Washington Legislative Update

MRGDocs' team of legal experts provide the most up-to-date overview of regulatory changes across state and federal agencies. This update is produced by Marsha Williams, a national expert in residential mortgage law and Chair of the National Mortgage Compliance Practice Group.

Washington House Bill 2057

The Washington legislature recently amended its laws related to foreclosure in the case of a deceased borrower or an abandoned property, effective June 7, 2018.

The seeking of the appointment of a receiver, or the filing of a civil case to obtain court approval to access, secure, maintain, and preserve property from waste or nuisance, do not constitute an action commencing foreclosure.

At least thirty days before notice of sale is recorded, transmitted or served, written notice of default and, for residential real property, the beneficiary declaration, must be transmitted by the beneficiary or trustee to the borrower and grantor at their last known addresses by both first-class and either registered or certified mail, return receipt requested, and the beneficiary or trustee must post a copy of the notice in a conspicuous place on the premises or personally serve the notice to the borrower and grantor.

For notices issued after June 30, 2018, the top of the first page of the notice must include:

  • The current beneficiary of the deed of trust;
  • The current mortgage servicer for the deed of trust; and
  • The current trustee for the deed of trust.

In the case where the borrower or grantor is known to the mortgage servicer or trustee to be deceased, the required notice must be sent to any spouse, child, or parent of the borrower or grantor known to the trustee or mortgage servicer, and to any owner of record of the property, at any address provided to the trustee or mortgage servicer, and to the property addressed to the heirs and devisees of the borrower.  If the name or address of any spouse, child, or parent of such deceased borrower or grantor cannot be ascertained with use of reasonable diligence, the trustee must execute and record with the notice of sale a declaration attesting to the same. Reasonable diligence means the trustee must search in the county where the property is located, the public records and information for any obituary, will, death certificate, or case in probate within the county for the borrower and grantor.  Upon written notice identifying the property address and the name of the borrower to the servicer or trustee by someone claiming to be a successor in interest to the borrower’s or grantor’s property rights, but who is not a party to the loan or promissory note or other obligation secured by the deed of trust, a trustee shall not record a notice of sale until the trustee or mortgage servicer completes the following:

  • Acknowledges the notice in writing and requests reasonable documentation of the death of the borrower or grantor from the claimant including, but not limited to, a death certificate or other written evidence of the death of the borrower or grantor. The claimant must be allowed thirty days from the date of this request to present this documentation. If the trustee or mortgage servicer has already obtained sufficient proof of the borrower’s death, it may proceed by acknowledging the claimant’s notice in writing and issuing a request as provided below.
  • If the mortgage servicer or trustee obtains or receives written documentation of the death of the borrower or grantor from the claimant, or otherwise independently confirms the death of the borrower or grantor, then the servicer or trustee must request in writing documentation from the claimant demonstrating the ownership interest of the claimant in the real property. A claimant has sixty days from the date of the request to present this documentation.
  • If the mortgage servicer or trustee receives written documentation demonstrating the ownership interest of the claimant prior to the expiration of the sixty days provided above, then the servicer or trustee must, within twenty days of receipt of proof of ownership interest, provide the claimant with, at a minimum, the loan balance, interest rate and interest reset dates and amounts, balloon payments if any, prepayment penalties if any, the basis for the default, the monthly payment amount, reinstatement amounts or conditions, payoff amounts, and information on how and where payments should be made. The mortgage servicers must also provide the claimant application materials and information, or a description of the process, necessary to request a loan assumption and modification.
  • Upon receipt by the trustee or the mortgage servicer of the documentation establishing claimant’s ownership interest in the real property, that claimant will be deemed a “successor in interest.”
  • There may be more than one successor in interest to the borrower’s property rights. The trustee and mortgage servicer must apply the above provisions to each successor in interest. In the case of multiple successors in interest, where one or more do not wish to assume the loan as coborrowers or co-applicants, a mortgage servicer may require any nonapplicant successor in interest to consent in writing to the application for loan assumption.
  • The existence of a successor in interest does not impose an affirmative duty on a mortgage servicer or alter any obligation the mortgage servicer has to provide a loan modification to the successor in interest. If a successor in interest assumes the loan, he or she may be required to otherwise qualify for available foreclosure prevention alternatives offered by the mortgage servicer.
  • The above provisions do not prejudice the right of the mortgage servicer or beneficiary from discontinuing any foreclosure action initiated under the deed of trust act in favor of other allowed methods for pursuit of foreclosure of the security interest or deed of trust security interest.

If a borrower or grantor is deceased, a notice of sale must be transmitted by both first-class and either certified or registered mail to any spouse, child, or parent of the borrower or grantor, at the addresses discovered by the trustee.

In addition to all other indexing requirements, the Notice of Sale must clearly indicate on the first page the following information, which the auditor will index:

  • The document number or numbers given to the deed of trust upon recording;
  • The parcel number(s);
  • The grantor;
  • The current beneficiary of the deed of trust;
  • The current trustee of the deed of trust; and
  • The current loan mortgage servicer of the deed of trust;

The above provisions do not:

  • Require a trustee or beneficiary to cause to be recorded any new notice of trustee’s sale upon transfer of the beneficial interest in a deed of trust or the servicing rights for the associated mortgage loan;
  • Relieve a mortgage loan servicer of any obligation to provide the borrower with notice of a transfer of servicing rights or other legal obligations related to the transfer; or
  • Prevent the trustee from disclosing the beneficiary’s identity to the borrower and to county and municipal officials seeking to abate nuisance and abandoned property in foreclosure.

In the case where no successor in interest has been established, and neither the beneficiary nor the trustee are able to ascertain the name and address of any spouse, child, or parent of the borrower or grantor, then the trustee may, in addition to mailing notice to the property addressed to the unknown heirs and devisees of the grantor, serve the notice of sale by publication in a newspaper of general circulation in the county or city where the property is located once per week for three consecutive weeks.  Upon this service by publication, to be completed not less than thirty days prior to the date the sale is conducted, all unknown heirs will be deemed served with the notice of sale.

If a servicer or trustee receives notification by someone claiming to be a successor in interest to the borrower or grantor after the recording of the notice of sale, the trustee or servicer must request written documentation within five days demonstrating the ownership interest, provided that, the trustee may, but is not required to, postpone a trustee’s sale upon receipt of such notification by someone claiming to be a successor in interest.

Upon receipt of documentation establishing a claimant as a successor in interest, the servicer must provide such claimant with the loan balance, interest rate and interest reset dates and amounts, balloon payments if any, prepayment penalties if any, the basis for the default, the monthly payment amount, reinstatement amounts or conditions, payoff amounts, and information on how and where payments should be made as well as application materials and information, or a description of the process, necessary to request a loan assumption and modification.  Only if the servicer or trustee receives the documentation confirming someone as successor in interest more than forty-five days before the scheduled sale must the servicer then provide such information to the claimant not less than twenty days prior to the sale.

For each notice of trustee’s sale recorded on residential real property, the beneficiary on whose behalf the notice of trustee’s sale has been recorded must remit $325 (previously $250) to the Department of Commerce (“Department”) to be deposited into the foreclosure fairness account.  The $325 payment is required for every recorded notice of trustee’s sale for noncommercial loans on residential real property, but does not apply to the recording of an amended notice of trustee’s sale. No later than January 1, 2020, the Department may from time to time adjust the amount of the fee, not to exceed $325, at a sufficient level to defray the costs of the program.  Any adjustment to the amount of the fee must be made by rule adopted by the Department.

The revisions also set forth new provisions regarding foreclosure procedures when a trustor under a deed of trust is named as a defendant in an action or proceeding in which that deed of trust is the subject and the foreclosure of a reverse residential mortgage.

Property is “abandoned” when there are no signs of occupancy and at least three of the following indications of abandonment are visible from the exterior:

  • The absence of furnishings and personal items consistent with residential habitation;
  • The gas, electric, or water utility services have been disconnected;
  • Statements by neighbors, passersby, delivery agents, or government employees that the property is vacant;
  • Multiple windows on the property are boarded up or closed off or are smashed through, broken, or unhinged, or multiple window panes are broken and unrepaired;
  • Doors on the residence are substantially damaged, broken off, unhinged, or conspicuously open;
  • The property has been stripped of copper or other materials, or interior fixtures have been removed;
  • Law enforcement officials have received at least one report within the immediately preceding six months of trespassing or vandalism or other illegal activities by persons who enter unlawfully on the property;
  • The property has been declared unfit for occupancy and ordered to remain vacant and unoccupied pursuant to an order issued by a municipal or county authority or a court of competent jurisdiction;
  • Construction was initiated on the property and was discontinued before completion, leaving a building unsuitable for occupancy, and construction has not taken place for at least six months;
  • Newspapers, circulars, flyers, or mail has accumulated on the property or the United States postal service has discontinued delivery to the property;
  • Rubbish, trash, debris, neglected vegetation, or natural overgrowth has accumulated on the property;
  • Hazardous, noxious, or unhealthy substances or materials have accumulated on the property;
  • Other credible evidence exists indicating the intent to vacate and abandon the property.

Property is in “mid-foreclosure” when a notice of default or notice of pre-foreclosure options has been issued or a notice of trustee’s sale has been recorded in the office of the county auditor.

Property is a “nuisance” when so determined by a county, city, or town.

A county, city, or town may notify a mortgage servicer that a property has been determined to be abandoned, in mid-foreclosure, and a nuisance.  A notice issued to notify a mortgage servicer of this fact must:

  • Be accompanied by an affidavit or a declaration made under penalty of perjury by a county, city, or town official that a property is abandoned, in mid-foreclosure, and a nuisance, and the affidavit or declaration must outline at least three indicators of abandonment and be supported with time and date stamped photographs, a finding that the property is a nuisance, and a copy of the notice of default, notice of pre-foreclosure options, or notice of trustee’s sale; and
  • Be sent to the mortgage servicer by certified mail.

A mortgage servicer may contact a county, city, or town regarding a property it believes to be abandoned, and a nuisance and request that a county, city, or town official visit the property and make a determination as to whether the residential real property is abandoned and a nuisance. When making such a request, the mortgage servicer must furnish a copy of a notice of default, notice of pre-foreclosure options, or notice of trustee’s sale applicable to the property.

A county, city, or town must respond to such a request within fifteen calendar days of receipt and notify the mortgage servicer:

  • That a county, city, or town official has visited the property and determined that the property is not abandoned, or not a nuisance;
  • That a county, city, or town official has visited the property and determined that the property is abandoned, in mid foreclosure, and a nuisance. In this case, the notification must be accompanied by an affidavit or a declaration made under penalty of perjury by a county, city, or town official that a property is abandoned, mid-foreclosure, and a nuisance, and the affidavit or declaration must outline at least three indicators of abandonment and be supported with time and date stamped photographs, a finding that the property is a nuisance, and a copy of the notice of default or notice of trustee’s sale supplied by the mortgage servicer; or
  • That the county, city, or town does not have adequate resources or is otherwise unable to make the requested determination.

Upon receipt from a county, city, or town of an affidavit or declaration under penalty of perjury that a property is abandoned, in mid-foreclosure, and a nuisance, a mortgage servicer or its designee may enter the property for the purposes of abating the identified nuisance, preserving property, or preventing waste and may take steps to secure the property, including but not limited to:

  • Installing missing locks on exterior doors. If any locks are changed the mortgage servicer must provide a lock box. Working locks may not be removed or replaced unless all doors are secured and there is no means of entry, and in such cases only one working lock may be removed and replaced;
  • Replacing or boarding broken or missing windows;
  • Winterizing, including draining pipes and disconnecting or turning on utilities;
  • Eliminating building code or other code violations;
  • Securing exterior pools and spas;
  • Performing routine yard maintenance on the exterior of the residence; and
  • Performing pest and insect control services.

The mortgage servicer or its designee must make a record of entry by means of dated and time-stamped photographs showing the manner of entry and personal items visible within the residence upon entry.  Neither the mortgage servicer nor its designee may remove personal items from the property unless the items are hazardous or perishable, and in case of such removal must inventory the items removed. Prior to each entry, a mortgage servicer or its designee must ensure that a notice is posted on the front door that includes the following:

  • A statement that, pursuant to RCW 7.28.230, until foreclosure and sale is complete the property owner or occupant authorized by the owner has the right to possession;
  • A statement that the property owner or occupant authorized by the owner has the right to request that any locks installed by the mortgage servicer or its designee be removed within twenty-four hours and replaced with new locks accessible by the property owner or occupant authorized by the owner only;
  • A toll-free, twenty-four-hour number that the property owner or occupant authorized by the owner may call in order to gain timely entry, which entry must be provided no later than the next business day; and
  • The phone number of the statewide foreclosure hotline recommended by the housing finance commission and the statewide civil legal aid hotline, together with a statement that the property owner may have the right to participate in foreclosure mediation pursuant to RCW 61.24.163.

Records of entry onto property must be maintained by the mortgage servicer or its designee for at least four years from the date of entry.  If, upon entry, the property is found to be occupied, the mortgage servicer or its designee must leave the property immediately, notify the county, city, or town, and thereafter neither the mortgage servicer nor its designee may enter the property regardless of whether the property constitutes a nuisance or complies with local code enforcement standards.  In the event a mortgage servicer is contacted by the borrower and notified that the property is not abandoned, the mortgage servicer must so notify the county, city, or town and thereafter neither the mortgage servicer nor its designee may enter the property regardless of whether the property constitutes a nuisance or complies with local code enforcement standards.  A county, city, or town is not liable for any damages caused by any act or omission of the mortgage servicer or its designee.

Unless the property is found to be occupied upon entry or the mortgage servicer is contacted by the borrower and notified that the property is not abandoned, if a mortgage servicer receives notice from a county, city, or town that a property is abandoned, in mid-foreclosure, and a nuisance, and the mortgage servicer does not abate the nuisance within the time prescribed by local ordinance, a county, city, or town may exercise its authority to abate the nuisance and recover associated costs.

When a property has been the subject of foreclosure, a county, city or town may notify the grantee of the trustee’s deed or sheriff’s deed, via certified mail, that a property is a nuisance. Upon receipt of such a notice, the grantee of the trustee’s deed or sheriff’s deed must respond within fifteen calendar days and provide one of the following responses:

  • That the grantee of the trustee’s deed or sheriff’s deed will abate the nuisance within the time prescribed by local ordinance; or
  • That the grantee of the trustee’s deed or sheriff’s deed does not have adequate resources to abate the nuisance within the time limits required by local ordinance.

If the grantee of the trustee’s deed or sheriff’s deed is notified and does not abate the nuisance within the time prescribed by local ordinance, a county, city, or town may abate the nuisance and recover associated costs.

Unless the property is found to be occupied upon entry or the mortgage servicer is contacted by the borrower and notified that the property is not abandoned, if, after issuance of a notice, a nuisance has not been abated within the time prescribed by local ordinance and the county, city, or town has exercised its authority to abate the nuisance, the county, city, or town may recover its costs by levying an assessment on the real property on which the nuisance is situated to reimburse the county, city, or town for the costs of abatement, excluding any associated fines or penalties. This assessment constitutes a lien against the property and is binding upon successors in title only from the date the lien is recorded in the county in which the real property is located. This assessment is of equal rank with state, county, and municipal taxes and is assessed against the real property upon which cost was incurred unless such amount is previously paid.

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Marsha Williams

Senior Attorney

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