When you bought your Washington home, the lending bank most likely required you to sign a deed of trust. This document gives the bank the right to sell the property through a process called foreclosure if you default on the loan, like by failing to make the payments. The bank then applies the proceeds from the foreclosure sale toward paying off your mortgage debt.
In Washington, the bank may choose to file a lawsuit in court to foreclose. This process is called a judicial foreclosure. But in most cases, the bank will opt to use out-of-court procedures. This process is called a nonjudicial foreclosure. Because the most common kind of foreclosure in the state of Washington is nonjudicial, this article focuses on that process.
Under federal law, in most cases, a loan servicer must wait until you're over 120 days' delinquent before officially starting a foreclosure. (12 C.F.R. § 1024.41). This preforeclosure period is an excellent time to submit an application to your servicer asking for an alternative to foreclosure. You might be able to stay in your home by working out a repayment plan or modification, for example, or give it up without going through a foreclosure in a short sale or deed in lieu of foreclosure.
Federal law also provides other protections to homeowners facing a foreclosure.
Before the foreclosure can start, Washington law usually requires the bank to send most borrowers what’s commonly called a “meet and confer” notice. This notice explains the right to meet to discuss foreclosure alternatives. If the borrower asks for a meeting, the bank can’t issue a notice of default for 90 days from the date of the letter. If the borrower doesn’t ask for a meeting, the bank can proceed with the foreclosure 30 days after satisfying certain requirements, like trying to contact the borrower by phone. (Wash. Rev. Code § 61.24.031).
The bank or trustee (the third party that handles nonjudicial foreclosures) mails a notice of default to the borrower 30 days before recording or serving a notice of sale (see below). The bank also posts the notice in a conspicuous place on the property or personally serves the notice of default on the borrower. (Wash. Rev. Code § 61.24.030).
Foreclosure mediation is an alternative dispute resolution process where the borrower, the bank, and an impartial mediator meet to discuss ways to avoid foreclosure. Borrowers become eligible for mediation after the notice of default is issued, and can take advantage of the program up until 20 days after the notice of sale is recorded. (Wash. Rev. Code § 61.24.030).
As a prerequisite to participate in mediation, the borrower must get a referral from a housing counselor or attorney. (Wash. Rev. Code § 61.24.163).
At least 120 days or, in some cases 90 days, before the sale, the trustee will:
The notice of sale must also be published in a newspaper. (Wash. Rev. Code § 61.24.040).
"Reinstating" is when the borrower catches up on the defaulted loan's missed payments (principal and interest), plus fees and costs, to stop a foreclosure.
Under Washington law, you get the right to reinstate the loan at any time prior to the 11th day before the sale. (Wash. Rev. Code §§ 61.24.040, 61.24.090).
In some states, the borrower can redeem the home within a specific amount of time after the foreclosure. In Washington, however, the borrower doesn’t get the right to redeem the property following a nonjuducial foreclosure. (Wash. Rev. Code § 61.24.050). (To learn more, see Nolo’s article If I Lose My Home to Foreclosure in Washington, Can I Get It Back?)
When the total mortgage debt exceeds the foreclosure sale price, the difference is called a deficiency. Some states allow the foreclosing bank to seek a personal judgment, which is called a deficiency judgment, against the borrower for this amount. Other states prohibit deficiency judgments with what are called anti-deficiency laws.
Washington does have an anti-deficiency law: Deficiency judgments are not allowed following nonjudicial foreclosures. (Wash. Rev. Code § 61.24.100).
In Washington, the purchaser is entitled to possession of the home on the 20th day after the foreclosure sale. If the foreclosed homeowners don't leave, the purchaser may file a lawsuit to evict them from the home. (The purchaser has a right to summary proceedings to get possession of the property.) (Wash. Rev. Code § 61.24.060).
If you want to get more information about foreclosure procedures in Washington or would like to find out about potential defenses in your particular situation, consider talking to a lawyer. Also, consider making an appointment to speak to a HUD-approved housing counselor if you want to learn about different foreclosure avoidance options.