Failure to Comply with WA Deed of Trust Act (RCW 61.24) May Invalidate Foreclosure Sale

Count this as another victory for homeowners facing foreclosure or who have lost their home to foreclosure as a result of a trustee’s and lender’s failure to comply with statutory foreclosure guidelines in Washington State. In a very fresh decision by the Washington Supreme Court, the Court was faced with answering questions regarding a lender’s and trustee’s compliance, or lack thereof, with Washington’s Deed of Trust Act (RCW 61.24) and whether the failure to comply with the Act could undo a foreclosure sale. 

In many circumstances, and just as general observation, the courts will usually allow a bonafide purchaser of a foreclosed home to maintain their purchase of the home following the trustee sale (a bonafide purchaser is one who pays fair market value and who purchases without actual or constructive knowledge of another's claim of right). However, in the WA Supreme Court Case of Albice v. Premier Mortg. Servs. of Wash., Inc., the Court decided differently due to the trustee’s failure to comply with Washington’s Deed of Trust Act (RCW 61.24) and holding that the purchaser was not a bonafide purchaser.

The WA Deed of Trust Act RCW 61.24 is the statutory rules that govern nonjudicial foreclosures.  The WA Supreme Court provided a great explanation of the Act, stating that it “creates a three-party mortgage system allowing lenders, when payment default occurs, to nonjudicially foreclose by trustee's sale. The act furthers three goals: (1) that the nonjudicial foreclosure process should be efficient and inexpensive, (2) that the process should result in interested parties having an adequate opportunity to prevent wrongful foreclosure, and (3) that the process should promote stability of land titles.”

The main question in Albice v. Premier Mortg. Servs. ofWash., Inc. concerned whether a trustee's sale taking place beyond the 120 days permitted by RCW 61.24.040(6) warrants invalidating the sale.  In this case, the Court held that under RCW61.24.040(6), a trustee is not authorized, at least not without reissuing the statutory notices, to conduct a sale after 120 days from the original sale date, and such sales are invalid. Thus, the original homeowner is going to be permitted to invalidate the foreclosure sale and regain ownership.