move on,” said Gutiérrez Kenney, about the scenario that is not uncommon given our current economy. “But you may still not be off the hook – and you only find out when the bank, or someone you never even heard of, comes after you for the outstanding debt.”
The lawmaker said this situation was brought to her by a realtor who is seeing the beginning of this new disturbing real estate problem affecting Washington homeowners. Representative Gutiérrez Kenney and her seatmate, Senator David Frockt, worked closely together by bringing lenders, realtors and homeowner advocates to the table to balance everyone’s concerns and reach a viable solution. Frockt was the prime sponsor of a Senate companion bill, Senate Bill 6337.
HB 2614 creates a notice mechanism to homeowners to be informed of whether the lender/bank will pursue that remaining debt after the home is sold, and it reduces the amount of time, from six to three years, that lenders have to pursue short-sale home owners for remaining debt. Frockt says the bill provides a first step in what will be an ongoing process.
“Six years are not necessary to decide whether or not you want to pursue someone in a deficiency situation. I don’t think three years are needed, either, but this will be a work in progress,” said Frockt, who sponsored a similar bill, that didn’t make it out of the Senate, which would have required the lenders to waive the remaining debt if they agree to short-sale closing costs. “By shortening the amount of time given to the banks, you create an incentive for homeowners to go through with the short sale rather than foreclosure, move the homes off the market and let the homeowners move on with some certainty.”
Gutiérrez Kenney, who chairs the House Community & Economic Development & Housing Committee, said that requiring upfront notice to the homeowner about possible future debt, and limiting the time for the debt’s collection will enable homeowners to make the right decisions and not get caught off guard.
“We need this law to make sure that homeowners who opt for short-sales know—without a shadow of a doubt—if they will be free and clear or if they will continue to owe the lender,” Gutiérrez Kenney said.
To further help struggling homeowners, HB 2614 was amended to include the provisions of two other consumer protection bills (HB 2421 & SB 6515) that got stuck in the legislative process. The first one makes important changes to the Foreclosure Fairness Act of 2011 to make the mediation program run more smoothly, and streamline the demands on lenders. The other one provides remedies for when a home is lost due to mistakes in the trustee sale. Currently, if you lose your home because of a mistake in the foreclosure process, it is impossible to get it back.
HB 2614 is a comprehensive measure to help homeowners in crisis by providing alternatives, remedies and assistance. It now heads to Gov. Gregoire’s desk for her signature.