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Financial Services Law Insights and Observations

Washington Enacts Legislation Requiring Licensure for Servicers, Loan Modifiers

State Issues

On March 12, Washington Governor Chris Gregoire signed into law H.B. 2608, a bill requiring individuals performing residential mortgage loan modification services under the Consumer Loan Act and/or the Mortgage Broker Practices Act to be licensed as mortgage loan originators through the Nationwide Mortgage Licensing System. Additionally, the bill prohibits the collection of an advance fee for performing residential mortgage loan modification services, unless the borrower has been provided with a written fee agreement summarizing all material terms. The Washington Department of Financial Institutions has been charged with adopting the model format of this written fee agreement. The bill also requires a license under the Consumer Loan Act to service residential mortgage loans and sets forth a number of practice requirements applicable to residential mortgage loan servicers. Notably, actions taken by individuals servicing a residential mortgage loan prior to July 1, 2011, are excluded from the definition of “residential mortgage loan modification services” under the Consumer Loan Act. The bill becomes effective on July 1, 2010.