Washington Foreclosure Laws
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Washington usually follows the title theory wherein the title of the property stays as guaranty till the loan in question is paid off in full. Foreclosure, through this theory, is a non-judicial option. The legal document through which the title is secured is generally referred to as a deed of trust. Mortgages can function as liens on property, and can be used while following non-judicial foreclosures through courts, as per the law in Washington. The provision of a power of sale clause within the deeds of trust makes this a faster process to bring about the foreclosure, this therefore, is the most widely used process for foreclosures.
Washington primarily follows the non-judicial foreclosure procedure to foreclose on properties. No court-action is required in this procedure but a notice of sale is required. At the initial signing of the deed of trust, a power of sale clause is generally included in the document, through which a property can be sold by the trustee if the borrower defaults on the loan, thereby allowing the unpaid loan to be taken care of. The trustee works as the lender’s representative and brings into effect the auction, which is the typical way for the foreclosure property to sell. This being a non-judicial procedure, some very strict requirements for notices are in place, and a power of sale clause has to be included in the legal loan documents for this process to be followed.
Before a lender initiates a foreclosure sale, a notice of default must be served to the defaulting borrower a minimum of thirty days prior to the scheduled sale. This needs to be sent through registered or certified mail, and also needs sent to the borrower’s attorney, if one exists. The notice must also be served to the borrower personally or posted on the property in question.
The notice of default as mentioned above needs to contain information which includes the default’s description, the deed of trust being identified by lenders and a break-up of the fees and costs incurred in foreclosures. The loan can be reinstated anytime until eleven days prior to the trustee’s foreclosure sale. The loan can be paid off in full anytime before the foreclosure sale. The discretion of reinstating a loan after the eleven days prior to the sale lies with the lender.
In case the default on the loan is not taken care of in the thirty day period mentioned within the notice of default, the borrower, other holders of liens on the property and other parties who hold interest, must be mailed a notice of trustee’s sale by the trustee a minimum of ninety days before the trustee’s sale. The recording of this notice with the auditor in the county where the property is situated is necessary or alternatively this notice must be served and posted as was the notice of default. The publication of the notice within a newspaper approved to carry legal notices at two specific time periods within the month that precedes the sale is also required.
Sales of foreclosures have to take place in between 09:00am and 04:00pm on Fridays. If a legal holiday falls on the Friday, then the sale is held on the Monday that follows. The sale has to occur within a 190 day period from the date the default first occurred and can be extended by 120 days at the discretion of the trustee. In cases of bankruptcies, sales can be reinstated within 45 days of the bankruptcy being dismissed or the automatic stay being lifted.
Lenders in Washington can choose to follow a judicial foreclosure process through a court, wherein the court announces the final ruling. If the power of sale clause is absent from the deed of trust, judicial foreclosure must be followed by the lender. The property then sells at a publicly notified sale. The court requires the filing of a complaint in combination with a lis pendens (a document that is recorded to provide notice to the public about the foreclosure on the property).
In commercial transactions, the document is referred to as a security agreement, and it is otherwise referred to as a deed of trust. At times, they are both merged together. The filing of a mortgage can also be done to verify the debt in question and its payment terms which are part of the note.
It generally takes around 120 days to bring into effect a non-judicial foreclosure that is not contested; this does depend on the time the various notices require. If the process is contested by the borrower in court, and if a delay or an adjournment of the sale is sought; or if bankruptcy is filed for by the borrower, the process can be deferred. A majority on the existing delays in sales of foreclosures are in relation to the proper serving of notices to the interested parties, government agencies, and holders of junior liens. The difficulties in finding and serving the parties in question hold up the procedure.
Non-judicial foreclosures in Washington have no post foreclosures sale statutory right of redemption. Judicial foreclosures have a one year redemption right and the owner can continue to possess the property in the redemption period.
If a foreclosure property sells for lesser than the amount on the loan that is secured by the mortgage at the public-sale through the non-judicial foreclosure procedure, a deficiency judgment cannot be obtained. In a sale involving a judicial foreclosure, a deficiency judgment may be obtained, except in cases where the property in question is abandoned for six months before the judgment on the foreclosure or if a ruling has prohibited any deficiency.
Foreclosures in Washington are governed by laws that are part of Title 61 Revised Code Washington (Mortgages, Deeds of Trust and Real Estate Contracts).
