Legislature approves key protections for new homeowners

March 7, 2008

OLYMPIA – Earlier today the Washington State Senate unanimously passed House Bill 2770, a measure that will protect people wanting to buy a home from bad deals and unscrupulous lending.

“There are people who agree to loans that are so vaguely worded or have crucial information withheld, so when the dust settles, new homeowners find that they are buried,” said the bill’s prime sponsor, Rep. Phyllis Gutiérrez Kenney (D – Seattle), chair of the Community and Economic Development and Trade Committee. “We really need to make sure consumers are protected. Everybody has a right to a home, but nobody should be victimized because they want to provide a roof for their family.”

Rep. Gutiérrez Kenney explained that although our state has not been hit nearly as hard on the mortgage crisis as other states in the nation, there have been recent spikes in foreclosures.  She said that in the past few years many lenders relaxed their standards and provided subprime loans to consumers who could not get traditional loans. These lending practices have lead to lost wealth, suffering, and homelessness.

Gutiérrez Kenney’s bill will provide much needed protections to new homeowners by:

• Requiring additional disclosure to mortgage borrowers;

• Prohibiting prepayment penalties that extend beyond 60 days prior to the initial reset of an adjustable rate mortgage in subprime residential loans;

• Banning negative amortization for a borrower in subprime residential loans;

• Banning the steering of consumers into higher cost loans; and

• Establishing the framework and penalties for crimes related to mortgage fraud.

HB 2770 now heads to Gov. Gregoire’s desk for her signature.