By Gary Burris, Senior Policy Associate
With the current state budget shortfall, federal budget deficits and looming cuts in vital services, it’s easy to miss a few of the good things that are happening in our state legislature. Specifically, several bills currently on their way to the Governor’s desk will increase consumer protection for homeowners and promote personal savings.
The first bill, which we’ve written about before, is the Foreclosure Fairness Bill (HB 1362), sponsored by Representative Orwall. The legislature has seen the wisdom in this important homeowner protection bill, which was passed by the state House and Senate in early April. The bill is set to provide more funding for housing counselors, who will advise homeowners struggling to make their mortgage payments.
The counselors are funded by banks or other mortgage-holders, with a fee added to each foreclosure that is filed. The housing counselors will help homeowners asses their finances and determine whether a modification to their mortgage is feasible. It also provides for a mandatory mediation process after the borrower is referred to mediation by a housing counselor. Through mediation, the borrower and mortgage holder sit down, face to face, with a neutral and trained third party to discuss a mortgage modification.
By working with a housing counselor prior to the mediation, it is expected that most homeowners entering into mediation will be able to work out a plan to afford payments under a modified mortgage. Homeowners will have lower monthly payments and, most importantly, will be able to stay in their homes.
The second piece of consumer protection legislation is SB 5115, which will ban the practice of private transfer fees on home sales. Banks began a practice of adding a 1% fee to the contract of home sales that was to be assessed each time the home was sold. The fee would then be given to the bank that originated this first loan.
In some cases, this fee was put in place for 100 years and would be assessed each time the home was sold. But these fees serve no public good, they simply steal equity from home buyers and pad the pockets of Wall Street executives. As of today, twenty-two states have banned this practice – and Washington is poised to join them. SB 5115, sponsored by Senator Harper, passed the House and Senate unanimously.
The third bill, SB 5232, recognizes that saving money, especially if you’re lower to moderate income, is one of the cornerstones of a middle class life. Over the years a number of efforts have been made to incentivize savings, such as individual development accounts. This year, one more might be added to the list.
Prize Linked Savings (SB 5232), introduced by Senator Kilmer, passed the House and Senate with only two no votes in each chamber, and is on its way to the Governor’s desk. This bill will allow credit unions and certain banks to conduct promotional contests – much like a lottery. Here’s how it works: savers will put a small amount, such as $25, into a Certificate of Deposit (CD) and be entered into a contest to win a larger prize. The financial institutions that participate will put up the prizes. The chance to win “the lottery” has proven to be a successful way to get many people who haven’t previously saved to start putting money away.
These three bills – and many more ideas – are part of the recently released Prosperity Blueprint: Building, Leveraging, and Protecting Washington State’s Future. This Blueprint was produced by the Washington State Asset Building Coalition and BURST for Prosperity. The Economic Opportunity Institute (EOI) was a partner in policy development for the Blueprint.
Most middle class families have experienced financial loss as a result of the Great Recession. Many have been hit by inflated housing prices, paying more than the true value for their home, and finding they now owe more than their home is worth. Some face foreclosure. Other families lost a significant portion of their retirement or other investments.
It’s during times like these that preserving the promise of achieving a middle class lifestyle is critical to our democracy. The Asset Building Coalition recognizes that government plays a big role in helping working people build and keep financial assets. Building and protecting wealth is key to attaining a middle class lifestyle, and the work of EOI, BURST, the Asset Building Coalition and others provides practical strategies to support working families in this pursuit.