As in all states, if you fall behind on your mortgage payment, a bank cannot start a Washington foreclosure until the balance is delinquent by 120 days or more. The delay is intended to give you time to explore ways to avoid a foreclosure. If the waiting period passes and you haven’t applied for or received a foreclosure alternative, the bank can move forward with one of the two types of foreclosure allowed in Washington (the bank can choose which type to use). In this article, you’ll find information about both foreclosure methods and homeowner rights that might help you stay in your home.
(Find out how you can catch up on your mortgage payment in a Chapter 13 bankruptcy by reading Secured Claims in Chapter 13 Bankruptcy: Can I Catch Up on My House or Car Payment?)
120-Day Foreclosure Waiting Period
Under federal Consumer Financial Protection Bureau (CFPB) rules that went into effect January 10, 2014, the loan servicer (the company that manages the home loan) must postpone foreclosure proceedings until you are more than 120 days delinquent on a mortgage obligation. This period gives borrowers facing foreclosure time to address a financial setback or to learn about and apply for different foreclosure avoidance options called “loss mitigation.” Once you turn in a complete loss mitigation application, the servicer must evaluate the submission, and inform the borrower of the results, before it can foreclose under state law.
(Learn more about the loss mitigation period in Delaying Foreclosure: The Dodd-Frank Act 120-Day Rule.)
Washington Foreclosure Procedure
A bank can utilize one of two types of foreclosure: a judicial (in court) process and a nonjudicial (out-of-court) method. Here's a summary of both.
A judicial foreclosure will start when the bank files a lawsuit asking the court for permission to sell the borrower’s home at auction. The homeowner must respond to avoid automatically losing the suit—usually by stating a defense in a legal document called an answer. If done, the case will move through the litigation process wherein both sides can request evidence from the other. If, after considering the evidence, the court sides with the bank, it will enter a judgment and order a foreclosure sale.
Unlike a judicial foreclosure, a nonjudicial foreclosure gets handled by a third party called a trustee—not by the court. The trustee must complete certain steps outlined in state law before selling the home at a foreclosure sale.
In Washington, the trustee starts the process by mailing a notice of default (a letter informing the borrower of the mortgage arrearage) to the borrower at least 30 days before recording or serving a notice of sale (a letter that tells the borrower when the trustee will sell the home). Additionally, the trustee must post the notice of default on the property or personally serve it on the borrower.
If the home is owner-occupied, the trustee must also do the following at least 120 days before the sale:
- file the notice of sale with the recorder's office
- mail a copy of the notice to the borrower, and
- post the notice on the property (or serve it to any occupant).
The trustee must also publish the notice in a newspaper.
(Read about the basics of foreclosure in Foreclosure and Your Home: Understanding the Process, Your Rights, and Your Options.)
Washington Borrowers’ Foreclosure Rights
Borrowers facing a foreclosure have rights that will allow them to attempt to resolve the action and stay in the home. For instance, borrowers can participate in a pre-foreclosure meeting or a mediation. Additionally, the borrower can stop the foreclosure by bringing the loan current.
Before the foreclosure can start, the bank must send most borrowers a “meet and confer” notice explaining the right to meet to discuss foreclosure alternatives. If the borrower asks for a meeting, the bank cannot issue a notice of default (the first official foreclosure step) for 90 days. If the borrower doesn’t ask for a meeting, the bank can proceed with the foreclosure 30 days after the notice.
Foreclosure Mediation Program
Foreclosure mediation is an alternative dispute resolution process wherein the borrower, the bank, and an impartial mediator will 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 recording of the notice of sale. As a prerequisite for participation, the borrower must get a referral from a housing counselor or attorney.
Catching up on Or “Reinstating” the Loan
Under Washington law, the borrower can stop the foreclosure by reinstating the loan (paying the missed payments, plus fees and costs) up to twelve days before the foreclosure sale.
(For more help, read Understanding Foreclosure: Your Loan and Foreclosure Documents Hold the Answers.)
No Redemption Right in Washington
Some states have a statute (law) that gives the foreclosed homeowner the opportunity to buy back or “redeem” the home after a foreclosure auction. Washington, however, does not have this type of law.
No Deficiency Judgments in Washington
In some states, the bank can ask a court for judgment against the borrower for the deficiency balance (the balance remaining on the mortgage after the foreclosure sale). If the bank receives a “deficiency judgment,” it can use collection techniques to force the foreclosed homeowner to pay the difference between the auction price and the amount owed.
Other states don’t allow deficiency judgments under anti-deficiency laws. Under Washington’s statute, a deficiency judgment isn’t allowed after a nonjudicial foreclosure.
Finding Washington’s Nonjudicial Foreclosure Laws
You’ll find Washington’s nonjudicial foreclosure laws in the Revised Code of Washington (sections 61.24.020 through 61.24.140).
Questions for Your Attorney
- What are the advantages of participating in the pre-foreclosure meeting?
- Am I eligible for foreclosure mediation?
- Will the bank try to get a deficiency judgment against me?