[00:00:01] Speaker 00:
Your honors and may it please the court, my name is Thomas Scott Railton, and I represent the appellants in this case, Mr. and Mrs. Olson.

[00:00:08] Speaker 00:
And if I could, I would like to reserve five minutes for my rebuttal.

[00:00:11] Speaker 01:
Okay, watch your clock.

[00:00:14] Speaker 00:
Washington State strictly regulates reverse mortgages, and it does so because these are risky and complex financial products.

[00:00:22] Speaker 00:
If they go unregulated, people can lose their homes, or they can lose home equity that they spent decades of their lives diligently building up.

[00:00:29] Speaker 00:
Now, Unison's product meets the key terms of reverse mortgage.

[00:00:33] Speaker 00:
It functions like a reverse mortgage, but it does not comply with the protections that Washington determined are necessary to protect homeowners like the Olsons.

[00:00:41] Speaker 00:
And as a result, the Olsons stand to make no money for a home that they've been paying off since the 1980s.

[00:00:47] Speaker 00:
This violates Washington law in three distinct ways.

[00:00:52] Speaker 00:
First, Unison's product is a reverse mortgage under the Consumer Loan Act, or at the very least, it's just a general residential mortgage.

[00:01:00] Speaker 00:
Either way, it doesn't comply with the relevant protections, including usury laws.

[00:01:06] Speaker 00:
Second, even if Unison has designed its product to slip through the cracks of the Consumer Loan Act, that's just what the broad protections of the Consumer Protection Act prohibit.

[00:01:17] Speaker 00:
Conduct that poses the same kinds of risks as regulated conduct, but that, quote, eventively evades regulation.

[00:01:25] Speaker 00:
And third,

[00:01:26] Speaker 00:
Unison's marketing practices have been consistently identified by both federal regulators and commentators as deceptive.

[00:01:34] Speaker 00:
And that also violates the Consumer Protection Act.

[00:01:37] Speaker 00:
And finally, while this court can decide this appeal under general principles of Washington law, it also meets the criteria for certification.

[00:01:45] Speaker 00:
It involves novel, complex, and dispositive questions of state law that will affect dozens if not hundreds of Washington homeowners.

[00:01:53] Speaker 00:
So we ask that the court reverse.

[00:01:56] Speaker 00:
And turning to the question of whether Unison's product is a reverse mortgage under the Consumer Loan Act.

[00:02:03] Speaker 00:
So under Washington law, a reverse mortgage has the following features.

[00:02:08] Speaker 00:
A homeowner is given a cash advance.

[00:02:10] Speaker 00:
They turn over a deed of trust in their dwelling.

[00:02:13] Speaker 00:
And on three triggering conditions, whether they die, sell the home, or move out, payment comes due.

[00:02:20] Speaker 00:
And that payment can take several forms.

[00:02:22] Speaker 00:
It's written in the disjunctive.

[00:02:24] Speaker 00:
That payment could be any principle.

[00:02:26] Speaker 00:
It could be interest or it could be shared appreciation or equity in the home.

[00:02:31] Speaker 02:
What are the specific things that make it unlawful if it qualifies as a, their actions unlawful if it qualifies under that definition?

[00:02:43] Speaker 00:
There are a variety of things.

[00:02:44] Speaker 00:
So first of all, it would violate usury laws because of their interest that they would receive.

[00:02:49] Speaker 00:
It's at this point, I think about 40% annual interest.

[00:02:52] Speaker 00:
It violates requirements that unison ensure that homeowners receive independent counseling from a HUD approved counselor so that homeowners can understand what they're getting into when they put their homes on the line.

[00:03:04] Speaker 00:
Uh, there's also requirement, uh, directly or indirectly that homeowners purchase insurance.

[00:03:08] Speaker 00:
Unison is also not licensed as a lender.

[00:03:11] Speaker 00:
So there's a number of, uh, statutory requirements that unison would violate if it does in fact fall into the statute.

[00:03:18] Speaker 00:
Now,

[00:03:19] Speaker 00:
Unison's main argument on the statutory text is that this product doesn't fall within the definition of the term credit, which is in a threshold clause in the statute, which says a reverse mortgage loan is a non-recourse consumer credit obligation.

[00:03:36] Speaker 01:
But they argue that it's not even a loan because your clients don't owe any money to Unison.

[00:03:46] Speaker 00:
So their argument, as I understand it, is that

[00:03:49] Speaker 00:
I think they think credit and loan are sort of coextensive.

[00:03:52] Speaker 00:
And so under the statutory text, they say it needs to qualify as a credit in order to meet the other criteria.

[00:03:59] Speaker 00:
Because otherwise, if you look at the specific criteria that the reverse mortgage statute sets out, all of those are met.

[00:04:06] Speaker 00:
And there is a advance.

[00:04:10] Speaker 00:
There's a deed of trust in the borrower's dwelling.

[00:04:13] Speaker 00:
There's a payment requirement that becomes due upon these three conditions.

[00:04:17] Speaker 00:
And that payment can take various forms, and it could just be shared appreciation or equity in the home, which of course are going to vary with the amount of the home.

[00:04:25] Speaker 00:
So Unison's whole argument rests on this idea that the single word credit in this threshold clause that then gives specific definitions isn't met.

[00:04:33] Speaker 00:
And that's wrong both as a matter of credit generally, but here we actually have a statute that tells us exactly what kind of credit obligation the Washington legislature had in mind.

[00:04:43] Speaker 00:
And so credit is a quite broad term.

[00:04:46] Speaker 00:
It's giving the provision of money with expectation of future payment.

[00:04:50] Speaker 00:
That could mean a lot of things, but here the statute tells us what that future payment is.

[00:04:54] Speaker 03:
Normally it would be repayment under traditional definitions of credit.

[00:05:00] Speaker 03:
I think that's their argument is that there's no obligation to repay, no extension of money at the beginning.

[00:05:09] Speaker 00:
Well, so here, I mean, the plain text definition of credit is just future payment.

[00:05:14] Speaker 00:
It doesn't require repayment.

[00:05:15] Speaker 00:
And that's actually consistent with the plain language definition of debt, which could also be relevant, which is being under obligation to pay or repay someone or something in return for something given.

[00:05:28] Speaker 00:
But here, we actually have a statute that tells us exactly what kind of payment obligations the legislature had in mind.

[00:05:34] Speaker 00:
And it is any principal interest or shared appreciation or equity.

[00:05:40] Speaker 00:
And so because that's written in the disjunctive, Washington statutory interpretation follows the same principles as federal statutory interpretation.

[00:05:47] Speaker 00:
And it says that could be satisfied in various ways.

[00:05:50] Speaker 00:
So the legislature is telling us,

[00:05:52] Speaker 00:
When that expectation of future payment, it could take the form of sort of the most traditional idea about principle, or it could take the form of shared appreciation or equity, and those are things that are going to vary significantly with the value of the home.

[00:06:05] Speaker 00:
If it's just a shared appreciation payment requirement, if there's no appreciation, the lender could end up with nothing, and that's right under the statutory definition.

[00:06:14] Speaker 00:
If it's equity in the home, that's the payment obligation, it could go up and down with the value of the home.

[00:06:19] Speaker 03:
So is it your position that all option contracts constitute reverse mortgages?

[00:06:25] Speaker 00:
Absolutely not.

[00:06:26] Speaker 00:
Give me an example of one that wouldn't.

[00:06:28] Speaker 00:
So under this statute, you would need to have, first of all, a deed of trust secured by the obligation.

[00:06:35] Speaker 00:
So any option that isn't secured by a deed of trust, automatically you don't fall under the statute.

[00:06:40] Speaker 00:
And I will say it's telling that Unison identifies various Washington court decisions that describe options generally, but none of them involves a deed of trust.

[00:06:51] Speaker 00:
And that makes sense, because a deed of trust is an extremely powerful document.

[00:06:54] Speaker 00:
that it allows for non-judicial foreclosure.

[00:06:56] Speaker 00:
And as the Washington State Supreme Court has explained, this is in Clem at 1185, with a deed of trust, land is conveyed to a trustee as security for credit or a loan the lender has given the borrower.

[00:07:11] Speaker 00:
If you look at the very cases that Unison itself cites in its brief at page 29, they cite a case White

[00:07:19] Speaker 00:
for the proposition that a mortgage, that a deed of trust creates nothing more than a lien.

[00:07:24] Speaker 00:
And then they cut off the second hand of that sentence, which is nothing more than a lien in support of the debt which it is given to secure.

[00:07:30] Speaker 01:
So what the difference here is, I take it, is that because they have the deed of trust, they can, Unison can declare a default based on some breach of keeping the place repaired in good shape.

[00:07:49] Speaker 01:
and then for close and sell the home.

[00:07:52] Speaker 01:
Is that the difference here?

[00:07:53] Speaker 00:
That is one of the differences.

[00:07:55] Speaker 00:
I mean, also any option that didn't have these three triggering criteria would also not qualify because the statute is very specific about the kind of credit obligation it has in mind.

[00:08:06] Speaker 00:
So a regular option that looked like over the course of the next month, you can give us X amount of money for this property.

[00:08:12] Speaker 00:
that certainly wouldn't meet the statutory definition.

[00:08:15] Speaker 00:
So here you have a much more specific kind of financial instrument in mind.

[00:08:20] Speaker 00:
And then I will just say, even if this court were to conclude that

[00:08:25] Speaker 00:
This doesn't fall under the specific definition of a reverse mortgage, or it doesn't even fall under the definition of a mortgage generally, despite the relevant agency's explanation that it does.

[00:08:35] Speaker 00:
And that's an explanation to which Washington courts would give great weight if there's any ambiguity on that point.

[00:08:40] Speaker 00:
But even if you put that aside, that's exactly where the Consumer Protection Act comes in.

[00:08:45] Speaker 00:
And so it exists specifically as the Washington Supreme Court has repeatedly explained,

[00:08:51] Speaker 00:
even if a practice is not regulated by the statute, so long as it offends public policy as has been established by statutes, the common law, or otherwise.

[00:09:01] Speaker 02:
Are these alternative theories, if we were to agree with you that it meets the definition, statutory definition of a reverse mortgage and is therefore covered by those provisions, would that preclude reliance on this particular alternative theory?

[00:09:18] Speaker 00:
So if it is covered by the Consumer Loan Act, that's a per se violation of the Consumer Protection Act.

[00:09:24] Speaker 00:
And so this is just sort of a secondary.

[00:09:26] Speaker 00:
If it's not covered by a statute, there's this gap-filling rule that comes in.

[00:09:30] Speaker 02:
So if it is covered by the statute, then that claim goes away?

[00:09:34] Speaker 00:
You wouldn't need to rely on it.

[00:09:36] Speaker 00:
That's right.

[00:09:38] Speaker 01:
You have three alternative theories for what this product is.

[00:09:42] Speaker 00:
Yes, I mean, I think there's three theories as to reasons why it falls under the statute.

[00:09:47] Speaker 00:
It meets the statutory definition.

[00:09:49] Speaker 00:
And then there's the Consumer Protection Act that exists to fill gaps.

[00:09:52] Speaker 02:
But if we were to agree, I'm just trying to understand the relationship of the arguments.

[00:09:57] Speaker 02:
If we were to agree that it's covered as a reverse mortgage by the statute, then we wouldn't have to reach the issues about whether it fit within this alternative doctrine about things that aren't regulated but that deceptively go around or that.

[00:10:16] Speaker 00:
that evade the statute.

[00:10:18] Speaker 00:
I think if this court were to hold as a matter of law that it's a reverse mortgage under the statute, I believe that's right.

[00:10:23] Speaker 00:
Because we're at the motion to dismiss stage, you know, if the court was just to say it's plausible that it's a reverse mortgage, then maybe you wouldn't, the other claim, you wouldn't want it to drop away.

[00:10:31] Speaker 02:
I see.

[00:10:32] Speaker 02:
So if it turned on facts that could change, then you might need the other, okay.

[00:10:37] Speaker 00:
Right.

[00:10:38] Speaker 00:
And I'd like to reserve the balance of my time.

[00:10:40] Speaker 00:
Thank you very much.

[00:10:40] Speaker 01:
All right.

[00:10:41] Speaker 01:
Thank you very much, counsel.

[00:11:04] Speaker 04:
May it please the court, I'm Jeremy Creelan here representing defendant Appellee Unison.

[00:11:12] Speaker 04:
Thank you.

[00:11:13] Speaker 04:
I'd like to

[00:11:16] Speaker 04:
begin by noting, essentially, the plaintiff's appeal here really is remarkable for the ways in which it departs completely and is contradicted by the plaintiff's allegations in the complaint.

[00:11:32] Speaker 04:
And that really shows the problem here with this appeal.

[00:11:37] Speaker 04:
With respect to the first claim, the Per Se Consumer Protection Act claim,

[00:11:46] Speaker 04:
the plaintiffs alleged in their complaint that the unison product the homeowner agreement did not meet the criteria the statutory criteria in washington for a reverse mortgage loan that's it at four point two six of their complaint and of course that is the reason why the legislature in washington this past session considered in

[00:12:08] Speaker 04:
has so far declined to add home equity sharing products to the definition of reverse mortgage loan under the very statute that we're talking about.

[00:12:19] Speaker 04:
Legislators, in the process of considering that, they've declined to do so.

[00:12:22] Speaker 04:
They, of course, wouldn't be considering that if it were already covered.

[00:12:26] Speaker 04:
And that is dispositive here of the Per Se Consumer Protection Act claim.

[00:12:32] Speaker 04:
The alternative then for the plaintiffs here is essentially

[00:12:38] Speaker 04:
In equity, and I'm going to get to the deception and unfairness claims in a moment, but on the per se claim, the only alternative is to urge this court to invoke equity and re-characterize the unison product homeowner agreement as a reverse mortgage loan or a mortgage loan in some way.

[00:12:58] Speaker 01:
But of course, the only- Even if it isn't a reverse mortgage,

[00:13:03] Speaker 01:
The amicus brief from the Washington State Department of Financial Institutions argues that it is a mortgage, because whatever it is, the money that it advances is secured by a deed of trust.

[00:13:16] Speaker 04:
Well, two points there, Your Honor.

[00:13:19] Speaker 04:
First, the Washington agency, DFI, testified before the legislature urging it to amend the statute to include these types of products in the statute.

[00:13:29] Speaker 04:
So in the context of the legislative hearings, they did not think that it was already covered.

[00:13:34] Speaker 01:
Can I ask you why we should be considering legislative hearings where there's no law that's been enacted or not enacted?

[00:13:43] Speaker 01:
I mean, is that even something our court

[00:13:46] Speaker 01:
can consider.

[00:13:47] Speaker 01:
I mean, it's not a law.

[00:13:49] Speaker 01:
It's something outside the laws we have in front of us and the complaint, and we can't take judicial notice of anything that's said because it's not reliable.

[00:14:00] Speaker 01:
Why are you raising that?

[00:14:02] Speaker 04:
Well, I raise it only for that very point, Your Honor, which is that respectfully, this Court should not substitute its policy judgments as to whether this product should or shouldn't be covered and thus should or shouldn't be considered a per se

[00:14:17] Speaker 04:
Consumer Protection Act claim.

[00:14:18] Speaker 04:
So it's very relevant to the question of the per se claim, because the per se Consumer Protection Act claim depends on the violation of a statute.

[00:14:27] Speaker 04:
So the question of whether this product is in or out of that statute is directly relevant.

[00:14:34] Speaker 04:
Of course, the court can take judicial notice of the fact that the legislature is considering this.

[00:14:40] Speaker 04:
case of Schwab, State v. Schwab, and also the Greenberg case, the Washington courts made clear that the courts should defer to the legislative process and not substance misdemeanors.

[00:14:53] Speaker 02:
But we have to apply the statute as it's written.

[00:14:54] Speaker 02:
Right.

[00:14:54] Speaker 02:
And what element of the definition of reverse mortgage loan is not satisfied here?

[00:15:01] Speaker 04:
The non-recourse consumer credit obligation, the word credit

[00:15:07] Speaker 04:
is essentially read out of the statute by the plaintiffs here.

[00:15:10] Speaker 04:
And the word credit, the statute was based.

[00:15:12] Speaker 02:
How is it read out?

[00:15:13] Speaker 02:
Because money is given upfront, and then you get a deed of trust, and there is an expectation that you'll share in the appreciation of equity, and you're going to get that back.

[00:15:28] Speaker 02:
There's an expectation payment that's tied to the type of interest identified in the statute.

[00:15:33] Speaker 04:
This is important, Your Honor.

[00:15:35] Speaker 04:
The Deed of Trust does not secure any kind of repayment obligation.

[00:15:38] Speaker 04:
There is absolutely no obligation to repay anything.

[00:15:43] Speaker 04:
The Deed of Trust, and here this is important clarification, in some states Deed of Trust is referred to as a mortgage.

[00:15:49] Speaker 04:
But every mortgage loan is a mortgage, but not every mortgage is a mortgage loan.

[00:15:54] Speaker 04:
The key is the loan.

[00:15:55] Speaker 04:
This is not a loan.

[00:15:56] Speaker 04:
There is no obligation to repay anything.

[00:16:00] Speaker 04:
What it is, and this is why TILA, which is the federal statute that this Washington state statute was based upon,

[00:16:08] Speaker 04:
identifies in the commentary that options are not considered credit.

[00:16:12] Speaker 04:
The difference is that with an option, what is given and what was given here by the Olsons is in exchange for the initial investment payment of $64,750 at a future time, typically when the property is sold by the homeowner, then the Unison has the option

[00:16:34] Speaker 04:
of paying an additional payment, the balance of the purchase price, here it would be $194,000, and in exchange obtaining 70% of the sale proceeds when the property is sold.

[00:16:48] Speaker 04:
But if the market, at the time in 2019 when this deal was made, and it was explained clearly in the documents, in the offer and in the contracts,

[00:16:59] Speaker 04:
it was unclear whether that would mean whether the market would go up or down.

[00:17:03] Speaker 04:
And if the market goes down, Unison can decline to exercise the option.

[00:17:08] Speaker 04:
And the homeowner, the Olsons here, walk away with $64,750 free and clear with no obligation, no principal payments, no interest.

[00:17:17] Speaker 04:
They never pay anything.

[00:17:18] Speaker 04:
So that is what credit, which is defined as debt in TILA,

[00:17:24] Speaker 04:
That is the key difference here.

[00:17:26] Speaker 04:
What's the function of the deed of trust here?

[00:17:28] Speaker 04:
Well, so the deed of trust secures the non-financial obligations, if you will, of the homeowner.

[00:17:35] Speaker 04:
In other words, the obligations to pay their taxes, to upkeep the home.

[00:17:40] Speaker 04:
If a tree falls on the property and water starts to leak in, there's an obligation to repair it so the value is not lost.

[00:17:50] Speaker 04:
And it's important to note, on appeal,

[00:17:53] Speaker 04:
The plaintiffs here suggest a parade of horribles of all these terrible things, none of which are alleged in the complaint, mind you.

[00:18:02] Speaker 04:
But these are all things designed to preserve and protect the value, not only for Unison, but for the homeowner.

[00:18:09] Speaker 04:
These things like if a tree falls on the property, making sure that the property doesn't get destroyed by mold or whatever, these kinds of things.

[00:18:19] Speaker 04:
So this deed of trust, in some states they're called mortgages, but that doesn't mean they're loans.

[00:18:23] Speaker 04:
In Washington state it's called a deed of trust, secures those obligations.

[00:18:28] Speaker 04:
But they're not securing any repayment of anything.

[00:18:30] Speaker 03:
So just walk me through this.

[00:18:34] Speaker 03:
Let's say there's mold.

[00:18:36] Speaker 03:
How do you enforce the deed of trust?

[00:18:39] Speaker 03:
Are you going to foreclose on the house?

[00:18:40] Speaker 03:
No.

[00:18:41] Speaker 03:
And it's notable.

[00:18:42] Speaker 03:
So essentially, I just don't understand how the taxes, mold, tree falling in the house, how that plays into the deed of trust.

[00:18:52] Speaker 04:
So it's notable that in Unison's history, there's never been a foreclosure in Washington, and there's only been one in the entire country for very inapplicate, peculiar circumstances.

[00:19:03] Speaker 01:
Talking about by Unison?

[00:19:06] Speaker 04:
Unison right there's never been a foreclosure and the reason why there isn't there's and this it gets to your to your question these sorts of these these obligations to preserve the properties value Usually what happens is it when the when and if the property is sold?

[00:19:23] Speaker 04:
there's kind of a true up in the sense that if there's deferred maintenance that wasn't done on the property, then it can come out in the appraisal and there might be an adjustment to the purchase price.

[00:19:38] Speaker 04:
In the rare cases, the deed of trust allows Unison, if the tree falls and the property doesn't repair the home, to step in and make that repair.

[00:19:48] Speaker 04:
and then seek payment for that repair either immediately or later when the home is sold.

[00:19:54] Speaker 04:
But that is the rare, you know, that's the tail on the dog.

[00:19:57] Speaker 04:
That's not the dog.

[00:19:59] Speaker 03:
Well, with respect to the... I mean, if your client comes in and says, okay, I'm going to repair the damage of the tree falling on the house and I'm going to collect later, that's an extension of credit, isn't it?

[00:20:14] Speaker 04:
But this is the important distinction.

[00:20:16] Speaker 04:
Is that a yes or a no?

[00:20:20] Speaker 04:
I understand your point in that it could demand the repayment and it could even seek interest on that payment.

[00:20:26] Speaker 04:
But the point is that's not the product here.

[00:20:28] Speaker 04:
That's this extra element.

[00:20:31] Speaker 04:
That's not the core product we're talking about.

[00:20:33] Speaker 03:
I understand that, but you're answering Judge Collins' question about what is the function of the trust

[00:20:40] Speaker 03:
due to trust.

[00:20:42] Speaker 03:
And your answer was, it protects taxes, it protects falling on trees, it protects all these other things.

[00:20:48] Speaker 03:
And I'm just trying to play out how that happens.

[00:20:50] Speaker 03:
And your answer seems to be, that doesn't come into play until the option is exercised or not exercised.

[00:20:57] Speaker 04:
It depends on the circumstance.

[00:20:59] Speaker 04:
And the most important thing for this appeal is that none of these things have happened with the Olsons.

[00:21:05] Speaker 04:
They're not alleged.

[00:21:06] Speaker 04:
They haven't occurred.

[00:21:08] Speaker 03:
And in fact, there's no... Why would that have to occur in order to meet the statutory definition of a reverse mortgage?

[00:21:16] Speaker 03:
That's a factual argument, isn't it?

[00:21:21] Speaker 04:
No, the point is that if the argument is that these factual scenarios are somehow the important element that turns this from an option into a loan, then it's reasonable for the district court to look at the complaint and say, well, were these things even alleged?

[00:21:38] Speaker 04:
Or are these attorneys' arguments on appeal that are fanciful?

[00:21:41] Speaker 04:
And there's a reason why they aren't alleged.

[00:21:44] Speaker 04:
They don't occur, you know, very often.

[00:21:46] Speaker 04:
That's not the typical situation, and it certainly didn't happen with respect to the Olsons.

[00:21:50] Speaker 04:
What the Olsons got here, and this is what is alleged, is that they were, they got the flyer indicating that this product, unlike a loan,

[00:21:59] Speaker 04:
does not have interest payments or principal payments at all.

[00:22:03] Speaker 04:
And in fact, they allege, and this is critical, they allege that the reason why they took this product and they engage in this agreement is that unlike a loan, they needed money and they didn't have, they wouldn't get refinancing.

[00:22:18] Speaker 04:
They had just refinanced the year before, they said, and one of the things that was appealing about this is that unlike a loan, it wouldn't have those payments.

[00:22:26] Speaker 02:
Here's the problem I am struggling with with your argument, which is that if you look at the definition of a reverse mortgage loan, it has all of these particular features that are listed.

[00:22:40] Speaker 02:
and you have all of those, and then you wanna say that the general term credit obligation actually limits those terms further.

[00:22:51] Speaker 02:
And that seems, I'm not sure that's a correct reading of the statute, because it seems that if you have a deed of trust that gives a security interest, and you have a shared appreciation

[00:23:08] Speaker 02:
or equity that is due and payable under the prescribed circumstances, that that's the type of thing it's capturing.

[00:23:16] Speaker 02:
It's suggesting that that is a credit obligation.

[00:23:20] Speaker 04:
Well, respectfully, Your Honor, the credit obligation, that word, which sets up these conditions, is so central to the definition of reverse mortgage loan.

[00:23:30] Speaker 04:
I mean, the word loan is the key.

[00:23:33] Speaker 04:
And to read it out of that definition is to literally open it up to any kind of product where there's a payment of money and almost any kind of after effect here.

[00:23:47] Speaker 02:
No, because of the deed of trust.

[00:23:48] Speaker 02:
It's really unusual to have a deed of trust with an option.

[00:23:52] Speaker 04:
But it doesn't secure any repayment.

[00:23:54] Speaker 04:
It doesn't secure any kind of repayment of any of the money that was paid.

[00:24:00] Speaker 04:
It's a deed of trust only to secure these other obligations.

[00:24:05] Speaker 04:
And that's the key.

[00:24:06] Speaker 04:
It's not debt.

[00:24:07] Speaker 04:
There's no repayment obligation on the part of the consumer.

[00:24:10] Speaker 04:
That's both why the Olsen's engaged in it and, frankly, what provides such benefits that this product provides such benefits to consumers.

[00:24:17] Speaker 02:
Can you contend that this doesn't

[00:24:20] Speaker 02:
This deed of trust does not secure one or more advances?

[00:24:25] Speaker 04:
No, it does not.

[00:24:26] Speaker 04:
It does not secure any repayment of anything.

[00:24:29] Speaker 04:
There's an investor payment, which the Olsen's got, the $64,000 payment.

[00:24:34] Speaker 04:
They don't have to repay that.

[00:24:36] Speaker 04:
Nor do they have to repay any other monies as part of this.

[00:24:40] Speaker 04:
The deed of trust only secures these other obligations to keep the property,

[00:24:47] Speaker 04:
make it to stay in the property, in other words, to make it your primary residence so you're not an investor just looking for short-term financing, to pay your taxes and all these other obligations.

[00:24:58] Speaker 04:
It does not secure the fundamental, the crux of this product.

[00:25:01] Speaker 04:
And that's why it's an option and not a loan, and why TILA itself defines options as not being credit, not being included.

[00:25:12] Speaker 04:
I just want to address one or two more other things.

[00:25:23] Speaker 04:
With respect to the Consumer Protection Act and the notion of the court including this, even though it's not counted in the statute, the Consumer Loan Act statute, that this court is urged by plaintiffs to consider it covered by Consumer Protection Act, if you read Schwab and Greenberg, and Greenberg was highlighted by the plaintiffs here,

[00:25:46] Speaker 04:
those cases, not only in all the cases that the plaintiff cites, the circumstances, not only do the courts make clear that the court should defer to the legislative process and not substitute its policy judgment, but also in the case of Schwab, there's a situation where the conduct, the residential, the landlord's conduct was already covered by the Washington statute, and the court said, we're not gonna

[00:26:12] Speaker 04:
We're not going to step in where the legislature can do its job and include it.

[00:26:16] Speaker 04:
We're just going to defer.

[00:26:17] Speaker 04:
And we respectfully urge the court to do that here.

[00:26:20] Speaker 04:
I think my time's up.

[00:26:21] Speaker 04:
Thank you.

[00:26:22] Speaker 01:
All right.

[00:26:22] Speaker 01:
Thank you very much, counsel.

[00:26:24] Speaker 01:
Mr. Scott Railton.

[00:26:35] Speaker 00:
Thank you, Your Honors.

[00:26:37] Speaker 00:
One thing I'd just like to say at the outset as to Judge Collins' questions is we would ask that this court allow every claim to survive just because there could be factual issues that come up down the road.

[00:26:47] Speaker 02:
What's your response to his argument that this deed of trust doesn't secure one or more advances because it carves out the investment payment from the obligations?

[00:27:01] Speaker 00:
So I'll point the court to the deed of trust itself.

[00:27:03] Speaker 00:
And so this is at 1ER 6364.

[00:27:06] Speaker 00:
And so if you look.

[00:27:08] Speaker 02:
6364?

[00:27:11] Speaker 00:
Correct.

[00:27:16] Speaker 00:
The court looks at what is being secured.

[00:27:18] Speaker 00:
It's the grantor's performance under the agreement.

[00:27:21] Speaker 00:
So that's the Olsons.

[00:27:23] Speaker 00:
And then there's a long list of things.

[00:27:24] Speaker 00:
It includes the payment of obligations, and it includes

[00:27:30] Speaker 00:
The payment of the investor interest, which is the equity or shared appreciation that unison would get.

[00:27:36] Speaker 00:
So that's at Roman at five.

[00:27:39] Speaker 00:
So you have is the deed of trust is actually securing all of the obligations.

[00:27:43] Speaker 02:
But is it securing it has to secure one or more advances.

[00:27:46] Speaker 02:
And what's the advance isn't the advance the investment payment.

[00:27:51] Speaker 00:
So that's the advance.

[00:27:52] Speaker 00:
And there are certain scenarios where that is actually a guaranteed obligation under the contract.

[00:27:57] Speaker 02:
But the deed says grantor shall not be obligated to repay any part of the unison investment payment.

[00:28:04] Speaker 02:
So that's their argument.

[00:28:06] Speaker 02:
Does it not secure the advance?

[00:28:08] Speaker 00:
It does secure the advance, so there's two scenarios where Unison is guaranteed its advance back.

[00:28:14] Speaker 00:
So the first scenario is if the homeowner decides to sell within the three-year window, Unison's contract guarantees that it gets the larger of its initial investment payment or the initial investment payment plus shared appreciation.

[00:28:29] Speaker 00:
And if the Olsons decide that they want to buy out of this agreement because all the triggering conditions require them to leave their home,

[00:28:36] Speaker 00:
They then, once again, under Unison's own contract, they're required to repay the greater of the advance or the advance plus shared appreciation.

[00:28:45] Speaker 00:
So there are situations where the advance is fully guaranteed, and then the due and payable obligation

[00:28:52] Speaker 00:
is secured generally, and for reasons having to do with the nature of the housing market and equity and shared appreciation, how those will function in practice, those also effectively secure the advance.

[00:29:01] Speaker 00:
And that's certainly the case here.

[00:29:03] Speaker 00:
At this point, Unison would be getting the advance and 40% interest up on top of it.

[00:29:08] Speaker 00:
And then I'll say with the CPA unfair practices claim, if Unison has managed to craft a product where they have secured the advance in two scenarios, if they have effectively secured the advance in all scenarios,

[00:29:24] Speaker 00:
But they managed to sneak through that specific language in the statute.

[00:29:28] Speaker 00:
That's exactly where the CPA unfair practices comes in.

[00:29:32] Speaker 00:
And as to the cases cited by my friend on the other side, the Washington Supreme Court has actually repeatedly held that it was the legislature's decision to tell the judiciary through a process of judicial inclusion and exclusion to regulate practices that are not covered by statutes.

[00:29:49] Speaker 00:
The court has explained that's because there is no area where human inventiveness is quite as impressive as with predatory financial products.

[00:29:57] Speaker 00:
And if the legislature were to go through and define at any given moment every single unfair practice, it would immediately become necessary to start again because practices will arise that dodge the statute.

[00:30:09] Speaker 00:
So if it turns out that they have managed to slip through that crack, that's exactly where

[00:30:16] Speaker 00:
the unfair practices claim comes in, and Greenberg supports that.

[00:30:19] Speaker 00:
Greenberg lists these three criteria for unfair practices.

[00:30:24] Speaker 00:
It says each of those criteria apply, and one of them is the one I read earlier about offending public policy as established by the statutes but not regulated.

[00:30:33] Speaker 00:
And then another is just generally immoral, unethical, oppressive, or unscrupulous.

[00:30:38] Speaker 00:
And either of those would be amply satisfied here.

[00:30:41] Speaker 00:
And the last thing I'll say about the marketing claims, there are cases

[00:30:46] Speaker 00:
where the Olsons would owe what is very clearly credit and interest if they don't make certain payments.

[00:30:51] Speaker 00:
That's included in the contract.

[00:30:52] Speaker 00:
There's a specific provision setting that amount of interest.

[00:30:56] Speaker 00:
So that certainly would be credit.

[00:30:58] Speaker 00:
And then I think it's telling that these are statements that have been repeatedly identified as misleading in the reverse mortgage lending context.

[00:31:05] Speaker 00:
And that's because the reason Unison is saying the same things as reverse lending companies is because Unison is also engaged in reverse mortgage lending.

[00:31:14] Speaker 00:
That's why it's making the same kinds of claims to consumers and has the same features of the product that consistently confuse them.

[00:31:20] Speaker 01:
All right.

[00:31:21] Speaker 01:
Thank you, counsel.

[00:31:22] Speaker 00:
Thank you.

[00:31:22] Speaker 01:
Olsen v. Unison is submitted.