Washington State introduces foreclosure prevention fee for residential mortgage loans

On March 5, 2025, Washington State introduced Senate Bill 5686, aimed at enhancing foreclosure prevention measures for homeowners. The bill proposes the establishment of a foreclosure prevention fee of $80, applicable to each residential mortgage loan, excluding reverse mortgages for seniors over 61. This fee will be collected at the time of loan closing and directed into the newly created foreclosure fairness account.

The primary objective of Senate Bill 5686 is to bolster resources for housing counseling and legal aid services, which are critical for homeowners facing foreclosure. The bill outlines that funds from the foreclosure fairness account will be allocated to various initiatives: 50% for housing counseling, 16.5% for legal representation in foreclosure matters, and additional percentages for a foreclosure prevention hotline and outreach efforts.

Debate surrounding the bill has focused on its potential impact on borrowers, particularly in terms of affordability and access to necessary support services. Proponents argue that the fee is a small price to pay for the significant benefits of preventing foreclosure and providing essential counseling services. Critics, however, express concern that adding fees could further strain homeowners already facing financial difficulties.

The implications of Senate Bill 5686 are significant, as it seeks to address the ongoing challenges of housing instability in Washington. By enhancing funding for counseling and legal aid, the bill aims to reduce the number of foreclosures and support families in maintaining their homes. Experts suggest that if implemented effectively, the bill could lead to improved outcomes for homeowners and a more stable housing market.

As the legislative process continues, stakeholders will be closely monitoring discussions and potential amendments to the bill, which could shape its final form and effectiveness in addressing foreclosure prevention in Washington State.