Washington Legislative Week in Review

The winter storm was the big story at the Capitol this past week, as Olympia, Wash., was in the path of some of the worst weather in the region. Although many hearings were cancelled or rescheduled—and by the end of the week Governor Christine Gregoire had officially declared a state of emergency—the legislature continued its work.

Public Funds

Senate Bill 5913 received a do-pass recommendation from the Senate Financial Institutions, Housing & Insurance Committee on Tuesday, Jan. 17, and was referred to the Senate Rules Committee. The bill passed after the committee heard testimony in opposition to the bill from the Washington Bankers Association. The bankers admitted that the bill is not one of their highest priorities, saying they appreciated that the bill was the same as last year and held credit unions to the level of federal insurance so as not to pose a risk to the Public Deposit Protection Commission (PDPC). The bankers went on to say that they oppose the bill because credit unions compete against banks on a non-tax basis, giving them a 25-to-33-percent pricing advantage over products banks offer, and that when you broaden credit union powers you take tax money out of the pockets of the state.


State Bank

The idea of a state-run bank continues to gain support, with Democratic Rep. Bob Hasegawa’s House Bill 2434 garnering 44 cosponsors—just six shy of a majority in the House. The Washington Investment Trust (the new name for the state bank) specifically allows the bank to provide student loans and infrastructure financing and might also let the bank take over services related to welfare benefits cards and other financial products. The governor, lieutenant governor and treasurer would make key decisions for the bank. The bill’s prospects in the Senate, where Democrats have a smaller majority, are less certain. Although leadership says it is interested, the proposal is not on the list of dozens of government reforms unveiled last week. Senate Democrats also say it is unclear where the money would come from to capitalize the bank.

State Treasurer Jim McIntire has gone on record saying that government programs already exist to serve the functions of a proposed state bank and has been a vocal opponent of the idea. The Public Works Trust Fund loans out hundreds of millions of dollars a year to Washington’s local governments for infrastructure, and an alphabet soup of agencies have similar goals, including the Community Economic Revitalization Board, the Drinking Water State Revolving Fund, and the Transportation State Infrastructure Bank. And he contends there are federal student-loan programs.

Rep. Barbara Bailey, R-10, Ranking Minority Member of the House Business & Financial Services Committee, questions the need to set up a new bureaucracy and is concerned that eventually a state bank would be in direct competition with the state financial industry.

House Bill 2434 relating to establishing the Washington Investment Trust is scheduled for a hearing before the House Business & Financial Services Committee on Thursday, Jan. 26. The hearing is expected to be packed with supporters and may well serve as a platform for Occupy protesters.


Document Recording Fees

Senate Bill 5952 relating to low-income and homeless housing assistance surcharges received a do-pass recommendation from the Senate Financial Institutions, Housing & Insurance Committee on Wednesday, Jan. 18, and was referred to the Senate Ways & Means Committee. The bill increases county recording fees to $40 from the current $30 surcharge for local homeless housing and assistance.


Drivers’ Licenses

House Bill 2433 relating to a facial recognition matching system for drivers’ licenses, permits, and Identicards was introduced on Friday, Jan. 13, and referred to the House Transportation Committee, where it is scheduled for a hearing on Wednesday, Jan. 25.

Both House Bill 2433 and Senate Bill 6150 make facial recognition mandatory on all drivers’ licenses and Identicards. Legislation that passed in 2006 requiring the Department of Licensing to adopt a facial recognition system was weakened in 2011 and made voluntary. The Northwest Credit Union Association (NWCUA) is in support of the legislation because it will increase the reliability of state-issued identification cards, which are relied upon for their accuracy by financial institutions.


Pierce County Air Standards

Sen. Sharon Nelson, D-34, has proposed a bill that addresses Pierce County air standards. Air quality standards in Pierce County are below those required by the Federal Clean Air Act, and the county must have a plan to meet the air standards or risk losing federal financial assistance. The bill would require financial institutions to conduct an energy efficiency assessment on all older Other Real Estate Owned (OREO) properties, and spend up to 3 percent of the value of the home on energy retrofitting—particularly the replacement of old wood stoves, a substantial cause of pollution in the county.

Association staff is skeptical of this proposal and is reaching out to credit unions in Pierce County to see what type effect this might have. Many of the homes are actually investor-owned (FNMA), and the proposal adds time and expense to an already expensive foreclosure and sale process. Based on the Association’s research, many older short-sale homes already sell at a loss to the financing financial institution, and while adding another 3 percent in costs might make the homes marginally more saleable, it is unlikely that credit unions would be able to recoup the costs.


Financial Literacy

House Bill 2268 would establish financial literacy as a high school graduation requirement. The bill is scheduled for a hearing before the House Education Committee on Monday, Jan. 23, and the Association plans to testify in favor of the concepts behind the bill.


Mortgage Loan Servicers

Senate Bill 5810 amends the Consumer Loan Act to revise the definition of “individual servicing a mortgage loan” to include a person acting on behalf of a federally chartered or licensed financial institution or its affiliate and expands the duties of a residential mortgage loan servicer. The bill is scheduled for a hearing before the Senate Financial Institutions, Housing & Insurance Committee on Tuesday, Jan. 24. The Association has concerns about the impact of this bill on mortgage lending but considers it likely that the bill is only being given a courtesy hearing.


Short Sales

Senate Bill 6337 adds a new section to the Washington Deed of Trust Act. It provides that if a lender accepts a short-sale price that is less than what is owed on the property and files a 1099-C IRS forgiveness of debt, the lender cannot collect on a deficiency balance. The bill applies to all residential real estate, not just owner-occupied. The bill was introduced on Wednesday, Jan. 18, and referred to the Senate Financial Institutions, Housing & Insurance Committee, where it is scheduled for a hearing on Tuesday, Jan. 24. The Association has some concerns about the bill, which is being offered up by realtors; however, practically speaking, a credit union that forgave a debt on a loan would be very unlikely to also seek a deficiency balance judgment against a borrower. The Association expects a substitute version of the bill to be offered up that will clarify that it is not applicable to commercial properties.

A similar bill, House Bill 2614, also amends Washington’s Deed of Trust Act, prohibiting the beneficiary on a deed of trust from obtaining a judgment on a deficiency balance in conjunction with a short sale of owner-occupied residential real property resulting in a deficiency if the beneficiary has filed an IRS forgiveness of debt (1099-C) or has consented to the sale of the property in writing. The Association opposes this bill, because the lender must consent to a short sale in order to sell a foreclosed property. In essence, the bill would prohibit the collection of deficiency judgments on all short-sale properties. The bill was introduced on Wednesday, Jan. 18 and referred to the Senate Judiciary Committee, where it is scheduled for a hearing on Thursday, Jan. 26.


Tax Preferences

Senate Bill 6088 concludes that in order for the state to make policy choices and choices regarding the best use of limited state resources, the legislature must set an expiration date and articulate the legislative intent for each new tax preference. The bill requires any new bill adopting a new tax preference or expanding on an existing tax preference to include a legislative intent provision and establish policy goals and metrics that might provide data useful for reviewing whether the tax preference met the policy goals established by the bill.

The bill provides that any tax preference taking effect on or after July 1, 2012, expires five years after the effective date, unless an earlier expiration date is specified in the enacting legislation. The bill is not applicable to existing tax preferences, but the Association will continue to monitor it for its effect on credit unions. The bill is scheduled for a hearing before the Senate Ways & Means Committee on Wednesday, Jan. 25.


Administrative Procedures

House Bill 2276 enacts the Regulatory Freedom and Accountability Act. It recognizes that government continues to increase the burden on citizens and employers through perpetual alteration and expansion of rules. The bill reduces administrative costs to the state and to businesses by placing a moratorium on rulemaking until July 1, 2015, except in certain specified instances. The bill also provides that before adopting a rule, an agency must determine whether compliance with the rule will result in a specified economic impact. If it does, the agency may not enforce the rule until the rule is enacted into law by the legislature.

The Association supports HB 2276, and the bill is scheduled for a hearing before the House State Government & Tribal Affairs Committee on Thursday, Jan. 26.


Foreclosures

House Bill 2421 relating to modifying the Foreclosure Fairness Act is scheduled for a hearing before the House Judiciary Committee on Thursday, Jan. 26. The bill continues to be a work in progress. Association staff remains involved in working on the negotiated changes to last year’s bill. The latest draft of the bill makes the following substantive (and largely helpful) changes. The bill:

  • Allows the statutorily-required meet-and-confer process to occur telephonically;
  • Incorporates a new mediation timeline, including explicit triggers for mediation;
  • Specifies when a sale may proceed if the borrower has been referred to mediation when a trustee does not receive a certification from the mediator; and
  • Amends the timing of the mediation process, including specific statutory time frames for the exchange of documents.

While many of these changes make beneficial clarifications to Washington’s Foreclosure Fairness Act, they are not expected to have a significant operational effect on credit unions.


Questions? Contact a member of the Association’s Legislative Advocacy team:
Mark Minickiello, Vice President, Legislative Affairs
Stacy Augustine, Senior Vice President & General Counsel

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