HB 2081 — Regulating home equity sharing agreements under the consumer loan act.

(ii) Bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property;

(iii) Negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property, other than in connection with providing financing with respect to such a transaction;

(iv) Engaging in any activity for which a person engaged in the activity is required to be registered or licensed as a real estate agent or real estate broker under any applicable law;

and (v) Offering to engage in any activity, or act in any capacity, described in (c)(i) through (iv) of this subsection.

(d) This subsection does not apply to employees of a housing counseling agency approved by the United States department of housing and urban development unless the employees of a housing counseling agency are required under federal law to be individually licensed as mortgage loan originators.

(19) "Nationwide mortgage licensing system" means a licensing system developed and maintained by the conference of state bank supervisors for licensing and registration.

(20) "Officer" means an official appointed by the company for the purpose of making business decisions or corporate decisions.

(21) "Person" includes individuals, partnerships, associations, limited liability companies, limited liability partnerships, trusts, corporations, and all other legal entities.

(22) "Principal" means any person who controls, directly or indirectly through one or more intermediaries, alone or in concert with others, a ten percent or greater interest in a partnership;

company;

association or corporation;

or a limited liability company, and the owner of a sole proprietorship.

(23) "Registered mortgage loan originator" means any individual who meets the definition of mortgage loan originator and is an p.

4 HB 2081 employee of a depository institution;

a subsidiary that is owned and controlled by a depository institution and regulated by a federal banking agency;

or an institution regulated by the farm credit administration and is registered with, and maintains a unique identifier through, the nationwide mortgage licensing system.

(24) "Residential mortgage loan" means any loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other consensual security interest on a dwelling, as defined in the truth in lending act, or residential real estate upon which is constructed or intended to be constructed a dwelling.

"Residential mortgage loan" includes home equity sharing agreements.

(25) "Residential mortgage loan modification" means a change in one or more of a residential mortgage loan's terms or conditions.

Changes to a residential mortgage loan's terms or conditions include but are not limited to forbearances;

repayment plans;

changes in interest rates, loan terms, or loan types;

capitalizations of arrearages;

or principal reductions.

(26) "Residential mortgage loan modification services" includes negotiating, attempting to negotiate, arranging, attempting to arrange, or otherwise offering to perform a residential mortgage loan modification for compensation or gain.

"Residential mortgage loan modification services" also includes the collection of data for submission to an entity performing mortgage loan modification services.

(27) "S.A.F.E.

act" means the secure and fair enforcement for mortgage licensing act of 2008, Title V of the housing and economic recovery act of 2008 ("HERA"), P.L.

110-289, effective July 30, 2008.

(28) "Senior officer" means an officer of a licensee at the vice president level or above.

(29) "Service or servicing a loan" means on behalf of the lender or investor of a residential mortgage loan:

(a) Collecting or receiving payments on existing obligations due and owing to the lender or investor, including payments of principal, interest, escrow amounts, and other amounts due;

(b) collecting fees due to the servicer;

(c) working with the borrower and the licensed lender or servicer to collect data and make decisions necessary to modify certain terms of those obligations either temporarily or permanently;

(d) otherwise finalizing collection through the foreclosure process;

or (e) servicing a reverse mortgage loan.

p.

5 HB 2081 (30) "Service or servicing a reverse mortgage loan" means, pursuant to an agreement with the owner of a reverse mortgage loan:

Calculating, collecting, or receiving payments of interest or other amounts due;

administering advances to the borrower;

and providing account statements to the borrower or lender.

(31) "Simple interest method" means the method of computing interest payable on a loan by applying the annual percentage interest rate or its periodic equivalent to the unpaid balances of the principal of the loan outstanding for the time outstanding.

(a) On a nonresidential loan each payment is applied first to any unpaid penalties, fees, or charges, then to accumulated interest, and the remainder of the payment applied to the unpaid balance of the principal until paid in full.

In using such method, interest must not be payable in advance nor compounded.

The prohibition on compounding interest does not apply to reverse mortgage loans made in accordance with the Washington state reverse mortgage act.

The director may adopt by rule a more detailed explanation of the meaning and use of this method.

(b) On a residential mortgage loan payments are applied as determined in the security instrument.

(32) "Student education loan" means any loan solely for personal use to finance postsecondary education and costs of attendance at an educational institution.

A student education loan includes a loan made to refinance a student education loan.

A student education loan does not include a payment plan or accounts receivable at a higher education institution as defined in RCW 28B.07.020(4) only during the time of a student's enrollment in the higher education institution, not to include a refinanced payment plan or accounts receivable, an extension of credit under an open-end consumer credit plan, a reverse mortgage transaction, a residential mortgage transaction, or any other loan that is secured by real property or a dwelling.

(33) "Student education loan borrower" means:

(a) Any resident of this state who has received or agreed to pay a student education loan;

or (b) any person who shares responsibility with such resident for repaying the student education loan.

(34) "Student education loan servicer" means any person, wherever located, responsible for the servicing of any student education loan to any student education loan borrower.

(35) "Student education loan servicing" or "service a student education loan" means:

(a) Receiving any scheduled periodic payments p.

6 HB 2081 from a student education loan borrower pursuant to the terms of a student education loan;

(b) applying the payments of principal and interest and such other payments with respect to the amounts received from a student education loan borrower, as may be required pursuant to the terms of a student education loan;

(c) working with the student education loan borrower to collect data, or collecting data, to make decisions to modify the loan;

or (d) performing other administrative services with respect to a student education loan including collection activities.

"Student education loan servicing" does not include third-party student education loan modification services.

(36) "Third-party residential mortgage loan modification services" means residential mortgage loan modification services offered or performed by any person other than the owner or servicer of the loan.

(37) "Third-party service provider" means any person other than the licensee or a mortgage broker who provides goods or services to the licensee or borrower in connection with the preparation of the borrower's loan and includes, but is not limited to, credit reporting agencies, real estate brokers or salespersons, title insurance companies and agents, appraisers, structural and pest inspectors, or escrow companies.

(38) "Third-party student education loan modification services" means for compensation or other consideration by or on behalf of the borrower working with the student education loan borrower or his or her representative to collect data or prepare or submit documents, or collecting data and preparing or submitting documents, to modify, refinance, or consolidate the loan, or change repayment plans.

(39) "Unique identifier" means a number or other identifier assigned by protocols established by the nationwide mortgage licensing system.

(40) "Home equity sharing agreement" means any obligation in which an advance sum of money or other thing of value is extended to a borrower in exchange for an interest or future share of equity in the borrower's residential real estate or a future obligation to pay a sum upon the occurrence of an agreed-upon event.

Sec.

2.

RCW 31.04.102 and 2018 c 62 s 14 are each amended to read as follows:

p.

7 HB 2081 (1) For all loans made by a licensee that are not secured by a lien on real property, the licensee must make disclosures in compliance with the truth in lending act, 15 U.S.C.

Sec.

1601 and regulation Z, 12 C.F.R.

Part 1026, and all other applicable federal laws and regulations.

(2) For all loans made by a licensee that are secured by a lien on real property, the licensee must provide to each borrower within three business days following receipt of a loan application a written disclosure containing an itemized estimation and explanation of all fees and costs that the borrower is required to pay in connection with obtaining a loan from the licensee.

A good faith estimate of a fee or cost must be provided if the exact amount of the fee or cost is not available when the disclosure is provided.

Disclosure in a form which complies with the requirements of the truth in lending act, 15 U.S.C.

Sec.

1601 and regulation Z, 12 C.F.R.

Part 1026, the real estate settlement procedures act and regulation X, ((24)) 12 C.F.R.

Part 1024, and all other applicable federal laws and regulations, as now or hereafter amended, constitutes compliance with this disclosure requirement.

Each licensee must comply with all other applicable federal and state laws and regulations.

(3) In addition, for all loans made by the licensee that are secured by a lien on real property, the licensee must provide to the borrower an estimate of the annual percentage rate on the loan and a disclosure of whether or not the loan contains a prepayment penalty within three days of receipt of a loan application.

The annual percentage rate must be calculated in compliance with the truth in lending act, 15 U.S.C.

Sec.

1601 and regulation Z, 12 C.F.R.

Part 1024.

If a licensee provides the borrower with a disclosure in compliance with the requirements of the truth in lending act within three business days of receipt of a loan application, then the licensee has complied with this subsection.

If the director determines that the federal government has required a disclosure that substantially meets the objectives of this subsection, then the director may make a determination by rule that compliance with this federal disclosure requirement constitutes compliance with this subsection.

(4) In addition for all consumer loans made by the licensee that are secured by a lien on real property, the licensee must comply with RCW 19.144.020.

p.

8 HB 2081 (5) In addition for all consumer loans made by a licensee that are a refinance of a federal student education loan, the licensee must provide to the borrower a clear and conspicuous disclosure that some repayment and forgiveness options available under federal student education loan programs, including without limitation income- driven repayment plans, economic hardship deferments, or public service loan forgiveness, will no longer be available to the borrower if he or she chooses to refinance federal student education loans with one or more consumer loans.

(6) The director's obligations or duties under chapter 62, Laws of 2018 are subject to section 21, chapter 62, Laws of 2018.

NEW SECTION.

Sec.

3.

A new section is added to chapter 31.04 RCW to read as follows:

(1) A home equity sharing agreement:

(a) May not be used as a lien against the real property;

(b) May not run with title to real property and is not binding or enforceable at law or in equity against any subsequent owner, purchaser, or mortgagee or holder of any interest in real property as an equitable servitude;

(c) May not prevent the property owner from renting or using the real property as the property owner chooses;

and (d) May not contain provisions that prevent the property owner from refinancing a mortgage or lien on the real property.

(2) The total amount due under a home equity sharing agreement must not exceed the lesser of:

(a) Any amount paid to the borrower plus the interest amount calculated in accordance with this chapter;

or (b) 200 percent of the amount paid to the borrower.

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