The Washington State Legislature has passed three new laws that will go into effect June 12, 2008. 

SHB 2770
Governor Gregoire’s legislation implementing the recommendations of the Homeownership Task Force. This legislation impacts Banks, Credit Unions, the Consumer Loan Act (CLA), and the MBPA. The bill addresses prepayment penalties, negative amortization loans, the federal guidance on nontraditional mortgage products and subprime lending, and makes mortgage fraud a class B felony.
SHB 2770 PDF
SHB 2770 Summary
SHB 2270 Final Bill Report

Interesting highlights from the Final Bill Report:

The DFI must adopt a disclosure summary understandable to the average person that includes:
• the fees and discount points on the loan;
• the interest rate of the loan;
• the broker’s yield spread premium;
• the presence of any prepayment penalties;
• the presence of a balloon payment;
• whether or not property taxes and property insurance is escrowed; and
• other key terms and conditions of the loan.

A residential mortgage loan may not be made unless the summary is provided by a financial institution to a borrower within three days of a loan application. If the terms of the loan change, a new summary must be provided to the borrower within three days of the change or at least three days before closing, whichever is earlier.

Steering
A person subject to licensing under the MBPA or the Consumer Loan Act may not steer, counsel, or direct any potential borrower to accept a residential mortgage loan with a risk grade less favorable than what the borrower would qualify for under the lender’s existing underwriting standards. The licensee must prudently apply the underwriting standards to the information provided by the borrower.

Prepayment Penalties
A financial institution may not make or facilitate the origination of a residential mortgage loan that includes a prepayment penalty that extends beyond 60 days prior to the initial reset of an adjustable rate mortgage.

Negative Amortization
A financial institution may not make or facilitate the origination of a residential mortgage loan
that is subject to the Guidance and Statement if the loan includes any provisions that result in
negative amortization for a borrower.

SB 6471
This legislation amends the CLA and MBPA. All lenders, except those making loans under chapter 63.14 RCW, must have a license under the Consumer Loan Act. Lending is no longer allowed under the MBPA. Read the FINAL BILL REPORT link below. There is a lot of concern and confusion over this change.  More info is forthcoming at the next Mortgage Broker Commission meeting on May 13, 2008.

SB 6471 PDF
SB 6471 Summary
SB 6471 Final Bill Report

SB 6381
Establishes a fiduciary duty relationship between a mortgage broker and his or her client.

SB 6381 PDF
SB 6381 Summary
SB 6381 Final Bill Report

Other links:
Here’s a quick overview from the Wash State Housing Finance Commission.