Foreclosure Process Overview
Washington foreclosures are conducted both in court and out of court, although out-of-court foreclosures are more common. The out-of-court foreclosure process typically takes about five months.
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For in-court foreclosure proceedings, once a lender files suit against a borrower, the minimum time to a court ruling is 30 days. This time is extended to 60 days for out-of-state borrowers, in order to provide ample time to respond. If the court rules in favor of the lender, the property is sold to recover the amount owed to the lender. A sheriff’s sale occurs usually 6-8 weeks following court’s ruling.
Before starting a foreclosure out of court, the lender mails a notice of default to the borrower and either posts the notice at the property or delivers the notice to the borrower in person. The borrower has 30 days to respond before the property is scheduled for public sale.
Up until 11 days before the sale, the borrower can stop the foreclosure by paying the past due payments, plus applicable expenses.
Notice of Sale / Auction Legislative and Legal Updates
If the borrower does not stop the foreclosure within 30 days after receiving the notice of default, the lender records a notice of sale with the county recorder. The notice of sale is recorded at least 90 days before the sale date and is mailed to the borrower and any other affected parties.
The notice of sale is also published twice in a local newspaper. The lender publishes the notice of sale once between the 32nd and 28th days prior to the sale, and once between the 11th and 7th days before the sale.
Foreclosure sales are by public auction with the property going to the highest bidder, who must pay in cash. For out-of-court foreclosures, the trustee transfers ownership to the winning bidder, who can take possession of the property 20 days after the foreclosure sale. The borrower has no right to redeem the property after an out-of-court foreclosure sale.
For court foreclosures, the borrower has redemption rights for one year from the date of sale. To redeem the property, the borrower has to pay the full amount due and applicable costs. During the redemption period, the borrower can remain in possession of the property if it is used as their primary residence.
Legislative and Legal Updates
A new state Supreme Court ruling could put hundreds of home foreclosures in question in Washington, where the foreclosures were initiated by an organization known as MERS, or the Mortgage Electronic Registration System. MERS is a central tracking system that essentially represents the person or investor that holds the note on a loan when a mortgage is sold.
Lenders have been using MERS to initiate foreclosures, even though MERS doesn’t actually hold the loans. MERS and lenders maintain that under their system MERS is a legal beneficiary of the promissory note.
But in a 9-0 decision, the justices ruled that’s not what Washington state law intended. On August 16, 2012, the nine justices ruled that under Washington state law, the beneficiary must hold the promissory note. The court ruled that based on Washington state law, MERS is not a legal beneficiary unless it actually held the promissory note secured by the deed of trust when a foreclosure is initiated.
Huelsman says the implications are huge- with the potential to affect hundreds, perhaps thousands of foreclosures initiated by MERS in Washington in the past 10 years.
The ruling could open the door for legal action by homeowners who’ve been foreclosed by MERS — instead of an actual loan holder whose name is on the promissory note. It also has the potential to affect foreclosures currently being challenged because of MERS.
Washington state is one of several states where the legality of MERS initiated foreclosures is being challenged in court.
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