How to Stop Foreclosure in Washington
When you purchased your home, you probably never anticipated having trouble keeping up with the mortgage payments. Yet life is unpredictable, and there are a number of reasons why a person might fall behind on their house payments. In this situation, the bank may start the foreclosure process.
A foreclosure will result in you losing your house, along with the money that you have invested in it. In addition, foreclosure can seriously damage your credit. Fortunately, there are steps that you can take to stop foreclosure in Washington State, including a modification to your mortgage loan, challenging the validity of the foreclosure, or filing for bankruptcy. Depending on the type of bankruptcy you qualify for, you may be able to stop the foreclosure completely.
Richard D. Granvold is a Federal Way bankruptcy lawyer who fights for the rights of individuals who have found themselves in a difficult financial situation. We work with our clients to help them find a solution that meets their needs. Give our law office a call today to schedule a consultation with a member of our team, and learn how you might be able to stop foreclosure.
The Foreclosure Process
Foreclosure is how a mortgage company or bank gets paid when a borrower isn’t paying on their home loan. The mortgage company forces a sale of the property at a foreclosure auction so that the loan can be paid.
In Washington State, most foreclosures start with a notice of default. The bank will send this breach letter out once a homeowner is at least 3 months behind on their loan payments. This letter provides a borrower with a statement of how much in arrears they are, which must be paid within 30 days (the grace period) to avoid the next foreclosure step. Washington is a nonjudicial foreclosure state, which means that a lender can foreclose on a property through a third party (trustee) instead of through the court system (judicial foreclosure).
A relatively new law, the Washington State Foreclosure Fairness Act, requires the lender to contact a borrower at least 30 days before sending a notice of default to give them the opportunity to discuss loss mitigation options. This Act requires banks to issue a letter to the homeowner, prior to issuing the Notice of Default, that explains the homeowner’s new rights under Washington law. These additional protections include the right to a meeting with the bank’s agent, and the right to request formal mediation through an attorney or HUD-approved Housing Counselor.
Once a notice of default has been issued, then a homeowner can opt-into foreclosure mediation. There is an extremely short time-line for requesting mediation. An individual cannot participate in the mediation program without a referral, which must be made through a housing counselor or attorney.
Homeowners are advised to speak to a foreclosure attorney at the earliest moment possible to avoid missing deadlines. Homeowners in default have only days to act! You need to check your paperwork for that deadline. But once that timeline date has expired, that does NOT stop you from saving your home!
Many homeowners skip the above step and do not participate in mediation. Participating may allow you to stay in a home longer, even if you are not attempting to keep it. It also gives you a longer time to possibly make an informed decision about your foreclosure options.
After expiration of the above Notice of Default 30 day grace period, the creditor will mail and post a Notice of Trustee’s Sale and a Notice of Foreclosure; such notices will establish a foreclosure date, which must be at least 90 days after the date of such notices as well as at least 270 days from the date of default. If a bankruptcy is filed before that sale date, the foreclosure will not take place on that date as a result of the automatic stay.
If you don’t participate in mediation, or if mediation is not successful, then the trustee will issue a notice of sale and record it in the local courthouse. This notice of sale must also be mailed to the homeowner and posted on the property at least 90 to 120 days before the sale date. The notice of sale must also be published in a newspaper.
Under Washington State law, the bank cannot hold a foreclosure sale less than 190 days after the date of default. At the sale, the lender may make a credit bid, where it can bid up to the total amount owed. In some states, a lender can get a deficiency judgment against the borrower if they have the winning bid and the amount is less than the total debt. In Washington, deficiency judgments are usually not allowed.
If the lender is the highest bidder on the property, then it becomes “Real Estate Owned.” If a third party is the higher bidder and the total foreclosure sale price is more than what the borrower owes, then the borrower is entitled to the surplus funds after all agreed secured debts and recorded other debts are paid possibly. After the foreclosure sale, the buyer is entitled to possession of the property within 20 days.
Of course, there are ways to stop or delay foreclosure. Experienced foreclosure lawyers can walk you through your options, which may include filing for bankruptcy to completely stop the foreclosure action.
How to Stop Foreclosure
In Washington, there are several ways that you may be able to stop or delay an impending foreclosure process. Depending on your personal situation, you may qualify for one or more of these options.
First, you may request a mortgage modification from the lender. This involves asking the creditor to agree to new terms for the promissory note. Through a loan modification, you may be able to negotiate a reduction in the interest rate, the loan amount, the monthly payment, or other terms.
Keep in mind that there is no guarantee that the bank will agree to a loan modification – and that it can take time to negotiate these changes to the promissory note. While you are attempting to get a loan modification, your financial situation may get worse.
Second, you can file a lawsuit against your mortgage lender to challenge the validity of the foreclosure or the mortgage loan itself. This lawsuit would be based on an assertion that the mortgage is somehow invalid due to improperly drawn loan documents, foreclosure documents, or other technical shortcomings.
Filing a lawsuit will typically require hiring an attorney, and can be costly and time-consuming. As with a loan modification, there is no guarantee that a lawsuit to stop a foreclosure will work.
Third, you may put your house on the market if you believe that you won’t be able to keep it. This is known as a short sale. If you are able to sell the home for as much as you owe – or more – then you may be able to avoid a deficiency judgment. If you plan to go this route, you should notify your lender and ask them to postpone the foreclosure sale while the house is on the market.
Of course, even in the hot Seattle housing market, and Western Washington counties, you may not be able to sell your house for what you owe on your promissory note. The process of selling your house can take time – and can be emotionally draining. It also leaves you without a place to live, although it may help to protect your credit if the foreclosure sale does not occur.
Fourth, you can file for bankruptcy to stop the foreclosure. Chapter 13 bankruptcy filings can completely stop foreclosure actions. Even if you file for Chapter 13 just one minute before the foreclosure sale, it will put a stop to the foreclosure. However, if you have repeatedly filed for Chapter 13, then your rights in regards to stopping foreclosure may depend on the facts in prior bankruptcy filings.
With a Chapter 13 bankruptcy, you may be able to stop a foreclosure and keep your home. As long as you can keep your home loan current, then you might be able to stay in your house. At a minimum, a bankruptcy filing can give you time to figure out your next steps.
Will I Have to File for Bankruptcy?
If you are facing foreclosure, then you will not necessarily have to file for bankruptcy in order to keep your home. As noted above, there are several options that you may pursue to stop or delay a foreclosure sale other than bankruptcy. However, these options may only delay the inevitable – and won’t necessarily put a stop to the foreclosure proceedings.
Filing for Chapter 7 or Chapter 13 bankruptcy can put an immediate stop to foreclosure. However, Chapter 7 bankruptcy – known as a “fresh start” bankruptcy – will only stop foreclosure on a temporary basis.
By contrast, a Chapter 13 bankruptcy petition may offer a long-term solution to your problems. With a Chapter 13 bankruptcy, you will have the opportunity to make up delinquent mortgage payments over a period of 5 years – which may allow you to keep your home. You can also strip off a second mortgage if your house is worth less than the balance of the first mortgage.
A Chapter 13 bankruptcy will stop a foreclosure and give you an opportunity to get back on track financially. It is a good choice for someone who got behind on mortgage payments during a crisis (such as the COVID-19 pandemic) and who is working towards financial stability. If you can’t come up with the entire outstanding mortgage default, but can work on a payment plan, then a Chapter 13 bankruptcy may be the best way to move forward when you are behind on your house payments.
You can save your house from foreclosure if a bankruptcy is filed prior to the actual trustee sale date and time. What happens after that depends on the type of bankruptcy and your goals. The length of time that you have lived in Washington State over the last several years may also affect your rights.
Attorney Richard D. Granvold will help you keep your home if possible and go through your options with you. The bankruptcy system can protect your rights and enable you to start over.
Should I Try to Keep My House?
Foreclosure can cause long-lasting damage to your life. After a foreclosure, credit repair can be incredibly difficult. However, a foreclosure may also provide relief of being free of overwhelming mortgage payments.
The real question for most homeowners is whether you can afford to keep your home, and if you even want to keep it. Your choice to keep or let go of your house may dictate which type of bankruptcy you file.
If you want to save your home, then a Chapter 13 bankruptcy may be the best option for you. It will give you time to get current on your mortgage. Filing for Chapter 13 will also put an automatic stay on foreclosure proceedings.
If you decide that you don’t want to keep your house (or cannot afford to do so), then a Chapter 7 bankruptcy might be a better bet. With a Chapter 7, you will get a temporary stay on foreclosure. While this type of bankruptcy will wipe the slate clean with many types of debt, it may not allow you to stay in your home.
What If I Have More Than One Mortgage?
In Chapter 13, if the fair market value of your home is less than the amount owed on your first mortgage balance, the second mortgage may possibly be eliminated by treating it as an unsecured debt like other unsecured claims. The ability to do this will depend on what type of Chapter 13 you are filing.
You will need to know the value of your home and may want to obtain 2 or 3 free “market analysis” by calling a real estate agent to obtain those so you can be advised on your options concerning the second mortgage. Although a market analysis is not valid as proof in a court, most persons do not obtain and pay for a formal appraisal as such fee is normally avoided by using a market analysis. Do not use the county assessed value to determine your home’s value either as they are often not reflective of the true value.
In a Chapter 7 bankruptcy, it may be possible to reduce a second mortgage through an agreement with the creditor. In such cases, some second mortgage creditors recognize that they will receive no monies if the first mortgage creditor forecloses. As a result, a second mortgage creditor may agree to new terms of the balance owing, the interest rate, the monthly payment, and when the next payment is due.
That must be accomplished during your Chapter 7 case within certain deadlines and you must notify your attorney you want to explore that option in case you are able to keep the home with much smaller payments!
Does Washington Have a Foreclosure Moratorium?
During the COVID-19 pandemic, Washington State enacted a foreclosure moratorium. This moratorium ended on July 31, 2021. However, even without this moratorium in place, homeowners may have legal protections that allow them to stop or delay a foreclosure.
This may include seeking a mortgage modification or filing a bankruptcy petition. Through a Chapter 13 bankruptcy, you may be able to stop a foreclosure and keep your home by paying off your outstanding debt over time. Call Richard D. Granvold to schedule a free consultation about your foreclosure.
When Can A Bank Start Foreclosure Proceedings?
Under both federal and Washington state law, a bank generally cannot start foreclosure proceedings until a homeowner is more than 120 days overdue on their mortgage payments. During this preforeclosure period, a homeowner has the opportunity to get caught up on their loan and potentially work out a loss mitigation option, such as a mortgage modification.
However, if you are unable to get current on your mortgage debt, the best option might be to file for bankruptcy. As an experienced foreclosure attorney, Richard D. Granvold can help you explore your options. Give our law firm a call today to learn more about our legal services and how we can help you.
Can The Bank Foreclose If My Payments Are Current?
As a general matter, a foreclosure can only happen when a borrower is at least 3 months behind on their mortgage payments. However, there may be situations where a foreclosure process may be started even if you are up to date on your loan. For example, if you have unpaid property taxes that are paid through your mortgage, if your homeowners’ insurance is not up to date, or if you have violated other terms of your mortgage, then the bank may initiate foreclosure proceedings.
The most common reason for foreclosure is falling behind on mortgage payments. If you are in this situation, reach out to an experienced Federal Way bankruptcy lawyer to schedule a free initial consultation about your options.
Facing Foreclosure? Give Our Law Office a Call Today to Explore Your Options
If you are in default on your mortgage, you are probably under an incredible amount of stress. There are ways to avoid foreclosure. With the help of an experienced lawyer, you may be able to put a stop to a foreclosure through filing for bankruptcy.
Bankruptcy Attorney Richard D. Granvold can protect your home and your rights, provide an objective review of your options and take action to protect your rights. We’ll walk you through the process, explain your options, and advocate for you from the initial filing to the final resolution. Give our office a call at 253-945-6062 or fill out our online contact form to schedule a free consultation with a Federal Way bankruptcy attorney.