Why are most foreclosures in Washington non-judicial?

The security instrument used in almost all lending transactions in Washington is the deed of trust, not the mortgage.  This is because the deed of trust is versatile.  It can be foreclosed non-judicially by the trustee holding the power of sale, and it can also be foreclosed judicially as a mortgage.

The non-judicial, trustee sale is favored for two main reasons, time and expense.  A trustee typically charges a flat fee for the trustee sale, which theoretically should be cheaper than hiring an attorney to prosecute a judicial foreclosure.  The time from foreclosure to deed is much shorter with a trustee sale because there is no redemption period.  The trustee’s deed, given to the winning bidder at auction, is final.  The Deed of Trust Act “DTA” eliminates the redemption period. RCW 61.24.050.

In comparison, Washington’s property execution statutes, which apply to mortgage foreclosures, impose a redemption period after sheriff sale.  RCW 6.21.080. The winning bidder at sheriff sale receives only a certificate of purchase which does convert to deed until after expiration of the redemption period, which is typically 8-12 months. 

A judicial foreclosure of a deed of trust might be preferred in the following circumstances:

• There is a title issue requiring judicial correction and the foreclosure relief can be efficiently combined with the title relief.  

• The borrower / property owner is litigious and will sue to enjoin a trustee sale, so the lender will end up in court anyway. 

• Sometimes a judicial foreclosure is needed where the property owner is deceased and there is no probate.  The lender can utilize the judicial rules to effectuate notice to unknowns (although amendments to the DTA over the years have addressed and largely fixed this issue). 

• Finally, the lender may want to preserve a deficiency judgment against the borrower, which cannot be done under the DTA.  The DTA generally bars deficiency judgments. RCW 61.24.100. A deficiency is preserved in a judicial foreclosure. Am. Fed. Sav. & Loan Ass'n v. McCaffrey, 107 Wn.2d 181, 189-90 (1986).

Lenders unsure of the best route for deed of trust enforcement should seek the advice of counsel.  The pros and cons of each route can be analyzed, allowing the lender to make an informed decision and have a roadmap for enforcement.