Senate Bill Report — SB 5968, Home Equity Sharing Agreements (as of January 9, 2024)
Summary
Senate Bill Report on SB 5968, as of January 9, 2024, an act relating to regulating home equity sharing agreements under the consumer loan act, sponsored by Senator Stanford. The bill establishes the regulation of home equity sharing agreements (HESA) under the Consumer Loan Act and establishes certain protections for borrowers. HESA may not be used as a lien against the property or run with title to property. The total amount due under a HESA cannot exceed the lesser of any amount paid to the borrower plus the interest amount, or 200 percent of the amount paid to the borrower. The committee activity is dated 1/11/24.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
- Issuer
- Congressional materials
- Document type
- Report
- Date
- 2024-01-11
- Case
- 2024 01 11 A31505 D263666 Bill Report 5968 Sba Bfgt 24
Cite this document
“Senate Bill Report — SB 5968, Home Equity Sharing Agreements (as of January 9, 2024).”
Original at app.leg.wa.gov, dated 2024-01-11. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2024-01-11-2024-01-11-a31505-d263666-bill-report-5968-sba-bfgt-24/
, SHA-256 6ee48b4aa148921dd152bb7bcecd11b59a057b9128061498c8b3b2c41fe0c61a.Full text
SENATE BILL REPORT
SB 5968
As of January 9, 2024
Title: An act relating to regulating home equity sharing agreements under the consumer loan
act.
Brief Description: Regulating home equity sharing agreements under the consumer loan act.
Sponsors: Senator Stanford.
Brief History:
Committee Activity: Business, Financial Services, Gaming & Trade: 1/11/24.
Brief Summary of Bill
• Establishes the regulation of home equity sharing agreements under the
Consumer Loan Act.
• Establishes certain protections for borrowers.
SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES, GAMING & TRADE
Staff: Clint McCarthy (786-7319)
Background: Financial Tools to Access Home Equity. Homeowners have a number of
options for accessing equity in their homes.
Home Equity Loans. This product allows a borrower to receive a lump sum equity draw in
exchange for repaying the principle at a fixed interest rate. These loans are commonly
referred to as second liens or second mortgages. Under current federal tax law, home equity
loan interest is tax deductible through 2026. Certain fees and credit checks are needed for
approval from a lender.
Cash-out Refinance. This is a similar product to a home equity loan, but it refinances the
This analysis was prepared by non-partisan legislative staff for the use of legislative
members in their deliberations. This analysis is not part of the legislation nor does it
constitute a statement of legislative intent.
Senate Bill Report -1- SB 5968
entire value of the mortgage in addition to the amount of equity a borrower wants to take
out of their home. A cash-out refinance requires certain fees and credit checks for approval
from a lender. The interest on repayments may be tax deductible. The additional proceeds
from a cash-out refinance are not taxable.
Home Equity Line of Credit. A home equity line of credit (HELOC) provides a borrower a
line of credit. Rather than having to take a lump sum, as one does in a home equity loan or
a cash-out refinance, a HELOC allows a borrower to pay interest on the amount of home
equity they draw. This financial product has a variable interest rate which can increase or
decrease a borrower's payment. Subject to certain limits, HELOC interest may be tax
deductible.
Home Equity Sharing Agreements. Home equity sharing agreements (HESA) are financial
arrangements between a homeowner and an investor to share ownership and appreciation of
a property. Typically, an investor provides funds for a share of a property's value and both
parties agree on how to distribute proceeds when a property is either sold or refinanced.
During the establishment of a HESA, the borrower is required to pay for certain costs
including, but not limited to:
• an appraisal;
• origination fee;
• costs associated with title and escrow;
• title insurance;
• state taxes; and
• notary and recording fees.
HESAs are not currently covered under the Washington Consumer Loan Act.
Summary of Bill: HESA are regulated financial products under the Consumer Loan Act.
HESA are subject to the provisions of the Consumer Loan Act. The term home equity
sharing agreement is defined as any obligation where a borrower receives an advance sum
of money in exchange for an interest or future share of equity in the borrower's residential
real estate. The definition of the term residential mortgage loan is expanded to include
HESA. Most lenders require the borrower to have 20 percent equity in the home.
Certain rights for owners and mortgagees are established. HESA are subject to certain
restrictions. HESA may not:
• be used as a lien against the property;
• run with title to property and is not binding or enforceable at law or in equity against
subsequent owners, purchasers, or mortgagees;
• prevent the property owner from renting or using the property as the owner chooses;
and
• prevent a mortgagee from refinancing the a mortgage or lean on the property.
Limits on the total amount due under a HESA are established. The total amount due under a
Senate Bill Report -2- SB 5968
HESA cannot exceed the lesser of:
• any amount paid to the borrower plus the interest amount; or
• 200 percent of the amount paid to the borrower.
Appropriation: None.
Fiscal Note: Not requested.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Effective Date: Ninety days after adjournment of session in which bill is passed.
Senate Bill Report -3- SB 5968
File and source
- File
- 2024-01-11_a31505_d263666_bill-report-5968-sba-bfgt-24.pdf
- Size
- 8,922 bytes
- SHA-256
- 6ee48b4aa148921dd152bb7bcecd11b59a057b9128061498c8b3b2c41fe0c61a
- Original
- app.leg.wa.gov