Longer Waiting Period to Evict Tenants After Foreclosure in WA State Effective July 26, 2009 and Free Legal Aid for WA Homeowners Facing Foreclosure

There was a new law signed by Governor Gregoire this past legislative session,  SB 5810. Here is the link to the legislative page for the bill. Click on the “final bill report” for a quick summary.  The law gives TENANTS 60 days to vacate a residential home after foreclosure. Currently it’s 20 days (scroll to the very bottom of this page for details.)  Althought I sympathize with the tenants, it’s important to point out that lenders will think about this as they price new mortgage loans in Washington state. Today, any tenant renting a home or condo must wise up fast and do a thorough check on the landlord so their first, last, and damage doesn’t end up taking a walk with the seller.

This new change to 60 days is only good for tenants occupying a home that was sold during foreclosure. If a homeowner is occupying the foreclosed property, they will have to vacate in 20 days.

It looks like the law was also changed to add an additional 30 days to the foreclosure process in a residential, owner occupied foreclosure. This adds a step: The lender MUST make a detailed attempt to contact the homeowner and must make a declaration that they have taken steps to contact the homeowner. 

NEW SECTION. Sec. 2. A new section is added to chapter 61.24 RCW to read as follows:
(1)(a) A trustee, beneficiary, or authorized agent may not issue a notice of default under RCW 61.24.030(8) until thirty days after initial contact with the borrower is made… (b) A beneficiary or authorized agent shall contact the borrower by letter and by telephone in order to assess the borrower’s financial ability to pay the debt secured by the deed of trust and explore options for the borrower to avoid foreclosure…(c) During the initial contact, the beneficiary or authorized agent shall advise the borrower that he or she has the right to request a subsequent meeting and, if requested, the beneficiary or authorized agent shall schedule the meeting to occur within fourteen days of the request. The assessment of the borrower’s financial ability to repay the debt and a discussion of options may occur during the initial contact or at a subsequent meeting scheduled for that purpose. At the initial contact, the borrower must be provided the toll-free telephone number made available by the department to find a department-certified housing counseling agency and the toll-free numbers for the department of financial institutions and the statewide civil legal aid hotline for possible assistance and referrals.

There are some exceptions to the new law. Follow this link and click on “bill as passed by the legislature” to read along with me:

Subsections (1) and (5) of this section do not apply if any of the following occurs:
The borrower has surrendered the property as evidenced by either a letter confirming the surrender or delivery of the keys to the property to the trustee, beneficiary, or authorized agent; or the borrower has filed for bankruptcy, and the bankruptcy stay remains in place, or the borrower has filed for bankruptcy and the bankruptcy court has granted relief from the bankruptcy stay allowing enforcement of the deed of trust.

This section applies only to deeds of trust made from January 1, 2003, to December 31, 2007, inclusive, that are recorded against owner-occupied residential real property. This section does not apply to deeds of trust:
(i) Securing a commercial loan;
(ii) securing obligations of a grantor who is not the borrower or a guarantor; or
(iii) securing a purchaser’s obligations under a seller-financed sale.

This law will go into effect July 26, 2009.  Will it help?

There are some good things we can say about getting in the defaulting homeowner’s face with more correspondence.  The letter sent to the homeowner will provide information on how to contact the Dept of Financial Institutions, HUD-approved housing counselors, and information on how to connect with the WA State Bar Association, which recently launched a community outreach program to offer FREE legal services to homeowners facing foreclosure.

The Washington State Bar Association (WSBA) is pleased to announce that its Home Foreclosure Legal Aid Project is accepting clients. In response to the current foreclosure crisis in our state, the WSBA is partnering with the Northwest Justice Project (NJP) to provide free legal assistance to Washington residents in danger of losing their homes. The goal of the project, which will last through May 2010, is to help Washington homeowners avoid foreclosure and stay in their homes. Homeowners in need of help who are unable to afford a lawyer can sign up by calling a toll-free number, 1-877-894-HOME (4663)

Information is also available on the WSBA website here.  I am hopeful that a measurable percentage of homeowners in default will open that letter and contact the Bar Association. Maybe this will help homeowners avoid predatory loan modification salesmen and foreclosure rescue scams. During the bubble run-up, we had many homeowners who used stated income loans and flat-out lied about their income. We had homeowners who lied about occupancy. We had non-English speaking homeowners who were duped by people from within the industry and some of who knowingly lied to their lender. I could think of at least 10 more examples but these three will do. I hear that some of these folks are afraid to talk to their lender. They get phone messages from the default department and they see the letters, however, they are afraid that if they talk to the lender they might be confronted with evidence that might lead to negative consequences, so they ignore all communication and let the lender foreclose.

In class this week, an agent told me that 95% of all available listings under $300,000 in Kent are short sales.  I’m afraid the foreclosure train has left the station and is rolling down the tracks towards the mid to upper price tiers.  The 60 day eviction waiting period is going to slow down REOs returning to the market, adding more hold-time to the lender’s balance sheet losses and pushing the housing bottom out longer.  Score one point for the tenants, zero points for the lenders, and two points for homeowners who get to stay in their home payment free for another 30 days. Maybe we can justify giving the lenders half a point if they get to collect rent from the tenant for the 60 days.

We will pay the piper on this one: Higher rates and bank/lender fees are in our future.

The legislature also slipped in something interesting: The foreclosing bank must prove that they hold the note before the bank can foreclose.

About Jillayne Schlicke

Educator in the field of mortgage lending and real estate. Follow me on Google+

Comments

  1. This was very informative. Thank you very much. It seems I get questioned this once or twice a month!

  2. This will be my third attempt to leave a comment. I did copy the last comment so I can paste it.

    Let’s try this again. My last comment was lost.

    The posting on the front door is left over from the last foreclosure go around when investors would buy multiple properties with little or no money down and rent the house out and let it be foreclosed.

    The fact is though that an occupied property is much more likely to be cared for than an unoccupied property. What is getting to be a greater issue is that banks, or more correctly, the investors, should be liable for keeping the foreclosed homes from becoming a public nuisance.

    Banks and investors wanted the foreclosure option, they’ve got it, and now they need to take responsibility for their bad business decisions. The next law should force the investors to keep the properties in good repair. They need to at least cut the lawns and water the plants.

  3. This will be my third attempt to leave a comment. I did copy the last comment so I can paste it.

    Let’s try this again. My last comment was lost.

    The posting on the front door is left over from the last foreclosure go around when investors would buy multiple properties with little or no money down and rent the house out and let it be foreclosed.

    The fact is though that an occupied property is much more likely to be cared for than an unoccupied property. What is getting to be a greater issue is that banks, or more correctly, the investors, should be liable for keeping the foreclosed homes from becoming a public nuisance.

    Banks and investors wanted the foreclosure option, they’ve got it, and now they need to take responsibility for their bad business decisions. The next law should force the investors to keep the properties in good repair. They need to at least cut the lawns and water the plants.

  4. OK that worked. I’m just seeing if it will post another comment for me.

  5. Hi David,

    I checked pending and spam and didn’t find the lost comment. Not sure what happened there. Thanks for stopping by RCG.

  6. Hey Ray,

    What kind of short sale percentages are you seeing down there in the south end? I’m hearing that there are more short sales in south King Co v. central and north.

  7. I know a lot of people who have been waiting for news on this extended tenant occupancy decision. Will be hard for them to police owners signing bogus leases to extend the post foreclosure time frame.

  8. It is good that 20 days will be extended. That would benefit tenants and give then enough leeway!

  9. Jillayne, I think that last sentence of your post should be BOLD. Wow!

    “The legislature also slipped in something interesting: The foreclosing bank must prove that they hold the note before the bank can foreclose.”

    • biliruben says:

      Your response to that sentence says more to me than the sentence itself, Rhonda!

      What a crazy lending environment we have been in that a requirement proving you own the note earns a “Wow!”

  10. Mary Coulter says:

    The extension is good for some, squatters are taking advantage of this new provision.

  11. Angela Jones-Parker says:

    As a tenant who found out recently that my landlord is in foreclosure on the house I live in I applaud this. I had no way of knowing my landlord had fallen into default but I will suffer losing my place of residence through no fault of my own. It’s a relief to know that I will have a greater length of time to move.

    I will probably lose my last month’s rent and damage deposit from my landlord. I wish there was a way to force my landlord to honor that contract. This law doesn’t help that but at least now I won’t be scrambling with less than 3 weeks notice!

  12. Hi Angela,

    Thanks for stopping by RCG. In terms of getting your last month’s rent and damage deposit back, I have heard some tenants having luck through the small claims court process.

  13. The federal law recently passed by President Obama actually sets longer terms for tenant notice. Wouldn’t the new law signed by Gregoire be overridden?

    http://www.trulia.com/blog/GildaBaxter/2009/06/life_after_foreclosure_f

  14. Wouldn’t the recently enacted federal legislation regarding tenants rights in a foreclosure be stronger than the states and therefore render this portion of the states law meaningless?

    http://www.tenantstogether.org/article.php?id=723

  15. question I am a tenant in a home that has been served with trustee paperwork for sale in Sept. 2009. The homeowners keep telling me its all a mistake. I have been checking with the trustee and am advised sale is proceeding as scheduled. The homeowner brought me a formal lease to sign I told them no not while in this status. I have a verbal agreement with 9 months of receipts will I get 60 days to relocate?

  16. We have a property that is under contract and closing tenatively schedule for next week. 3 family home and has section 8 tenant that had agreed to be out by now and is not. We have attempted on several occasions to assit tenant with locating new housing. What can we do to remove tenant for new owner to have occupancy of home? The property is in Bronx New York.

  17. My question is simple but maybe not. I am a renter and i have had 2 notices on my front door. Since i see that the Landlord has not paid on his mortgage since i have moved in and now it is in forcloser proceedings do i keep paying him.. Sorry this sounds like a dumb question but honestly i dont know what to do at this point.

  18. Great question! You have a contract with your landlord to pay rent and you need to continue to honor that contract regardless of whether they pay their taxes/mortgage/etc. To not do so will adversely effect your credit and get you rightfully evicted.

    HOWEVER, once the property changes hands things are more up in the air and it may vary from state to state. The new owner may be quite happy to have you and you’ll need to then pay rent to them (you should get some additional advice at this stage if that’s the case). More times than not though they will want to evict you in which case you should have some rights that, depending on the local laws, should entitle you to move out costs and possibly some free rent as well. It could work out quite well for you in “keys for cash” situations like this. You do have rights, and I hear that tenants frequently make out quite well in these situations.

    Final note: If you fear that your landlord may actually be insolvent you might want to take steps to secure your deposit by asking the landlord to put the deposit in escrow. That way when the home is foreclosed on you don’t have to sue to get your deposit back. HOWEVER again, this may be factored in to the bank sale or short sale as the onus might fall on the new owner to return that deposit money to you and the escrow may be a moot point and a waste of time to negotiate with your landlord (no need to fight for that deposit money if you’re covered by the new buyer anyway). Again, will need to check your local city/state tenants rights laws to determine.

  19. Vicki Nurse says:

    If someone moves into a house where the owners have left and given the keys back to the bank, and this person revieves mail at the house’s address and puts the utilities in his name – is this illegal? Does this person have the same eviction rights as the defaulted owners? How long does a foreclosure usuallytake? Does a house with 2 mortgages take longer to foreclose?

  20. Hi Vickie,

    Google/Bing your local state or county bar association and find a real estate attorney or attorney who specializes in tenant’s rights. Legal questions are for someone who practices law.

  21. Eric Evans says:

    Im confused on subsections 1 and 5 that do not apply. Something about writing a letter or turning over the keys. Does that mean they cant do a judicial foreclosure on me or what. I just worried that my wages will be garished. Is it likely? Or is it likely I’ll get a non judicial forclosure? My name is Eric and I live in Eatonville, Washington.

  22. Hi Eric,

    I sent you an email with these questions:

    Do you live in a 1-4 family residence or do you live on 25 acres or more?

    Do you have just a first mortgage or are their junior liens as well like a second mortgage?

  23. Eric Evans says:

    Yes we live in a 1-4 residence and just a first mortgage. Thanks

  24. Hi Eric,

    First mortgage only….
    Washington State
    Non-judicial foreclosure (auction v. taking you to court)
    Owner occupied property
    …you signed a deed of trust and a note..

    there is NO RECOURSE. That means after the foreclosure auction the lender canNOT pursue you for their losses.

    the only way they could pursue you is if the lender decided to foreclose on you “judicially” which means they would have to take you to court and stand before a judge.

    Most all residential foreclosures in WA state happen non-judicially meaning they go through the Trustee Sale process and NOT before a judge.

    Hope that helps!

    Please note that I am not an attorney and I highly encourage you to seek legal counsel for all your legal questions. There is free legal help for people who are financially destitute here:

    http://nwjustice.org/

    Here is the Bar assoc website:

    http://wsba.org/

    Here is my attorney referral list:

    http://ceforward.com/?page_id=53

    Readers: This is NOT TRUE if you have junior liens behind the first mortgage! A second mortgage holder CAN pursue you for its losses after the trustee sale. Please consult an attorney to fully understand all the possible legal consequences of foreclosure.

  25. Hi Eric,

    First mortgage only….
    Washington State
    Non-judicial foreclosure (auction v. taking you to court)
    Owner occupied property
    …you signed a deed of trust and a note..

    there is NO RECOURSE. That means after the foreclosure auction the lender canNOT pursue you for their losses.

    the only way they could pursue you is if the lender decided to foreclose on you “judicially” which means they would have to take you to court and stand before a judge.

    Most all residential foreclosures in WA state happen non-judicially meaning they go through the Trustee Sale process and NOT before a judge.

    Hope that helps!

    Please note that I am not an attorney and I highly encourage you to seek legal counsel for all your legal questions. There is free legal help for people who are financially destitute here:

    http://nwjustice.org/

    Here is the Bar assoc website:

    http://wsba.org/

    Here is my attorney referral list:

    http://ceforward.com/?page_id=53

    Readers: This is NOT TRUE if you have junior liens behind the first mortgage! A second mortgage holder CAN pursue you for its losses after the trustee sale. Please consult an attorney to fully understand all the possible legal consequences of foreclosure.

  26. I had my home sold at auction on friday April 23. The new owner changed the locks on my home Saturday April 24th. Do I have any recourse on the new owner for violating my rights and locking me out of my residence, and breaking into the property prior to the mandatory waiting period for the new owner to take possession?

  27. Hi Drock,

    I like Ray’s idea of getting legal advice from a real estate attorney or an attorney who knows landlord/tenant/foreclosure laws asap.

    Was the home vacant? I’m trying to imagine a scenario where the person who was the successful bidder at auction would have meant well by making sure the home was secure after auction.

    Owner occupied residents have 20 days to vacate, tenants have a longer time frame….90 days.

  28. Hello,

    Quick question:

    “If a homeowner is occupying the foreclosed property, they will have to vacate in 20 days. It looks like the law was also changed to add an additional 30 days to the foreclosure process in a residential, owner occupied foreclosure.”

    Am I reading this correctly that owners in residence have 50 days after the auction to vacate the premises?

    Thank you.

    • David, I believe those days were added to the “process” that takes place prior to the foreclosure sale and not to the 21 days AFTER the sale.

      I’m sure Jillayne will come and answer it more fully, and also comment as to whether or not more recent “new rules” have changed all of this since she wrote the post in 2009. I am anxious to learn if the newer rules in WA have added time to the process.

      But as to the owners # of days to leave when the process is complete, I have not heard of a change from the 21 days. Not sure what happens if the owner is still living there on day 30…perhaps Jillayne can shed some light on that as well.

  29. David, Ardell is correct.
    Jess and Julie Lyda wrote a blog post on the new WA State Foreclosure Fairness Act here:
    http://www.snohomishcountymarketstatistics.com/2011/03/washington-state-legislature-moves-to.html

  30. Hello,

    I’m a tenant living in a home that is going to foreclose on 09/30/2011, in 2 weeks.
    Do I have 60 or 90 days to find a place and move out?

    Thank you!

    PS; This is a great resource and I’m glad you’re all here help one another!

  31. Hello,

    I’m a tenant living in a home that is going to foreclose on 09/30/2011, in 2 weeks.
    Do I have 60 or 90 days to find a place and move out?

    Thank you!

    PS; This is a great resource and I’m glad you’re all here help one another!

  32. Hi Alex,

    I don’t know the answer to that, but I wanted to suggest that you actually go to the auction if you can, as sometimes they are postponed on that date and not taken by the bank on that date. If it is at all possible for you to go, I certainly would if I were you. Someone at the auction may buy it at the auction, and they may be happy to have you as a tenant if that happens vs the bank taking it back.

    With only two weeks to go, I would wait to see if an investor buys it who might be happy to honor your lease.

    This is Jillayne’s post, and she may have more to say on that and your question. I just wanted to throw that out there for what it’s worth.

  33. Alex, it’s 90 days but you should contact a landlord/tenant attorney for all your legal questions. I am not an attorney. Here is a link to the WA State Bar Assoc:
    http://wsba.org/The-Public

    Rob McKenna’s office just published a VERY good 61 page PDF called the Washington State Foreclosure Prevention and Resource Guide. There’s a substantial Q&A section for tenants:

    http://www.dfi.wa.gov/consumers/pdf/washington-foreclosure-resource-guide.pdf

    • That is VERY confusing. They didn’t change the 60 day eviction time frame. They added a 90 day notice requirement. They must have had a very good reason to do it that way, but it makes one wonder if a notice can be sent 30 days before the foreclosure by the “to be” owner. Very confusing. Kind of makes you HAVE to see a lawyer, when they could have made it less ambiguous by increasing the eviction time frame from 60 to 90. Leaves you scratching your head to make some sense out of it.

  34. We need to find out how to get a tenent out of my mothers house. We have to move her back into her home,from assisted living facility.because her finances will not sustain her care there any longer. She owns her home outright,so we will be moving in with her to help care for her and eleviate some of the expences that she no longer has the funds to do. We have POA over all of her assets, etc. We would be thankful for any information and help on this matter.Or please advise where we can get the right information.

  35. Lisa, it really depends on what your lease says. You clearly have to compensate them for any inconvenience if you have a 12 month lease and want to move them out withing a short time after they moved in. That’s just the right thing to do.

    If you have a month to month lease, that is easy. If you have a long term lease, you usually need their compassion and cooperation.

  36. We recently purchased a house through an auction. There are renters still living in the home and have not moved out. Its nearing a month now and they do not show signs of moving (we understand they can take up to 90 days); however, they have not made any attempt to pay their rent to us either. What can we do to get them to pay rent while they are there? We offered to continue to let them rent the house but they said they did not want to. Do we have any legal way to demand them to pay rent? It doesn’t seem right that they can live there rent free..

  37. David, I believe those days were added to the “process” that takes place prior to the foreclosure sale and not to the 21 days AFTER the sale.

    I’m sure Jillayne will come and answer it more fully, and also comment as to whether or not more recent “new rules” have changed all of this since she wrote the post in 2009. I am anxious to learn if the newer rules in WA have added time to the process.

    But as to the owners # of days to leave when the process is complete, I have not heard of a change from the 21 days. Not sure what happens if the owner is still living there on day 30…perhaps Jillayne can shed some light on that as well.

Trackbacks

  1. [...] Changes to the WA State Deed of Trust Act are reviewed over on this post at RCG. [...]

  2. [...] Here’s more information on the new WA State Foreclosure laws. [...]

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