Foreclosure Bill Passes in Washington State

Foreclosures, Short Sales, Tax Foreclosures
1

I just got word from our local REIA in Seattle that a foreclosure-related bill (HB 2791) just passed overwhelmingly in the Washington State Senate and House.

http://apps.leg.wa.gov/documents/billdocs/2007-08/Pdf/Bills/House%20Passed%20Legislature/2791.PL.pdf

Here are some of the highlights (or low lights):
(1) A fudiciary relationship is established between the investor and the pre-foreclosure seller.
(2) The buyer must NOT “Fail to extinguish or assume all liens encumbering the distressed home immediately following the conveyance of the distressed home;” - so, Sub2’s will essentially become illegal when a pre-foreclosure seller is involved.
(3) Seller has 5 days to cancel a contract.
(4) You must pay the seller 82% of the FMV at the time of the transaction.

Our REIA heads will be reviewing the bill and providing guidance, but it looks like lots of banks will be taking back properties in Washington. Also, other states may not be far behind if laws like this don’t already exist.

Ben

2

I’m surprised there’s no language describing the foreclosing lenders as de facto “distressed homeowners.” They could then foreclose on themselves at no cost, sell the REOs at well below FMV. They’ll make money and increase the homeless population at he same time.

3

Ben,

Doesn’t the 82% rule only apply to reconveyance or repurchase agreements when the investor sells to a third party before the repurchase agreement has expired?

Unless the pre-foreclosure purchaser is required to enter into a repurchase agreement with the defaulting homeowner, this 82% rule may not apply if there is no agreement with the owner that would allow him to repurchase his property.

4

Yeah, the REIA is having a lawyer review the bill’s language. We got all hot and bothered about the new legislation, but it appears to be aimed at lease-back situations.

Ben