Washington passes consumer protection laws for homeowners
Washington has passed two new consumer protection laws aimed at protecting homeowners. One requires licensure of loan servicers and creates prohibited practices, and the other places new regulations on escrow agents, according to the Washington State Department of Financial Institutions (DFI).
DFI proposed the loan servicer bill after receiving complaints from homeowners about questionable third-party loan servicing practices, DFI Director of Consumer Services Deborah Bortner said in a statement. “Throughout the foreclosure crisis, homeowners desperately hoping to avoid losing their home have fallen victim to companies offering to help — for a substantial fee,” Bortner said. “In many cases, the homeowner pays several thousand dollars, receives no loan modification and loses their home to foreclosure anyway.”
The new law requires loan servicers to be licensed and to maintain a surety bond. The servicers also must explain all fees, credit all payments within one business day of receipt, make reasonable attempts to comply with requests for information from the borrower, and promptly correct errors and refund erroneous fees. It also makes modification service providers subject to the Mortgage Fraud Act and sets requirements for loan modification services, including a $750 cap on up-front fees.
The escrow bill is a response to instances of escrow company owners absconding with consumers’ funds with no bonding to cover the loss, Bortner said. Under the new law, escrow applicants must provide information about officers and directors, and are subject to fingerprinting. Escrow agents are restricted from employing people in specific positions who have been convicted of crimes involving dishonesty, and their bond must cover malfeasance of the owner, a director or an officer (the current bond only covers employees).
Read more information on Washington’s new consumer protection laws.