Washington Legislative Week in Review

The latest news about NWCUA efforts in the Washington State Legislature

Association staff and constituents of committee members continue to push for Senate Bill 5233 to be passed out of the Senate Financial Institutions, Housing & Insurance Committee. Most of the committee is new and a few have concerns about the tax treatment of credit unions versus banks, especially following bank complaints of their increased tax load following last year’s budget bill. The bill allows public entities to deposit public funds into federally chartered credit unions and increases the amount that may be deposited in all credit unions to the maximum level of NCUSIF insurance. The bill must be passed out of committee by February 21 or it will be considered dead.

Its companion measure HB 1327 is now in the House Rules Committee awaiting floor action.

Senate Bill 5232 received a do pass recommendation by unanimous vote last week from the Senate Labor, Commerce & Consumer Protection Committee. We urge everyone to thank these committee members!

  • Sen. Kohl-Welles (D-36) Chair, 360.786.7670
  • Sen. Conway (D-29) Vice Chair, 360.786.7656
  • Sen. Holmquist Newbry (R13) Ranking Minority Member, 360.786.7624
  • Sen. King (R-14) Asst. Ranking Minority Member, 360.786.7626
  • Sen. Hewitt (R-16), 360.786.7630
  • Sen. Keiser (D-33), 360.786.7664
  • Sen. Kline (D-37), 360.786.7688

An amendment proposed by the Muckelshoot Indian Tribe to set the prize-linked CD rate at a level comparable to other 12-month CDs, was set aside.

The House State Government & Tribal Affairs passed the companion bill, HB 1326 out of committee on Wednesday, February 9. Representative Gary Alexander (R-20) offered an amendment to narrow the bill to just “certificates of deposits with a term of at least one year”. That amendment was defeated (6-no, 5-yes) with Representatives Dunshee and Darneille speaking against the amendment and arguing that flexibility should be encouraged. After the amendment was defeated, the bill passed on a party-line vote of 7-yes, 5-no.

The bills would allow financial institutions to participate in prize-linked savings promotions. Prize-linked savings programs start with low threshold certificates of deposit, and incent consumer savings by entering participants into drawings for cash prizes.

Association staff continues to participate in negotiations on House Bill 1362 and its companion measure, Senate Bill 5275. Revised drafts of the bill were vetted this past weekend. All parties have until Tuesday to come to a tentative agreement on the bill.

Representatives from both credit unions and community banks have been working on exemption language that would be triggered if a financial institution only did a nominal number of foreclosures per year. Advocates for the bill attempted to exclude credit unions and community banks in early drafts of the bill, however the Chair of the Senate Financial Institutions, Housing & Insurance Committee has expressed his opposition to excluding any financial institutions from foreclosure reform.

House Bill 1362 has been scheduled for executive session before the House Judiciary Committee on Thursday, February 17.

The Association opposed the bills as originally introduced because they added a complex mandatory mediation requirement to the foreclosure process. The bills also make existing statutory meet & confer requirements permanent and add penalties for failure to comply.

House Bill 1558 has been scheduled for a hearing before the House Business & Financial Services Committee on Tuesday, February 15. The bill authorizes (and requires) shared appreciation mortgages (SAMs). A SAM occurs when the appraised value of a home is less than the outstanding mortgage and the lender reduces the monthly payment on the loan in return for a percentage of recouped market value on eventual sale. House Bill 1558 would essentially cram down the value of underwater loans and give lenders a cut of future values. While the bill would keep homeowners in their homes, it also represents substantial accounting, tax, and safety & soundness challenges for financial institutions. A study on SAMs was part of the recently passed Dodd Frank Act, however the study has not yet been completed. Based on the Association’s initial research on SAMs, it would be difficult to impossible for a financial institution to recoup its cram-down losses through property value recoupment.

Under current Washington law persons who are in military service and their dependents are protected from stays of execution, legal proceedings and fines when they are called to active duty. Under RCW 38.42.110 at the request of the service member, a financial institution must restructure a business loan (with balances of less than $100,000) to the same interest rate caps under the federal Service Members’ Civil Relief Act. The Act is only applicable to business loans in which the service member is a sole proprietor or owner of at least fifty percent of the entity and who will experience a material reduction in revenue due to the service member’s military service.

Under current law “military service” means a service member under a call to active service authorized by the President of the United States or the Secretary of Defense for a period of more than thirty consecutive days. As currently written, HB 1615 would allow business loan deferrals for all active duty members of the armed forces. The Association has concerns about this expansion under the current law. However, it’s our understanding that the bill will be amended in committee to remove this provision, and only expand Washington’s existing law to apply to reservists called to active duty by the Governor for more than thirty consecutive days (in addition to the President, etc.). The Association would not oppose this change.

The bill is scheduled for a hearing before the House Judiciary Committee on Tuesday, February 16.

House Bill 1768 adds a $48 fee to every assignment or substitution on a deed of trust recorded with the county auditor, with the funds used to support affordable housing programs. While a noble cause, it’s difficult for a financial institution to anticipate the number of times a deed of trust will be reconveyed during the life of the loan. Typically, a deed of trust is reconveyed three to five times, which means that lenders will likely add a $240 ($48 x five) fee to each mortgage loan, increasing costs to the consumer.