Facing a nonjudicial foreclosure? Here's what you need to know...
Washington law allows lenders to foreclose on properties that are in default by using either a judicial or a nonjudicial foreclosure process. While the judicial foreclosure process involves going through the courts to obtain an order to foreclose, the nonjudicial foreclosure process allows the lender or the trustee under a deed of trust to foreclose by selling the property without court involvement.
Often referred to as a “trustee’s foreclosure” or a “foreclosure by power of sale,” nonjudicial foreclosure can only be used if a deed of trust (or other mortgage instrument) authorizes it. Today, it is widespread practice for a deed of trust to contain such an authorization by including a “power of sale” clause. This “power of sale” clause preauthorizes the sale of the property to pay off the balance of the loan in the event that the borrower defaults. Because a court is not involved in a nonjudicial foreclosure, however, there are very specific provisions, procedures, and formalities that the trustee or the lender must observe during the foreclosure process. In Washington, the statutory requirements governing nonjudicial foreclosures are set forth in Chapter 61.24 of the Revised Code of Washington. The following are the major requirements of the nonjudicial foreclosure process.
1) Notice of Default
At least thirty (30) days before initiating a foreclosure sale, the trustee must send a written notice of default to the borrower. This written notice of default must be sent to the borrower’s last known address and must be sent by both first-class mail and either registered or certified mail, with a return receipt requested. Additionally, the trustee must either personally serve the notice of default on the borrower or post a copy of the notice in a conspicuous place on the premises.
The RCWs set forth very specific information that must be included in the notice of default. For example, a description of the subject property, a statement declaring the borrower in default, and an itemized account of all amounts in arrears are just some of the items of information that must be included in this notice. In addition, the RCWs set forth specific duties that lenders have and must complete even before a notice of default can be issued.
2) Notice of Sale
At least ninety (90) days before the foreclosure sale, the trustee must record a notice of sale in the office of the auditor in each county where the property is located. The trustee must then send a copy of the notice of sale to the borrower (and any other interested parties as set forth in the RCWs) by both first-class mail and either certified or registered mail, with a return receipt requested.
In addition to the notice of sale, the trustee must include a statement to the borrower that sets forth the steps required to cure the default and avoid foreclosure. This statement allows the borrower to stop the foreclosure process by paying past due payments, plus additional expenses. The ability to cure the default, however, ends eleven (11) days prior to the foreclosure sale.
In addition to mailing copies of the notice of sale and the statement regarding how the default can be cured, the trustee must also either personally serve the notice of sale upon any occupant of the property, or must post a copy of the notice of sale in a conspicuous place on the property. The trustee must also publish the notice of sale consecutively for four (4) weeks in a “legal” newspaper in the county where the property is located.
3) The Foreclosure Sale
The foreclosure sale itself also has rigid guidelines. The foreclosure sale must take place at a designated public place and must be on a Friday, or if the Friday is a legal holiday, on the following Monday. Additionally, the foreclosure sale must take place between 9:00 a.m. and 4:00 p.m., and it must take place at least 190 days from after the date of the first default.
4) Notice to Occupants or Tenants
If the property subject to the foreclosure proceeding is occupied by a tenant or other occupant, the trustee must, in addition to the requirements set out above, mail a specific notice in an envelope addressed to the “Resident of property subject to foreclosure sale.” Like many of the other notices, the specific language of this notice is set forth in the RCWs.
After the foreclosure sale is completed, the purchaser of the property is entitled to possession of the property on the twentieth day following the trustee’s sale, as against the borrower and anyone having an interest junior to the deed of trust, including occupants who are not tenants. When the occupants of the property are tenants, however, the purchaser cannot merely enter the property on the twentieth day following the sale. In this situation, the purchaser has two options: 1) The purchaser can negotiate a new purchase or rental agreement with the tenant or subtenant; or 2) The purchaser can elect to terminate the rental agreement. If the purchaser elects to terminate the rental agreement, the purchaser must give the tenant or subtenant sixty (60) days written notice to vacate. It is not until this sixty days notice has lapsed that the purchaser can lawfully remove the tenant or subtenant from the property.
Understanding these major requirements of Washington’s nonjudicial foreclosure process is important. Whether you are a homeowner who is facing foreclosure, a lender who is considering beginning the foreclosure process, or a tenant living in a property that is being auctioned at a foreclosure sale, understanding these requirements can help you to know your rights and your duties. The process of nonjudicial foreclosure can be a time-consuming and complex process, requiring strict adherence to the applicable RCWs and their substantive forms and language. Always keep in mind that because each situation involving nonjudicial foreclosure presents unique issues, seeking professional legal assistance to guide you through this complicated time may ultimately be that best decision you make in protecting your interests.
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