On May 20th, Governor Ferguson signed E2SSB 5686 into legislation. One part of this, effective July 27, 2025, is the assessment of a foreclosure prevention fee of $80.00. This applies to all residential mortgage loans, as defined under RCW 31.04.015(24) except reverse mortgages. With the short period until the effective date, we have been anxiously waiting for the Department of Commerce’s guidance. On June 25th, we received the guidance (dated June 23), which answers many of the questions that we had previously asked and brings up new questions. While waiting for the guidance to be issued, we were also posed with a number of questions and will address them below.
As a reminder, E2SSB’s section regarding the new Foreclosure Prevention Fee:
NEW SECTION. Sec. 8. A new section is added to chapter 61.24 RCW to read as follows:
(1) For each residential mortgage loan, as defined in RCW 31.04.015(24), originated within or outside of the state of Washington and related to property located within the state of Washington, excepting only reverse mortgage loans issued to seniors over the age of 61, a foreclosure prevention fee of $80 shall be assessed and due and payable at the time of closing by the escrow agent or other settlement or closing agent processing the loan closing into the foreclosure fairness account created in RCW 61.24.172. This foreclosure prevention fee may be financed in the loan and paid from the loan proceeds or from any borrower cash contribution at the time of closing. The department may make policies and procedures related to the implementation, collection, remittance, and management of the fee and may enter into individualized agreements governing the efficient remittance of the fee.
(2) At or before the time that the foreclosure prevention fee is assessed under subsection (1) of this section, the escrow agent or other settlement or closing agent must provide the borrower with a notice of the foreclosure prevention fee and its purpose. The department must create a notice form that an escrow agent or other settlement or closing agent may use to satisfy this notice requirement. The notice form must include the toll-free numbers for the statewide foreclosure hotline recommended by the housing finance commission.
Guidance and Disclosure:
- Washington State Department of Commerce Foreclosure Prevention Fee Guidance
- Foreclosure Prevention Fee Disclosure
Questions and Answers:
What is the effective date of the Foreclosure Prevention Fee assessment?
The guidance states “…all residential mortgage loans closed on or after July 27, 2025, must include the statutorily required $80 fee referred to as the “Foreclosure Prevention Fee.””
What loans will the Foreclosure Prevention Fee be assessed on?
The fee is applicable to any residential mortgage loan originated inside or outside of Washington State, on a property within Washington State, except reverse mortgage loans for any person over the age of 61. This would include first mortgages, and second mortgages – both closed- and open-end loans (home equity and home equity lines of credit). Note that the definition of residential mortgage loan under RCW 31.04.015(24) includes “…primarily for personal, family, or household use…” so the fee would not apply to investment properties.
Will the exemption provisions for federally insured depository institutions also include the Foreclosure Prevention Fee?
No, all lenders are subject to the Foreclosure Prevention Fee. The annual exemption for federally insured depository institutions does not apply to this fee.
Will the Foreclosure Prevention Fee be charged on open-end second mortgages, home equity lines of credit?
Yes, the only exception is reverse mortgages for any person over the age of 61.
Where will the Foreclosure Prevention Fee be disclosed on the Loan Estimate and Closing Disclosures?
It should be aggregated under Recording Fees and Other Taxes, under the Other Costs sections.
(1) Taxes and other government fees. Under the subheading “Taxes and Other Government Fees,” the amounts to be paid to State and local governments for taxes and other government fees, and the subtotal of all such amounts, as follows:
Official interpretation of 37(g)(1) Taxes and other government fees.
- Recording fees. Recording fees listed under § 1026.37(g)(1) are fees assessed by a government authority to record and index the loan and title documents as required under State or local law. Recording fees are assessed based on the type of document to be recorded or its physical characteristics, such as the number of pages. Unlike transfer taxes, recording fees are not based on the sale price of the property or loan amount. For example, a fee for recording a subordination agreement that is $20, plus $3 for each page over three pages, is a recording fee, but a fee of $1,250 based on 0.5 percent of the loan amount is a transfer tax, and not a recording fee.
- Other government charges. Any charges or fees imposed by a State or local government that are not transfer taxes are aggregated with recording fees and disclosed under § 1026.37(g)(1)(i).
Note that the guidance states that the disclosures “must include the statutorily required $80 fee referred to as the “Foreclosure Prevention Fee.” The Loan Estimate’s rules do not contain any provision for including the term “Foreclosure Prevention Fee.”
Does the Foreclosure Prevention Fee Disclosure have to be provided if the lender pays the fee – outside of the mortgage?
It appears that the lender cannot pay the fee. It must be paid by the borrower, either from the loan proceeds or from any borrower cash contribution at the time of closing.
How will the payment process work?
This is to be determined. The notice states that “more detailed payment instructions will be made available closer to the remittance effective date.”
Watch this page for updated guidance. We have additional questions into the Department of Commerce and will update this page as new information is provided.
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