McKenna expressing his sympathies.
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Last month, Attorney General Rob McKenna issued a press release announcing that several new laws he had requested during the most recent legislative session were going into effect. Three of "McKenna's new laws" (as the release called them) had to do with consumer privacy. The fourth was designed to protect homeowners from foreclosure rescue scams.
But McKenna has been less enthusiastic about that foreclosure measure as the state's realtors have stepped up their criticism of it. The Washington Association of Realtors recently posted a video on its Web site decrying the measure and talking about plans to get it changed. The video features McKenna. In it, he says the foreclosure bill that passed "was far different than what I originally proposed. The state Senate added in a lot of language that we never intended and that we actively opposed with our friends in the realtor community."
Sen. Brian Weinstein (D-Mercer Island) disputes that. He claims neither the attorney general nor the realtors ever opposed the bill when it came through the Consumer Protection and Housing Committee, which he chairs.
The bill, known as the "distressed property law," is intended to help prevent cases in which a homeowner seeking help in staving off foreclosure loses their home to the supposed rescuer. Realtors are upset because under the bill someone who approaches a homeowner who's struggling with their mortgage payments in order to discuss ways of getting out of the predicament is considered a "distressed home consultant." The bill says that any such consultant has a fiduciary responsibility to the homeowner, and has to act in their best interest. This, says Bill Riley, Vice President of Government Affairs for the WAR, could open realtors up to extra liability.
That, says Weinstein, is not a mistake. "Subjecting realtors to possible liability was not an unintended consequence," he says. "We intended for realtors to be subject to liability because consumer advocates noted that sometimes these foreclosure rescue scammers are also licensed real-estate agents." (See "Sold Out," April 2, for one alleged example.)
Riley wants to get realtors exempted from the fiduciary duty, as mortgage brokers and nonprofit counseling agencies are, under the law. He says realtors are vulnerable in that if a buyer gets a very good deal on a home, and if later the seller decides the deal was too good, the seller could sue. "What's happened as a result is that some of our members have elected not to help these people, and let the homes go to foreclosure, because they think it's safer to do that because of the increased liability," says Riley.
Such a scenario is not implausible, says Melissa Huelsman, a Seattle-based consumer-advocacy attorney who was involved in crafting the law. However, "they're, in my opinion, stretching it in a way that no rational judge would ever view it. This law in no way, shape, or form was directed at those kinds of transactions." No one contacted for this story had heard of a lawsuit yet being filed under the law.
Weinstein agrees. He says the new law would only impose liability on a realtor who did not put the homeowner's best interest first, or who failed to comply with the disclosures required in the bill, causing economic harm to the homeowner as a result of the transaction.
Either way, Weinstein says, the realtors and the attorney general had ample time to make their concerns known. "This bill probably had more hearings than any other bill in my committee," he says. "If there were concerns, they could have been voiced during the hearings. And of course my door was always open."
But Kristin Alexander, spokesperson for the AG's office, claims the amendments were dropped into the bill only hours before the legislature passed it. "We had literally moments in which to review the legislation," she says. She points to the bill's history as proof: In February and March, the bill morphed through several drafts before the House and Senate agreed on a final version—only a day before it was delivered to Gregoire.
"The [consultant] language was in, and then it was passed and we never had time to react," Riley says. "If we had known it was in there, we would have pitched a fit, we would have gone to huge lengths to eliminate it. But we didn't know."
Weinstein says that the realtors should have known. "I think what's going on is, first, the realtors donate big to McKenna, and number two, I think the realtors' lobbyists dropped the ball and they don't want to admit it. Having said that, I don't think this is bad policy." According to the Washington State Public Disclosure Commission, McKenna received some $4,800 from realty organizations and individual realtors during the 2004 election cycle, an amount comparable to what he received from other industries.
McKenna and the realtors are pledging to get the law changed next session. Lucky for them, Weinstein has decided to retire.
jfroehling@seattleweekly.com
