RCW 61.34.010
Legislative findings.
The legislature finds that persons are engaging in patterns of conduct which defraud innocent homeowners of their equity interest or other value in residential dwellings under the guise of a purchase of the owner's residence but which is in fact a device to convert the owner's equity interest or other value in the residence to an equity skimmer, who fails to make payments, diverts the equity or other value to the skimmer's benefit, and leaves the innocent homeowner with a resulting financial loss or debt.
The legislature further finds this activity of equity skimming to be contrary to the public policy of this state and therefore establishes the crime of equity skimming to address this form of real estate fraud and abuse.
[
1988 c 33 s 1
.]
RCW 61.34.020
Definitions.
Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
(1) An "act of equity skimming" occurs when:
(a)(i) A person purchases a dwelling with the representation that the purchaser will pay for the dwelling by assuming the obligation to make payments on existing mortgages, deeds of trust, or real estate contracts secured by and pertaining to the dwelling, or by representing that such obligation will be assumed; and
(ii) The person fails to make payments on such mortgages, deeds of trust, or real estate contracts as the payments become due, within two years subsequent to the purchase; and
(iii) The person diverts value from the dwelling by either (A) applying or authorizing the application of rents from the dwelling for the person's own benefit or use, or (B) obtaining anything of value from the sale or lease with option to purchase of the dwelling for the person's own benefit or use, or (C) removing or obtaining appliances, fixtures, furnishings, or parts of such dwellings or appurtenances for the person's own benefit or use without replacing the removed items with items of equal or greater value; or
(b)(i) The person purchases a dwelling in a transaction in which all or part of the purchase price is financed by the seller and is (A) secured by a lien which is inferior in priority or subordinated to a lien placed on the dwelling by the purchaser, or (B) secured by a lien on other real or personal property, or (C) without any security; and
(ii) The person obtains a superior priority loan which either (A) is secured by a lien on the dwelling which is superior in priority to the lien of the seller, but not including a bona fide assumption by the purchaser of a loan existing prior to the time of purchase, or (B) creating any lien or encumbrance on the dwelling when the seller does not hold a lien on the dwelling; and
(iii) The person fails to make payments or defaults on the superior priority loan within two years subsequent to the purchase; and
(iv) The person diverts value from the dwelling by applying or authorizing any part of the proceeds from such superior priority loan for the person's own benefit or use.
(2) "Distressed home" means either:
(a) A dwelling that is in danger of foreclosure or at risk of loss due to nonpayment of taxes; or
(b) A dwelling that is in danger of foreclosure or that is in the process of being foreclosed due to a default under the terms of a mortgage.
(3) "Distressed home consultant" means a person who:
(a) Solicits or contacts a distressed homeowner in writing, in person, or through any electronic or telecommunications medium and makes a representation or offer to perform any service that the person represents will:
(i) Stop, enjoin, delay, void, set aside, annul, stay, or postpone a foreclosure sale;
(ii) Obtain forbearance from any servicer, beneficiary, or mortgagee;
(iii) Assist the distressed homeowner to exercise a right of reinstatement provided in the loan documents or to refinance a loan that is in foreclosure or is in danger of foreclosure;
(iv) Obtain an extension of the period within which the distressed homeowner may reinstate the distressed homeowner's obligation or extend the deadline to object to a ratification;
(v) Obtain a waiver of an acceleration clause contained in any promissory note or contract secured by a mortgage on a distressed home or contained in the mortgage;
(vi) Assist the distressed homeowner to obtain a loan or advance of funds;
(vii) Save the distressed homeowner's residence from foreclosure;
(viii) Avoid or ameliorate the impairment of the distressed homeowner's credit resulting from the recording of a notice of trustee sale, the filing of a petition to foreclose, or the conduct of a foreclosure sale;
(ix) Cause a contract to purchase an interest in the distressed home to be executed or closed within twenty days of an advertised or docketed foreclosure sale, unless the distressed homeowner is represented in the transaction by an attorney or a person licensed under chapter
18.85
RCW;
(x) Arrange for the distressed homeowner to become a lessee or tenant entitled to continue to reside in the distressed homeowner's residence, unless (A) the continued residence is for a period of no more than twenty days after closing, (B) the purpose of the continued residence is to arrange for and relocate to a new residence, and (C) the distressed homeowner is represented in the transaction by an attorney or a person licensed and subject to chapter
18.85
RCW;
(xi) Arrange for the distressed homeowner to have an option to repurchase the distressed homeowner's residence; or
(xii) Engage in any documentation, grant, conveyance, sale, lease, trust, or gift by which the distressed homeowner clogs the distressed homeowner's equity of redemption in the distressed homeowner's residence; or
(b) Systematically contacts owners of property that court records, newspaper advertisements, or any other source demonstrate are in foreclosure or are in danger of foreclosure.
"Distressed home consultant" does not include: A financial institution; a nonprofit credit counseling service; a licensed attorney, or a person subject to chapter
19.148
RCW; a licensed mortgage broker who, pursuant to lawful activities under chapter
19.146
RCW, procures a nonpurchase mortgage loan for the distressed homeowner from a financial institution; or a person licensed as a real estate broker or salesperson under chapter
18.85
RCW, when rendering real estate brokerage services under chapter
18.86
RCW, regardless of whether the person renders additional services that would otherwise constitute the services of a distressed home consultant, and if the person is not engaged in activities designed to, or represented to, result in a distressed home conveyance.
(4) "Distressed home consulting transaction" means an agreement between a distressed homeowner and a distressed home consultant in which the distressed home consultant represents or offers to perform any of the services enumerated in subsection (3)(a) of this section.
(5) "Distressed home conveyance" means a transaction in which:
(a) A distressed homeowner transfers an interest in the distressed home to a distressed home purchaser;
(b) The distressed home purchaser allows the distressed homeowner to occupy the distressed home; and
(c) The distressed home purchaser or a person acting in participation with the distressed home purchaser conveys or promises to convey the distressed home to the distressed homeowner, provides the distressed homeowner with an option to purchase the distressed home at a later date, or promises the distressed homeowner an interest in, or portion of, the proceeds of any resale of the distressed home.
(6) "Distressed home purchaser" means any person who acquires an interest in a distressed home under a distressed home conveyance. "Distressed home purchaser" includes a person who acts in joint venture or joint enterprise with one or more distressed home purchasers in a distressed home conveyance. A financial institution is not a distressed home purchaser.
(7) "Distressed homeowner" means an owner of a distressed home.
(8) "Dwelling" means a one-to-four family residence, condominium unit, residential cooperative unit, residential unit in any other type of planned unit development, or manufactured home whether or not title has been eliminated pursuant to RCW 65.20.040
.
(9) "Financial institution" means (a) any bank or trust company, mutual savings bank, savings and loan association, credit union, or a lender making federally related mortgage loans, (b) a holder in the business of acquiring federally related mortgage loans as defined in the real estate settlement procedures act (RESPA) (12 U.S.C. Sec. 2602), insurance company, insurance producer, title insurance company, escrow company, or lender subject to auditing by the federal national mortgage association or the federal home loan mortgage corporation, which is organized or doing business pursuant to the laws of any state, federal law, or the laws of a foreign country, if also authorized to conduct business in Washington state pursuant to the laws of this state or federal law, (c) any affiliate or subsidiary of any of the entities listed in (a) or (b) of this subsection, or (d) an employee or agent acting on behalf of any of the entities listed in (a) or (b) of this subsection. "Financial institution" also means a licensee under chapter
31.04
RCW, provided that the licensee does not include a licensed mortgage broker, unless the mortgage broker is engaged in lawful activities under chapter
19.146
RCW and procures a nonpurchase mortgage loan for the distressed homeowner from a financial institution.
(10) "Homeowner" means a person who owns and has occupied a dwelling as his or her primary residence within one hundred eighty days of the latter of conveyance or mutual acceptance of an agreement to convey an interest in the dwelling, whether or not his or her ownership interest is encumbered by a mortgage, deed of trust, or other lien.
(11) "In danger of foreclosure" means any of the following:
(a) The homeowner has defaulted on the mortgage and, under the terms of the mortgage, the mortgagee has the right to accelerate full payment of the mortgage and repossess, sell, or cause to be sold, the property;
(b) The homeowner is at least thirty days delinquent on any loan that is secured by the property; or
(c) The homeowner has a good faith belief that he or she is likely to default on the mortgage within the upcoming four months due to a lack of funds, and the homeowner has reported this belief to:
(i) The mortgagee;
(ii) A person licensed or required to be licensed under chapter
19.134
RCW;
(iii) A person licensed or required to be licensed under chapter
19.146
RCW;
(iv) A person licensed or required to be licensed under chapter
18.85
RCW;
(v) An attorney-at-law;
(vi) A mortgage counselor or other credit counselor licensed or certified by any federal, state, or local agency; or
(vii) Any other party to a distressed home consulting transaction.
(12) "Mortgage" means a mortgage, mortgage deed, deed of trust, security agreement, or other instrument securing a mortgage loan and constituting a lien on or security interest in housing.
(13) "Nonprofit credit counseling service" means a nonprofit organization described under section 501(c)(3) of the internal revenue code, or similar successor provisions, that is licensed or certified by any federal, state, or local agency.
(14) "Pattern of equity skimming" means engaging in at least three acts of equity skimming within any three-year period, with at least one of the acts occurring after June 9, 1988.
(15) "Person" includes any natural person, corporation, joint stock association, or unincorporated association.
(16) "Resale" means a bona fide market sale of the distressed home subject to the distressed home conveyance by the distressed home purchaser to an unaffiliated third party.
(17) "Resale price" means the gross sale price of the distressed home on resale.
[
2009 c 15 s 1
;
2008 c 278 s 1
;
1988 c 33 s 4
.]
NOTES:
Effective date
—
2009 c 15:
"This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately [March 25, 2009]." [
2009 c 15 s 2
.]
RCW 61.34.030
Criminal penalty.
Any person who wilfully engages in a pattern of equity skimming is guilty of a class B felony under RCW 9A.20.021
. Equity skimming shall be classified as a level II offense under chapter
9.94A
RCW, and each act of equity skimming found beyond a reasonable doubt or admitted by the defendant upon a plea of guilty to be included in the pattern of equity skimming, shall be a separate current offense for the purpose of determining the sentence range for each current offense pursuant to RCW 9.94A.589
(1)(a).
[
1988 c 33 s 2
.]
RCW 61.34.040
Application of consumer protection act
—
Remedies are cumulative.
(1) In addition to the criminal penalties provided in RCW 61.34.030, the legislature finds that the practices covered by this chapter are matters vitally affecting the public interest for the purpose of applying chapter
19.86
RCW. A violation of this chapter is not reasonable in relation to the development and preservation of business and is an unfair method of competition for the purpose of applying chapter
19.86
RCW.
(2) In a private right of action under chapter
19.86
RCW for a violation of this chapter, the court may double or triple the award of damages pursuant to RCW 19.86.090, subject to the statutory limit. If, however, the court determines that the defendant acted in bad faith, the limit for doubling or tripling the award of damages may be increased, but shall not exceed one hundred thousand dollars. Any claim for damages brought under this chapter must be commenced within four years after the date of the alleged violation.
(3) The remedies provided in this chapter are cumulative and do not restrict any remedy that is otherwise available. The provisions of this chapter are not exclusive and are in addition to any other requirements, rights, remedies, and penalties provided by law. An action under this chapter shall not affect the rights in the distressed home held by a distressed home purchaser for value under this chapter or other applicable law.
[
2008 c 278 s 11
;
1988 c 33 s 3
.]
RCW 61.34.045
Arbitration not required.
(1) Any provision in a contract that attempts or purports to require arbitration of any dispute arising under this chapter is void at the option of the distressed homeowner.
(2) This section applies to any contract entered into on or after June 12, 2008.
[
2008 c 278 s 9
.]
RCW 61.34.050
Distressed home consulting transaction
—
Requirements
—
Notice.
(1) A distressed home consulting transaction must:
(a) Be in writing in at least twelve-point font;
(b) Be in the same language as principally used by the distressed home consultant to describe his or her services to the distressed homeowner. If the agreement is written in a language other than English, the distressed home consultant shall cause the agreement to be translated into English and shall deliver copies of both the original and English language versions to the distressed homeowner at the time of execution and shall keep copies of both versions on file in accordance with subsection (2) of this section. Any ambiguities or inconsistencies between the English language and the original language versions of the written agreement must be strictly construed in favor of the distressed homeowner;
(c) Fully disclose the exact nature of the distressed home consulting services to be provided, including any distressed home conveyance that may be involved and the total amount and terms of any compensation to be received by the distressed home consultant or anyone working in association with the distressed home consultant;
(d) Be dated and signed by the distressed homeowner and the distressed home consultant;
(e) Contain the complete legal name, address, telephone number, fax number, email address, and internet address if any, of the distressed home consultant, and if the distressed home consultant is serving as an agent for any other person, the complete legal name, address, telephone number, fax number, email address, and internet address if any, of the principal; and
(f) Contain the following notice, which must be initialed by the distressed homeowner, in boldface type and in at least fourteen-point font:
"NOTICE REQUIRED BY WASHINGTON LAW
THIS IS AN IMPORTANT LEGAL CONTRACT AND COULD RESULT IN THE LOSS OF YOUR HOME.
. . . Name of distressed home consultant . . . or anyone working for him or her CANNOT guarantee you that he or she will be able to refinance your home or arrange for you to keep your home. Continue making mortgage payments until refinancing, if applicable, is approved. You should consult with an attorney before signing this contract.
If you sign a promissory note, lien, mortgage, deed of trust, or deed, you could lose your home and be unable to get it back."
(2) At the time of execution, the distressed home consultant shall provide the distressed homeowner with a copy of the written agreement, and the distressed home consultant shall keep a separate copy of the written agreement on file for at least five years following the completion or other termination of the agreement.
(3) This section does not relieve any duty or obligation imposed upon a distressed home consultant by any other law including, but not limited to, the duties of a credit service organization under chapter
19.134
RCW or a person required to be licensed under chapter
19.146
RCW.
[
2008 c 278 s 2
.]
RCW 61.34.060
Distressed home consultant
—
Fiduciary duties.
A distressed home consultant has a fiduciary relationship with the distressed homeowner, and each distressed home consultant is subject to all requirements for fiduciaries otherwise applicable under state law. A distressed home consultant's fiduciary duties include, but are not limited to, the following:
(1) To act in the distressed homeowner's best interest and in utmost good faith toward the distressed homeowner, and not compromise a distressed homeowner's right or interest in favor of another's right or interest, including a right or interest of the distressed home consultant;
(2) To disclose to the distressed homeowner all material facts of which the distressed home consultant has knowledge that might reasonably affect the distressed homeowner's rights, interests, or ability to receive the distressed homeowner's intended benefit from the residential mortgage loan;
(3) To use reasonable care in performing his or her duties; and
(4) To provide an accounting to the distressed homeowner for all money and property received from the distressed homeowner.
[
2008 c 278 s 3
.]
RCW 61.34.070
Waiver of rights.
(1) A person may not induce or attempt to induce a distressed homeowner to waive his or her rights under this chapter.
(2) Any waiver by a homeowner of the provisions of this chapter is void and unenforceable as contrary to public policy.
[
2008 c 278 s 4
.]
RCW 61.34.080
Distressed home reconveyance
—
Requirements.
A distressed home purchaser shall enter into a distressed home reconveyance in the form of a written contract. The contract must be written in at least twelve-point boldface type in the same language principally used by the distressed home purchaser and distressed homeowner to negotiate the sale of the distressed home, and must be fully completed, signed, and dated by the distressed homeowner and distressed home purchaser before the execution of any instrument of conveyance of the distressed home.
[
2008 c 278 s 5
.]
RCW 61.34.090
Distressed home reconveyance
—
Entire agreement
—
Terms
—
Notice.
The contract required in RCW 61.34.080
must contain the entire agreement of the parties and must include the following:
(1) The name, business address, and telephone number of the distressed home purchaser;
(2) The address of the distressed home;
(3) The total consideration to be provided by the distressed home purchaser in connection with or incident to the sale;
(4) A complete description of the terms of payment or other consideration including, but not limited to, any services of any nature that the distressed home purchaser represents that he or she will perform for the distressed homeowner before or after the sale;
(5) The time at which possession is to be transferred to the distressed home purchaser;
(6) A complete description of the terms of any related agreement designed to allow the distressed homeowner to remain in the home, such as a rental agreement, repurchase agreement, or lease with option to buy;
(7) A complete description of the interest, if any, the distressed homeowner maintains in the proceeds of, or consideration to be paid upon, the resale of the distressed home;
(8) A notice of cancellation as provided in RCW 61.34.110
; and
(9) The following notice in at least fourteen-point boldface type if the contract is printed, or in capital letters if the contract is typed, and completed with the name of the distressed home purchaser, immediately above the statement required in RCW 61.34.110
;
"NOTICE REQUIRED BY WASHINGTON LAW
Until your right to cancel this contract has ended, . . . . . . (Name) or anyone working for . . . . . . (Name) CANNOT ask you to sign or have you sign any deed or any other document."
The contract required by this section survives delivery of any instrument of conveyance of the distressed home and has no effect on persons other than the parties to the contract.
[
2008 c 278 s 6
.]
RCW 61.34.100
Distressed homeowner's right to cancel.
(1) In addition to any other right of rescission, a distressed homeowner has the right to cancel any contract with a distressed home purchaser until midnight of the fifth business day following the day on which the distressed homeowner signs a contract that complies with this chapter or until 8:00 a.m. on the last day of the period during which the distressed homeowner has a right of redemption, whichever occurs first.
(2) Cancellation occurs when the distressed homeowner delivers to the distressed home purchaser, by any means, a written notice of cancellation to the address specified in the contract.
(3) A notice of cancellation provided by the distressed homeowner is not required to take the particular form as provided with the contract.
(4) Within ten days following the receipt of a notice of cancellation under this section, the distressed home purchaser shall return without condition any original contract and any other documents signed by the distressed homeowner.
[
2008 c 278 s 7
.]
RCW 61.34.110
Notice of distressed homeowner's right to cancel.
(1) The contract required in RCW 61.34.080
must contain, in immediate proximity to the space reserved for the distressed homeowner's signature, the following conspicuous statement in at least fourteen-point boldface type if the contract is printed, or in capital letters if the contract is typed:
"You may cancel this contract for the sale of your house without any penalty or obligation at any time before
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Date and time of day)
See the attached notice of cancellation form for an explanation of this right."
The distressed home purchaser shall accurately enter the date and time of day on which the cancellation right ends.
(2) The contract must be accompanied by a completed form in duplicate, captioned "NOTICE OF CANCELLATION" in twelve-point boldface type if the contract is printed, or in capital letters if the contract is typed, followed by a space in which the distressed home purchaser shall enter the date on which the distressed homeowner executes any contract. This form must be attached to the contract, must be easily detachable, and must contain in at least twelve-point type if the contract is printed, or in capital letters if the contract is typed, the following statement written in the same language as used in the contract:
"NOTICE OF CANCELLATION
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Enter date contract signed)
You may cancel this contract for the sale of your house, without any penalty or obligation, at any time before
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Enter date and time of day)
To cancel this transaction, personally deliver a signed and dated copy of this cancellation notice to
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name of purchaser)
at
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Street address of purchaser's place of business)
NOT LATER THAN
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Enter date and time of day)
I hereby cancel this transaction.
. . . . . . . . . .
(Date)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Seller's signature)"
(3) The distressed home purchaser shall provide the distressed homeowner with a copy of the contract and the attached notice of cancellation at the time the contract is executed by all parties.
(4) The five-business-day period during which the distressed homeowner may cancel the contract must not begin to run until all parties to the contract have executed the contract and the distressed home purchaser has complied with this section.
[
2008 c 278 s 8
.]
RCW 61.34.120
Distressed home purchaser
—
Prohibited practices.
A distressed home purchaser shall not:
(1) Enter into, or attempt to enter into, a distressed home conveyance with a distressed homeowner unless the distressed home purchaser verifies and can demonstrate that the distressed homeowner has a reasonable ability to pay for the subsequent conveyance of an interest back to the distressed homeowner. In the case of a lease with an option to purchase, payment ability also includes the reasonable ability to make the lease payments and purchase the property within the term of the option to purchase. An evaluation of a distressed homeowner's reasonable ability to pay includes debt to income ratios, fair market value of the distressed home, and the distressed homeowner's payment and credit history. There is a rebuttable presumption that the distressed home purchaser has not verified a distressed homeowner's reasonable ability to pay if the distressed home purchaser has not obtained documentation of assets, liabilities, and income, other than an undocumented statement, of the distressed homeowner;
(2) Fail to either:
(a) Ensure that title to the distressed home has been reconveyed to the distressed homeowner; or
(b) Make payment to the distressed homeowner so that the distressed homeowner has received consideration in an amount of at least eighty-two percent of the fair market value of the property as of the date of the eviction or voluntary relinquishment of possession of the distressed home by the distressed homeowner. For the purposes of this subsection (2)(b), the following applies:
(i) There is a rebuttable presumption that an appraisal by a person licensed or certified by an agency of the federal government or this state to appraise real estate constitutes the fair market value of the distressed home;
(ii) "Consideration" means any payment or thing of value provided to the distressed homeowner, including unpaid rent owed by the distressed homeowner before the date of eviction or voluntary relinquishment of the distressed home, reasonable costs paid to independent third parties necessary to complete the distressed home conveyance transaction, the payment of money to satisfy a debt or legal obligation of the distressed homeowner, or the reasonable cost of repairs for damage to the distressed home caused by the distressed homeowner. "Consideration" does not include amounts imputed as a down payment or fee to the distressed home purchaser or a person acting in participation with the distressed home purchaser;
(3) Enter into repurchase or lease terms as part of the distressed home conveyance that are unfair or commercially unreasonable, or engage in any other unfair or deceptive acts or practices;
(4) Represent, directly or indirectly, that (a) the distressed home purchaser is acting as an advisor or consultant, (b) the distressed home purchaser is acting on behalf of or in the interests of the distressed homeowner, or (c) the distressed home purchaser is assisting the distressed homeowner to save the distressed home, buy time, or use other substantially similar language;
(5) Misrepresent the distressed home purchaser's status as to licensure or certification;
(6) Perform any of the following until after the time during which the distressed homeowner may cancel the transaction has expired:
(a) Accept from any distressed homeowner an execution of, or induce any distressed homeowner to execute, any instrument of conveyance of any interest in the distressed home;
(b) Record with the county auditor any document, including any instrument of conveyance, signed by the distressed homeowner; or
(c) Transfer or encumber or purport to transfer or encumber any interest in the distressed home;
(7) Fail to reconvey title to the distressed home when the terms of the distressed home conveyance contract have been fulfilled;
(8) Enter into a distressed home conveyance where any party to the transaction is represented by a power of attorney;
(9) Fail to extinguish or assume all liens encumbering the distressed home immediately following the conveyance of the distressed home;
(10) Fail to close a distressed home conveyance in person before an independent third party who is authorized to conduct real estate closings within the state.
[
2008 c 278 s 10
.]