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Hearing on bill to raise mortgage-fraud surcharge to $5 draws prosecutors’ support, banker concerns
Summary
Senate Bill 5109 would raise the $1 surcharge on recorded deeds of trust to $5 and eliminate the surcharge’s sunset; prosecutors said the change restores resources for mortgage-fraud prosecution, while community bankers said funds were being reallocated away from the Department of Financial Institutions.
Senate Bill 5109, which would increase the surcharge collected at the recording of a deed of trust from $1 to $5 and remove the surcharge’s sunset, received a staff briefing and mixed public testimony at the Appropriations Committee hearing.
Jessica Van Horn, staff to the committee, told the panel the $1 surcharge currently deposits net revenues into the mortgage lending fraud prosecution account administered by the Department of Financial Institutions. “The $1 surcharge is increased to $5. The sunset provisions for both the surcharge and the account are removed,” Van Horn said, and the fiscal note estimates about $2.4 million in 2025–27 and $3.9 million in 2027–29 would be collected under the increased and continuing surcharge.
Patrick Hynes, chief deputy of the Economic Crimes and Wage Theft Division at the King County Prosecutor’s Office, urged support for 5109, saying funding has eroded over two decades. Hynes said the account once supported two prosecutors and an investigator in his office; “as of January of this year, the funding we receive only covers half of 1 investigator and less than half of a prosecutor.” He described the surcharge as collected on high-dollar transactions and said raising it to $5 would be “virtually imperceptible to lenders and consumers” while restoring prosecutorial capacity.
Hugo Torres, a senior deputy prosecutor in the King County Prosecuting Attorney’s Office who prosecutes mortgage fraud, described the fund’s role in prosecuting complex, industry-specific fraud and protecting vulnerable consumers. Torres said recent cases have involved large losses, including one in which business partners lost about $3 million.
Brad Tower of Community Bankers of Washington said his group supports the use of funds for prosecution but objected to what he described as a reallocation of department funds to the general fund and Department of Revenue. He said the bill would put roughly $3 million at the top of the bucket while “the budget is draining $14,300,000 out the bottom of the bucket” for the general fund and other purposes, and urged preserving funds at DFI rather than increasing the surcharge to refill amounts already reappropriated.
No committee vote was recorded at the hearing. Testimony and staff materials focused on the revenue estimates, the removal of the sunset, and competing views on how best to ensure sustainable funding for mortgage-fraud prosecution.
