In a recent article, we highlighted Oregon House Bill 3630, a new law that regulates foreclosure consultants. Not surprisingly, other states have passed similar legislation as a result of the mortgage crisis and its severe impact on some consumers. Washington recently passed a similar law, which went into effect on June 12, 2008. As many real estate brokers practice in both Oregon and Washington, it is important for those brokers to be aware of new laws in both states. This article will address the Washington law, House Bill 2791, and discuss some of the major differences between the Oregon law and Washington law.

Washington House Bill 2791 defines “distressed homes” and “distressed home consultants,” and outlines new requirements imposed on “distressed home consultants” in working with distressed homeowners.

Under the law, a “distressed home consultant” is a person who:

a) Solicits or contacts a distressed homeowner in writing, in person, or through any electronic or telecommunications medium and makes a representation or offer to perform any service that the person represents will:

(i) Stop, enjoin, delay, void, set aside, annul, stay, or postpone a foreclosure sale;

(ii) Obtain forbearance from any servicer, beneficiary, or mortgagee;

(iii) Assist the distressed homeowner to exercise a right of reinstatement provided in the loan documents or to refinance a loan that is in foreclosure or is in danger of foreclosure;

(iv) Obtain an extension of the period within which the distressed homeowner may reinstate the distressed homeowner’s obligation or extend the deadline to object to a ratification;

(v) Obtain a waiver of an acceleration clause contained in any promissory note or contract secured by a mortgage on a distressed home or contained in the mortgage;

(vi) Assist the distressed homeowner to obtain a loan or advance of funds;

(vii) Save the distressed homeowner’s residence from foreclosure;

(viii) Avoid or ameliorate the impairment of the distressed homeowner’s credit resulting from the recording of a notice of trustee sale, the filing of a petition to foreclose, or the conduct of a foreclosure sale;

(ix) Purchase or obtain an option to purchase the distressed homeowner’s residence within twenty days of an advertised or docketed foreclosure sale;

(x) Arrange for the distressed homeowner to become a lessee or tenant entitled to continue to reside in the distressed homeowner’s residence;

(xi) Arrange for the distressed homeowner to have an option to repurchase the distressed homeowner’s residence; or

(xii) Engage in any documentation, grant, conveyance, sale, lease, trust, or gift by which the distressed homeowner clogs the distressed homeowner’s equity of redemption in the distressed homeowner’s residence; or

b) Systematically contacts owners of properties that court records, newspaper advertisements, or any other source demonstrate are in foreclosure or are in danger of foreclosure.”

The definition of a “distressed home consultant” may include real estate brokers who list and sell short sale properties, particularly those who assist their clients in negotiating with lenders. In addition, real estate brokers may assist their clients with other items listed above, such as attempting to delay a foreclosure sale, or may contact their clients through searching court records for foreclosure properties.

Under the Oregon law, real estate brokers are specifically exempted from the requirements under the law. However, under the Washington law, real estate brokers are not exempted, and therefore must comply with the stringent requirements imposed in the law. Brokers who qualify as “distressed home consultants” are required by the law to provide distressed homeowners with an agreement that contains particular disclosures, and the law stipulates details such as the font size, language and content of such an agreement. In addition, the law allows distressed homeowners the right to cancel the agreement, such as a listing agreement, and imposes fiduciary duties beyond a real estate broker’s statutory duties and obligations towards buyers and sellers. Lastly, and significantly, the new law has both civil and criminal consequences for those who fail to comply, including double or triple damages. Those who fail to comply may also be subject to sanctions by RMLS™ or NWMLS, or the Washington Department of Licensing.

As a result of the possibility that real estate brokers may qualify as “distressed home consultants,” Washington REALTORS®, in conjunction with the Washington State Attorney General’s office, is developing literature that will assist both distressed homeowners and real estate brokers in complying with the new law. As the new law imposes requirements regarding the form of agreement between a “distressed home consultant” and the distressed homeowner, the Northwest Multiple Listing Service and RMLS™ have developed distressed home listing agreements that must be used for all new listings of distressed homes. In addition, the Clark County Association of REALTORS® and some brokerages have developed addendums that address the particular services a real estate broker may provide to a distressed homeowner.

Because Washington House Bill 2791 imposes many new requirements on those who assist distressed homeowners, Washington licensed real estate brokers must ensure they understand the new requirements, and make certain that they consistently use new forms that have been created to comply with the new law. In addition, brokers would benefit from reading any related educational materials produced by Washington REALTORS® and the Washington State Attorney General. Brokers would be well advised to speak with their managing brokers about new office policies, industry forms and other practices to which they must adhere.

Brokers who educate themselves on the new Washington law will be better equipped to deal with distressed homeowners, and will be less likely to violate one of the many intricate requirements of the law.

 
This column contains general information only and must not be construed as legal advice. Questions may be submitted directly to Maylie & Grayson by fax at (503) 775-1765, by email at or by mail at 7959 SE Foster Road, Portland, Oregon 97206.