SSB 5938
SignedSenate
Foreclosure prevention fee
Concerning the foreclosure prevention fee.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill adds a $80 foreclosure prevention fee to most residential mortgage loans on Washington property, with proceeds going to the foreclosure fairness account to support housing counseling and prevention services. It also requires a study to potentially create a new fund for direct financial aid to homeowners at risk of foreclosure.
- Imposes a $80 foreclosure prevention fee on most residential mortgage loans for Washington property, collected at closing by escrow or settlement agents.
- Exempts reverse mortgages for people age 60 or older and chattel loans or retail installment contracts for dwellings secured as personal property.
- Allows the fee to be rolled into the loan amount (financed) and paid from loan proceeds at closing.
- Requires escrow/closing agents to provide borrowers with a state-mandated notice about the fee and include contact info for the statewide foreclosure hotline.
- Directs the Department of Commerce to study by October 1, 2026 whether to create a state homeowner assistance fund using part of the fee revenue to help homeowners who’ve exhausted all other foreclosure prevention options.
Who is affected
- First-time and low-to-moderate-income homebuyers using state homeownership programs — Homebuyers and refinancers of residential mortgages in Washington must pay an $80 fee at closing, which may be rolled into the loan amount; this applies to most loans on Washington property, regardless of where the lender is located.
- Seniors and elderly homeowners using reverse mortgages — These homebuyers may benefit from a reduced fee burden, since the fee only applies to the first lien loan in multi-unit purchases (up to four units) if part of certain state-run affordability programs.
- Buyers of mobile homes or dwellings secured as personal property (chattel loans) — They are exempt from the $80 fee if the reverse mortgage is issued to someone age 60 or older.
- Escrow agents and closing agents — They are exempt from the fee when purchasing a dwelling as personal property rather than real property.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The $80 fee is projected to generate $20–$25 million annually to fund foreclosure prevention services—including housing counseling, legal aid, and mediation—which directly benefit at-risk homeowners, especially low-income and communities of color who face higher foreclosure rates.
HousingPeopleRef: Sec. 1(1); RCW 61.24.172Mandated borrower notice—including contact info for the statewide foreclosure hotline—improves access to critical support services and empowers homeowners to seek help earlier, potentially reducing displacement and community destabilization.
Public SafetyPeopleRef: Sec. 1(4)Exempting reverse mortgages for seniors 60+ protects a vulnerable population from added closing costs at a life stage when fixed incomes and home equity are central to financial security.
HousingPeopleRef: Sec. 1(2)(a)(i)Limiting the fee to one lien in multi-unit purchases under state affordability programs (e.g., CHAP, CHP) reduces the burden on participants in targeted homeownership programs—many of whom are first-time, low-income buyers.
HousingPeopleRef: Sec. 1(2)(b)The study to create a state homeowner assistance fund could lead to direct financial aid for homeowners who have exhausted all other options—potentially preventing displacement for those in the deepest distress, though this is not yet funded or guaranteed.
HousingPeopleRef: Sec. 2
Potential Concerns (5)
The $80 fee is imposed on nearly all residential mortgage borrowers in Washington, including first-time and low-to-moderate-income homebuyers, and may be rolled into the loan—effectively increasing total borrowing costs and monthly payments for many households, especially those with limited cash reserves.
FinancialPeopleRef: Sec. 1(1)Chattel loan borrowers (e.g., mobile home buyers) are exempt, but this group is disproportionately low-income and racially marginalized; however, the exemption does not extend to other vulnerable groups (e.g., underwater homeowners, those in high-risk neighborhoods), limiting the bill’s equity impact.
HousingLean peopleRef: Sec. 1(2)(a)(ii)The fee is collected by private escrow/closing agents, not local governments, but the administrative burden of compliance (e.g., notice delivery, fee collection, remittance) may fall on small title companies and local closing agents, especially in rural counties with fewer resources.
Local GovernmentLean peopleRef: Sec. 1(1)The study to create a future state homeowner assistance fund is promising but non-binding and contingent on future legislation; without guaranteed funding or eligibility criteria, it may not materialize—or may be structured in a way that excludes the most vulnerable homeowners.
HousingRef: Sec. 2Rolling the $80 fee into the loan increases the loan principal, which may push some borrowers above the conforming loan limit ($806,500 in 2026), triggering higher interest rates or jumbo loan fees—disproportionately affecting moderate-income borrowers in high-cost areas like King and Snohomish counties.
FinancialPeopleRef: Sec. 1(1)
Who Is Most Affected
Low-to-moderate-income homebuyers—especially those using state affordability programs—will pay $80 at closing (or face slightly higher loan balances), but may benefit from improved access to counseling and future direct aid if the fund is created. The fee is modest relative to overall closing costs, but regressive for cash-constrained buyers.
Seniors with reverse mortgages are fully exempt, protecting them from added costs during a time of high vulnerability. They benefit significantly from this protection, though they do not directly fund or receive services from the account.
Mobile home owners (chattel borrowers) are exempt, which helps a low-income, often rural and minority population. However, they are a smaller share of the housing market and receive no direct benefit from the services funded by the fee.
Escrow and closing agents face new administrative duties (notice delivery, fee collection, remittance), but the fee is small and standardized, and most already handle similar compliance tasks. The burden is modest and unlikely to threaten small firms.
State and local governments benefit from increased funding for foreclosure prevention services, which can reduce emergency shelter, health, and law enforcement costs tied to displacement. However, no new tax revenue is generated—this is a dedicated fee with a sunset.