The Senate Housing Committee on Feb. 14 heard testimony on Senate Bill 5,686, which would expand Washington’s Foreclosure Fairness Program to allow unit owners in condominiums and homeowner associations to be referred for mediation and would create a new $80 foreclosure prevention fee assessed at mortgage origination to fund the program.

The bill’s sponsor, Senator Emily Orwall, said the measure responds to gaps in the existing program and shortfalls in federal funding. “When I first ran for the legislature it was during the great recession … we didn't really have a system in place to support homeowners,” Senator Orwall said, describing mediation as a core piece of the program that has helped thousands of Washington homeowners avoid foreclosure.

Under the bill, the Department of Commerce would add reporting specific to unit owners and associations, and the fee—charged at loan closing—may be financed into the loan or paid in cash. Commerce staff told the committee the bill would change the distribution of the foreclosure fairness account: 50% to housing counseling, 8% to the attorney general, 16.5% to the Office of Civil Legal Aid, 15% to the foreclosure prevention hotline, 0.5% for outreach, and 10% to Commerce for program administration.

Department of Commerce program manager Kyle Young told the committee the program provides mediation intake, recruiting and assignment of mediators and tracks outcomes. He said the mediation program has received more than 13,000 referrals since 2011 and that the program’s total costs are about $8 million per fiscal year; the current default-notice fee generates about $1 million annually. Commerce’s fiscal estimate indicates the proposed origination fee could generate roughly $7 million per year.

Advocates and service providers testified in support, saying the additional funding and inclusion of unit owners would preserve access to counseling, legal aid and mediation. Denise Rodriguez of the Washington Homeownership Resource Center described the hotline as “the single point of entry for struggling homeowners” and said the centralized system streamlines referrals to counseling and legal services. Representatives of the Northwest Justice Project and the Northwest Consumer Law Center said the change would help keep low-income homeowners and communities of color in their homes.

The Attorney General’s Office supported the bill, saying the new fee would “ensure the good work” of foreclosure prevention services continues. Parkview Services and other nonprofit housing counselors described client outcomes and urged sustainable funding.

Several stakeholders in the mediation process urged careful drafting of the substitute language. Jeff Bean, a private foreclosure mediator, warned that proposed document‑sharing and confidentiality changes in the original draft could impede referral and make mediation less workable for private mediators. The Community Association Institute sought narrower referral timeframes and raised concerns about in‑person mediation requirements that they said could raise collection costs for associations.

Committee staff and stakeholders said substitute language was in progress to address technical concerns raised by mediators and industry groups. No vote was taken; the bill remained in public hearing at the close of testimony.

If enacted, the bill would broaden who may be referred to mediation and create a new, recurring revenue source for the foreclosure fairness account to support counseling, legal aid, mediation and outreach.