For some time, (Wall Street) loan servicers have threatened judicial foreclosure as a response to Washington's Foreclosure Fairness Act and other pre-foreclosure requirements set forth in Washington's deed of trust statutes. According to several local lawyers, the threats are close to becoming a reality.
A judicial foreclosure involves the lender/servicer filing a lawsuit against the borrower. The lawsuit is filed in Superior Court. A summons and complaint are served by a process server and a formal answer must be filed within the statutory time period. If a formal answer is not filed/served, the lender may obtain a default judgment against the borrower in a month or so after service.
A judicial foreclosure can result in fairly significant financial consequences for the borrower. Unlike a non-judicial foreclosure, a lender may obtain a deficiency judgment against the borrower. The relevant statute regarding deficiency judgments in judicial foreclosures is RCW 61.12.060, which states as follows:
"In rendering judgment of foreclosure, the court shall order the mortgaged premises, or so much thereof as may be necessary, to be sold to satisfy the mortgage and costs of the action. The payment of the mortgage debt, with interest and costs, at any time before sale, shall satisfy the judgment. The court, in ordering the sale, may in its discretion, take judicial notice of economic conditions, and after a proper hearing, fix a minimum or upset price to which the mortgaged premises must be bid or sold before confirmation of the sale. The court may, upon application for the confirmation of a sale, if it has not theretofore fixed an upset price, conduct a hearing, establish the value of the property, and, as a condition to confirmation, require that the fair value of the property be credited upon the foreclosure judgment. If an upset price has been established, the plaintiff may be required to credit this amount upon the judgment as a condition to confirmation. If the fair value as found by the court, when applied to the mortgage debt, discharges it, no deficiency judgment shall be granted."
In the event a lender obtains a deficiency judgment, RCW 61.12.080 authorizes the lender to enforce the deficiency judgment in the same way as any other judgment:
"Judgments over for any deficiency remaining unsatisfied after application of the proceeds of sale of mortgaged property, either real or personal, shall be similar in all respects to other judgments for the recovery of money, and may be made a lien upon the property of a judgment debtor as other judgments, and the collections thereof enforced in the same manner."
Therefore, a lender may garnish wages, levy bank accounts, attach a lien to other real property or personal property such as vehicles, and undertake various other collection actions if the lender obtains a deficiency judgment in a judicial foreclosure.
Since the first step in a judicial foreclosure is the service of a summons and complaint, it is imperative to consult with a lawyer as soon as possible after being served. If you fail to act, the lender will move quickly to obtain a default judgment which can be difficult to set aside at a later date.
For more information on judicial foreclosure or to discuss your situation, please contact my office at: (206) 903-1836 or by email at: email@example.com.