HB 2770

I just received notification regarding the newly passed house bill 2770 "Mortgage Lending and Homeownership". In the New Section (3)it says a disclosure summary form needs to be adopted that is reasonably understandable to the average person without the aid of a third-party resoursce.

Is anyone aware of any sample material?

The DFI will create this document and lenders will be required to use it - you don't have to make up your own.

Also, if you're an FSB (OTS regulated), this disclosure requirement is preempted by the HOLA and OTS regulations (12 CFR 560.2). Don't know if your bank wants to be the "test case" but if DFI, the AG, or a consumer challenged your bank about not complying, odds are in your favor. Check with your counsel about that.

On May 22, 2008, the DFI sent out a memo to all CEOs of WA State Chartered Financial Institutions regarding this new legislation. In the memo, it states that "during the rulemaking process, banks are not exempt from complying with the provisions and should seek legal counsel and take appropriate steps to comply with the law and minimize any legal risk of non-compliance." Has anyone come up with a "mortgage disclosure form" to assist them during the interim period?

There’s a proposed draft located here . There was a preliminary rulemaking meeting for SHB 2770 yesterday, but the outcome of the meeting has not yet been published.

I just found HB 2770. As we are chartered in Oregon, but do of course also make loans in WA.

They way I read this, Commercial Loans are not exempt. Does everyone else read it the same way?

The way I read it is that it is driven by collateral and if you have a commercial loan secured by single or multiple family dwelling of four or less units, this disclosure applies. I'm curious, since it became effective today, has anybody out there determined yet how they will comply? Will you be preparing the disclosures manually or have you already received updates to your loan software? There still seems to be a lot of unanswered questions out there not covered in the law....

Than I think we're both reading this the same way.
We haven't done anything yet, in fact, I just sent it to council for review. I'm guessing we'll be out of compliance for at least a month.

The DFI is providing a sample disclosure so you don't have to invent one. But I need clarification on whether this new disclosure is required for just purchases or is this for any closed end loan secured by residential mortgage located in Washington state.

I think you need to steer clear of Regulation Z’s definition of residential mortgage transaction. The Bill defines a residential mortgage loan as “an extension of credit secured by residential real property located in this state upon which is constructed or intended to be constructed, a single-family dwelling or multiple-family dwelling of four or less units.” I didn’t notice any differentiation in the Bill between purchase and refi transactions.

That's right, LF - all closed-end transactions are covered. Not only that, the bill doesn't specifically exclude open-end transactions. It says that DFI can issue regulations to clarify which parts of the statute apply to open-end transactions, but the draft regs didn't say anything about it. Informally, DFI has stated they don't see it applying to HELOCs.

I'm so glad that they've given such clear guidance on something as important as this.

I'll continue to look at it, but this looks to be something that will heavily impact all of our WA loans going forward.

If you have not already done so, check out DFI's website on their Proposed draft number 3. View Draft Disclosure Summary Rules at:

http://www.dfi.wa.gov/resources/2770_disclosure_rulemaking.htm

Well the final rule and approved forms came out yesterday. Compliance expected by December 5th.

See the forms at the DFI website

Maybe my brain is still on a day off but the final rule says this does not apply to business, commercial, agricultural, no rental, no reverse mortgage, no bridge loan, and no open or closed end heloc.
Is the final rule saying this applies only to purchases for consumer purposes.
I am having trouble figuring out why they talk about the definition of closing when we would use a ROR and when we wouldn't.
Which loans are included in this new disclosure that would require a ROR?

I spoke with DFI's General Counsel regarding pre-emption of this disclosure requirement for OCC and OTS regulated institutions. His response is that the law applies to those institutions specified as "financial institutions" under HB 2770. Here is the definition from that law:

(6) "Financial institution" means commercial banks and alien banks subject to regulation under Title 30 RCW, savings banks subject to regulation under Title 32 RCW, savings associations subject to regulation under Title 33 RCW, credit unions subject to regulation under chapter 31.12 RCW, consumer loan companies subject to regulation under chapter 31.04 RCW, and mortgage brokers and lenders subject to regulation under chapter 19.146 RCW.

So, the law does not apply to OTS and OCC regulated banks. In addition, OCC regulation also has a pre-emption clause for national banks in 12 CFR 34.4(a)(9), which specifies the applicability of state law to real estate lending. This provision is similar to the one noted for OTS banks under 12 CFR 560.2.

Hi all. We are making the leap from national to state chartered, so unfortunately the pre-emption clause noted above will no longer apply to us. It's been awhile since we last looked at this (2009), and in looking at the RCW updated in 2012, it appears that as long as you comply with RESPA, the one-page disclosure is not required as an additional disclosure (we're looking at RCW 19.144.020(4), which was added as the result of a 2012 legislative change).

Are we reading this correctly? The only other potential issue we see is that we might need to provide the one-page disclosure on HELOCs, since the RCW definition of "residential mortgage loan" does not specifically exclude open-end loans, and HELOCs don't receive the GFE.

Any thoughts or information on how you are handling this disclosure would be very much appreciated by this new state bank

Thank you!

My apologies, I missed the last post in the Washington specific forum (was searching through Google instead of going directly to the forum). In any case, I see the one-page disclosure summary is no longer required. However, your thoughts on the HELOC issue would still very much be appreciated.

Thanks!