Removal of time-barred mortgages from title in Washington (with some recent Washington litigation perspective).

Leading-up to the foreclosure crisis of 2007, many homeowners, in Washington and nationally, encumbered their properties with junior mortgages.  When the properties lost value during the crisis, so did the junior secured positions.  It made little sense for the junior lenders to foreclose following loan default, but the lenders also did not release the liens. Thus, the liens remained dormant on title.

Fast-forward a handful of years, the crisis subsided and home equity was re-gained.  The question for once-distressed homeowners who were able to save their homes was – what to do about the junior liens securing loans that had been in default for years.  Many turned to a Washington statute, RCW 7.28.300, which specifically authorizes a quiet title action by a homeowner against a mortgagee where enforcement of the lien is barred due to the passage of time.

There was a period of time (think 2015-2020) where a small wave of RCW 7.28.300 quiet title actions against junior-position mortgagees hit Washington superior courts and the federal district courts embracing Washington homeowners.  The specific disposition of those cases – which turned-on the legal question of whether the underlying debt was expired or not under Washington law -- is beyond the scope of this post, but there were successes for homeowners.  Some homeowners were successfully able to utilize RCW 7.28.300 to clear title, and, anecdotally, some homeowners were able to use threats of an RCW 7.28.300 action to obtain a voluntary lien release from the junior lender. 

Given the health of Washington’s current housing market (and probably stricter lending standards) the incidence of dormant junior liens securing defaulted loans has significantly declined.  The wave of RCW 7.28.300 quiet title actions that hit the courts a decade or so ago has subsided.  But old liens, many of which were probably abandoned, are still recorded against hundreds if not thousands of properties in Washington.  Property owners should be aware that Washington authorizes a specific mechanism for clearing the liens securing time-barred debt.  As for the holders of dormant junior debt who are maybe waiting for a re-finance or sale to get paid, they must be cognizant of the fact their liens can get wiped-out in Washington if the underlying secured debt goes stale.