A deed of trust is foreclosed in two ways: Judicial Foreclosure or Non-Judicial Foreclosure; the latter is more commonly known as Trustee’s Sale Foreclosure. Nearly all the foreclosures that occur in the State of Washington is a Non-Judicial Foreclosure.
Given this fact, we will elaborate on Non-Judicial Foreclosure: When a borrower defaults on the loan, the Lender, who is the named Beneficiary on the Deed of Trust, causes the original Trustee to resign and a Law Firm is usually appointed as the new Trustee. A notice of Trustee’s Sale is then filed stating that the subject property will be auctioned off or sold in 120 days after the Notice date.
The property is then wiped off of any junior liens and is sold to a third party Buyer. If the proceeds from the sale satisfies and exceeds the amount owed to the First position Lender, the remainder is used to payoff the 2nd and/or 3rd position Lenders and in that order. In today’s depressed market, the sales proceeds are usually not enough to payoff even just the First Lender.
In cases wherein there is more than one Loan on a property (For instance having a 1st and a 2nd Lender, sometimes a 3rd Lender), and although the Lender in second (or junior) position has every right to foreclose, it is usually the Lender in the first position who commences a foreclosure proceeding.
In a Non-Judicial foreclosure, there’s NOT a provision that provides the foreclosing Lender for a Deficiency Judgment. Therefore, the lender can NOT come after the borrower for the difference between the sales proceeds and the amount owed. HOWEVER, a foreclosure proceeding does NOT remove the right of Junior Lenders to come after you for any amount you still owe them. In simpler words, you can have a foreclosure on your record, and could still end up owing a large chunk of cash and be hounded by your 2nd and 3rd Lenders. This includes the risk of having your savings and wages garnished in the worst case situation.
In view hereof, there is a better way to mitigate your debts (from all your lenders), preserve your credit, and possibly come out NOT owing any money at all! --- I will elaborate on this on my next post.
For the meantime, if you have any urgent concerns or questions, please e-mail me at realestate@carlodelizo.com or call me at (425)444-1010. Take care.
MISSION STATEMENT: Our goal is to procure maximum equity for our Buyers and Investors by searching for the best home bargains. Our area of expertise include Foreclosures, REO or Bank-owned homes, Short Sales or Pre-foreclosures and Fire Sales. BY BRINGING THE BEST DEALS TO OUR BUYERS & CONNECTING THEM WITH SELLERS WHO ARE IN DIRE NEED TO SELL, WE ALL BECOME A PART OF THE SOLUTION.
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