Brown v. Wash. State Dep ‘t of Commerce, No. 90652-1 (October 22, 2015)
In 2011, the Washington Legislature enacted the foreclosure fairness act (FFA), to amend the deeds of trust act (DTA), ch. 61.24 RCW. Under the FFA, the Department of Commerce (Department) administers a mediation program to encourage home loan modifications in lieu of foreclosures. In that program, a beneficiary of a deed of trust must mediate with a residential borrower before the borrower’s home may be foreclosed. RCW 61.24.163. The FFA exempts from mediation certain beneficiaries that are relatively small banks, specifically federally insured depository institutions that were not a beneficiary of deeds of trust in more than 250 trustee sales of owner-occupied residential homes in Washington during the prior year. RCW 61.24.166.
After defaulting on her home loan, Darlene Brown requested FFA mediation. The Department denied the request, reasoning the beneficiary of her deed of trust was exempt from mediation. Whether that determination was correct turns on whether the beneficiary of Brown’s deed of trust for purposes of the exemption statute, id., is the holder of her promissory note (M&T Bank, an exempt entity), or its owner (Federal Home Loan Mortgage Corporation (Freddie Mac), a nonexempt entity).
The Court concluded that the Department correctly recognized the holder of the note as the beneficiary for the purposes of the mediation exemption statute, id. We further hold that a party’s undisputed declaration submitted under penalty of perjury that the party is the holder of the note satisfies the DTA’s proof of beneficiary provisions, RCW 61.24.030(7)(a) and RCW 61.24.163(5)(c). The holder of the note satisfies these provisions and is the beneficiary because the legislature intended the beneficiary to be the party who has authority to modify and enforce the note.
The Department correctly determined that Brown is not entitled to mediation because the note holder and beneficiary, M&T Bank, satisfies the conditions of the mediation exemption statute, RCW 61.24.166. We reject Brown’s contention that our interpretation of the DTA renders the statute unconstitutional. The Supreme Court affirmed the superior court’s judgment.
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