Washington State Proposes Amendments to Mortgage Paper Securities Rules

Rules providing optional registration for mortgage paper securities would be amended by the Washington Department of Financial Institutions to strengthen investor suitability requirements; revise the formula for calculating the number of investors that may participate in a loan; revise net worth and bonding requirements to better protect investors; address concerns regarding agreements with escrow agents who hold payments for purchasing mortgage paper securities; set forth requirements for servicing and participation agreements; clarify the fiduciary duties of mortgage broker-dealers and investors' rights to receive and access records and information concerning their investments; codify the requirement for including a disclaimer in mortgage paper security advertisements; and clarify that expired mortgage broker-dealer and mortgage broker-dealer representative licenses terminate if not renewed before the expiration of the issuer's securities registration.

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