Nonjudicial Foreclosure of Deeds of Trust.

Most loan obligations for residential real property in Washington are secured by deeds of trust, which resemble mortgages.  A deed of trust is a written instrument conveying title to real property to a trustee as security until the grantor repays the loan.  The grantor is the loan borrower or the purchaser of the real property, the trustee is usually a title insurance company, and the lender is the beneficiary of the deed of trust.  In the event of default, deeds of trust may be foreclosed either through the judicial process or through a nonjudicial trustee's sale (nonjudicial foreclosure). 

Nonjudicial foreclosure on residential real property is subject to detailed notice and process requirements under the Deeds of Trust Act (DOTA).  The main requirements include the following:

• Meet and Confer.  Before issuing a notice of default , the beneficiary must make initial contact with the borrower by letter and provide the borrower with a notice of preforeclosure options that informs the borrower of the opportunity to meet and confer with the beneficiary in an attempt to work out an alternative to foreclosure. 
• Due Diligence.  If a borrower does not respond to the initial contact letter, a notice of default may be issued 30 days after a trustee or beneficiary satisfies the due diligence requirements, including making several attempts to contact the borrower by mail and telephone and providing means for the borrower to contact the beneficiary in a timely manner.  If a borrower responds within 30 days of the initial contact letter, a notice of default may not be issued until 90 days after the initial contact with the borrower.
• Notice of Default.  At least 30 days before a notice of trustee's sale (NOTS) may be recorded, a borrower must be provided with a notice of default that contains certain information related to the property and the alleged default, along with a prominent statement providing specific information about the foreclosure process and the options a homeowner may have available, including housing counseling, mediation, and legal help.  
• Mediation Referral.  Most beneficiaries of deeds of trust on residential real property of up to four units are subject to certain preforeclosure mediation requirements as a requisite to a trustee's sale, including a requirement that the beneficiary provide the borrower with notice that the borrower may be eligible for mediation in front of a neutral third party to help save the borrower's home.  The notice must include certain information about how to contact a housing counselor or attorney to request referral to mediation under the Foreclosure Mediation Program (Program), as well as information about the mediation referral timelines.  A beneficiary is exempt from the preforeclosure mediation requirements if the beneficiary certifies to the Department of Commerce (Commerce) under penalty of perjury that it was not a beneficiary of deeds of trust in more than 250 trustee sales of residential real property that occurred in the state during the preceding calendar year.

Foreclosure Mediation Program.

Under the DOTA, a borrower may request that a housing counselor or attorney refer the borrower to mediation under the Program at any time after a notice of default has been issued, but no later than 90 days before the date of sale listed in the NOTS, or no later than 25 days before the date of sale listed in an amended NOTS. 

An attorney or housing counselor may refer a borrower to mediation under the Program by sending a referral notice to the borrower and Commerce stating that mediation is appropriate.  Within 10 days of receiving the referral notice, Commerce must select a mediator and send a notice that the parties have been referred to mediation to the beneficiary, the borrower, the housing counselor or attorney who referred the borrower, and the trustee. 

Required Documents.

Within 23 days of Commerce's notice that the parties have been referred to mediation, the borrower must transmit to the mediator and beneficiary the initial homeowner financial information worksheet that must include information about the borrower's:  (1) current and future income; (2) debts and obligations; (3) assets; (4) expenses; (5) tax returns for the previous two years; (6) hardship information; and (7) other applicable information commonly required by federal mortgage relief programs.

Within 20 days of the beneficiary's receipt of the borrower's documents, the beneficiary must transmit documents required for mediation to the mediator and the borrower, including:

• an accurate statement containing the balance of the loan within 30 days of the date on which the beneficiary's documents are due to the parties;
• copies of the note and deed of trust;
• proof that the entity claiming to be the beneficiary is the owner of any promissory note or obligation secured by the deed of trust;
• the best estimate of any arrearage and an itemized statement of the arrearages;
• an itemized list of the best estimate of fees and charges outstanding;
• the payment history and schedule for the preceding 12 months, or since default, whichever is longer, including a breakdown of all fees and charges claimed;
• all borrower-related and mortgage-related input data used in any net present values analysis;
• an explanation regarding any denial for a loan modification, forbearance, or other alternative to foreclosure;
• appraisal or other broker price opinion most recently relied upon by the beneficiary, not more than 90 days old at the time of the scheduled mediation; and
• the portion or excerpt of the pooling and servicing agreement or other investor restriction that prohibits the beneficiary from implementing a modification, if the beneficiary claims it cannot implement a modification due to limitations in a pooling and servicing agreement.

Mediation Session.

Within 70 days of receiving the referral from Commerce, the mediator must convene a mediation session in the county where the property is located, unless the parties agree on another location.  The mediator must send written notice of the time, date, and location of the mediation session to the borrower, the beneficiary, and Commerce at least 30 days before the mediation session. 

The notice must contain statements related to the following mediation session requirements: 

• the borrower may be represented in the mediation session by an attorney or other advocate; 
• the borrower, beneficiary or authorized agent, and the mediator must meet in person for the mediation session; however, a person with authority to agree to a resolution on behalf of the beneficiary may be present over the telephone or by videoconference during the mediation session; and
• the parties have a duty to mediate in good faith, and failure to mediate in good faith may impair the beneficiary's ability to foreclose on the property or the borrower's ability to modify the loan or take advantage of other alternatives to foreclosure.

The participants in mediation must address the issues of foreclosure that may enable the borrower and the beneficiary to reach a resolution including, but not limited to, reinstatement, modification of the loan, restructuring of the debt, or some other workout plan.  Generally, payment of the mediator's fee must be divided equally between the beneficiary and the borrower.

Mediator's Written Certification.

Within seven business days after the conclusion of the mediation session, the mediator must send written certification to Commerce, the trustee, and parties of:  (1) the date, time, and location of the mediation session; (2) the names of all persons in attendance; (3) whether resolution was reached by the parties, including whether the default was cured by reinstatement, modification, or restructuring of the debt, or some other agreed upon alternative to foreclosure; (4) whether the parties participated in the mediation in good faith; and (5) if a written agreement was not reached, a description of any net present value test used, along with a copy of the inputs.

Options After Mediation.

If the parties are unable to reach an agreement, or if the borrower failed to act in good faith during the mediation, the beneficiary may proceed with the foreclosure after receipt of the mediator's written certification.  

Mediation's Impact on Timing of a Trustee's Sale.

If a borrower has been referred to mediation before an NOTS has been recorded, a trustee may not record the NOTS until the trustee receives the mediator's certification stating that the mediation has been completed.  If the trustee does not receive the mediator's certification, the trustee may record the notice of sale after 10 days from the date the certification to the trustee was due.  If the mediator subsequently issues a certification finding that the beneficiary violated the duty of good faith, the certification constitutes a basis for the borrower to enjoin the foreclosure. 

If a borrower has been referred to mediation after the NOTS was recorded, the sale may not occur until the trustee receives the mediator's certification stating that the mediation has been completed. 

Duty to Mediate in Good Faith.

A violation of the duty to mediate in good faith may include:  (1) failure to timely participate in mediation without good cause; (2) failure of the borrower or the beneficiary to provide the documentation required before mediation or pursuant to the mediator's instructions; (3) failure of a party to designate representatives with adequate authority to fully settle, compromise, or otherwise reach resolution with the borrower in mediation; and (4) a request by a beneficiary that the borrower waive future claims he or she may have in connection with the deed of trust, as a condition of agreeing to a modification, except for certain rescission claims.  However, a beneficiary may request that a borrower dismiss with prejudice any pending claims against the beneficiary, its agents, loan servicer, or trustee, arising from the underlying deed of trust, as a condition of modification.

The mediator's certification that the beneficiary failed to act in good faith constitutes a defense to the nonjudicial foreclosure.  In any action to enjoin the foreclosure, the beneficiary is entitled to rebut the allegation that it failed to act in good faith.  The mediator's certification that the beneficiary failed to act in good faith during mediation does not constitute a defense to a judicial foreclosure or a future nonjudicial foreclosure action if a modification of the loan is agreed upon and the borrower subsequently defaults.

Annual Report to Legislature.

Commerce must report annually to the Legislature on the performance of the Program.  The report must include:

• the number of borrowers referred to mediation by a housing counselor or attorney;
• the results of the Program, including:  the number of mediations requested; the number of certifications of good faith issued; the number of borrowers and beneficiaries who failed to mediate in good faith and the reasons for the failure to mediate in good faith, if known; the numbers of loans restructured or modified; the change in the borrower's monthly payment for principal and interest and the number of principal write-downs and interest rate reductions; and, to the extent practical, the number of borrowers who report a default within a year of restructuring or modification;
• information received by housing counselors regarding outcomes of foreclosure; and
• any recommendations for changes to the Program statutes.

Foreclosure Fairness Account.

The Foreclosure Fairness Account (Account) is a nonappropriated account in the custody of the state treasurer, administered by Commerce, that funds the Foreclosure Fairness Program, which provides homeowner foreclosure assistance through housing counseling, mediation, and civil legal aid.  Biennial expenditures from the Account must include $400,000 to fund the counselor referral hotline.  The remaining funds must be distributed as follows:

• 69 percent for housing counseling activities;
• 8 percent to the Consumer Protection Division of the Attorney General's Office to enforce the DOTA;
• 6 percent to the Office of Civil Legal Aid to contract with legal aid programs for the representation of homeowners in foreclosure matters; and
• 17 percent to Commerce to implement and operate the Foreclosure Fairness Program.

Remittance Requirements.

Account revenue comes from remittances from beneficiaries of deeds of trust.  Each quarter beneficiaries of deeds of trust on residential real properties with up to four dwelling units are required to:

• report to Commerce the total number of residential real properties with up to four dwelling units for which the beneficiary issued a notice of default to a borrower of a loan secured by a deed of trust on residential real property during the previous quarter, together with the street address, city, and zip code; and
• remit $250 to Commerce for each such residential real property for which the beneficiary has issued a notice of default. 

A beneficiary is exempt from the remittance requirement if it certifies that it has issued or caused to be issued fewer than 250 notices of default during the preceding year.

Common Interest Communities.

A common interest community (CIC) is a form of real estate in which each unit owner or homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common area property.  In Washington, several statutes govern residential CICs, such as condominiums, cooperatives, leasehold CICs, miscellaneous communities, and plat communities.

The Washington Uniform Common Interest Ownership Act (WUCIOA) took effect July 1, 2018, and is applicable to CICs created on or after that date.  A CIC created prior to the effective date of the WUCIOA may choose to opt into the WUCIOA.

Older CICs that have not opted into the WUCIOA are regulated by the following statutes, depending on their ownership structure and the date they were created:

• The Horizontal Property Regimes Act (HPRA) governs residential condominiums created on or before July 1, 1990. 
• The Washington Condominium Act (WCA) governs condominiums created after July 1, 1990.
• The Homeowners' Association Act (HOAA) provides a framework for the formation and legal administration of homeowners' associations created before July 1, 2018.

Effective January 1, 2028, the older CIC statutes will be repealed and the WUCIOA will apply to all CICs regardless of their creation date.

Assessments and Charges.
A CIC unit owners' association may impose assessments for common expenses, which usually include expenditures for administration, maintenance, repair, and replacement of the common elements of a CIC, as well as any allocations to reserves.  An association may also collect reasonable charges for late payments of assessments and establish a rate of interest to be charged on all subsequent delinquent assessments.
 
Collection of Delinquent Assessments.
An association may be entitled to recover any costs and reasonable attorneys' fees incurred in connection with the collection of delinquent assessments.  An assessment is delinquent when the payment of the assessment is missed or late.  Under the WUCIOA, the HPRA, and the WCA, an association has a statutory lien on each unit for any unpaid assessment against the unit from the time the assessment is due.  With some exceptions, the association's lien takes priority over all other liens and encumbrances.  Under the HOAA, the governing documents of the CIC may provide for a lien on the lot of any owner for unpaid assessments.

To collect delinquent assessments, an association may bring a collection action in court or foreclose its lien on the unit.  The WUCIOA and the WCA allow associations to foreclose liens either judicially or nonjudicially, depending on the ownership structure of the community and the nature of the unit owners' interests in the units.  The HRPA allows an association to foreclose its liens in the same manner as a mortgage of real property.  The HOAA does not specify how an association may foreclose its liens.

All four CIC statutes require that every aspect of a collection, foreclosure, sale, or other conveyance to enforce a lien for unpaid assessments must be commercially reasonable.
 
Preforeclosure Requirements—Notice of Delinquency for Past Due Assessments.
The WUCIOA, the HPRA, and the WCA prohibit an association from commencing an action to foreclose the association's lien for delinquent assessments unless certain preforeclosure requirements are met.  These preforeclosure requirements also apply to a CIC organized under the HOAA if the governing documents of the CIC provide for a lien on the lot of any owner for unpaid assessments.  

These preforeclosure requirements include the following: 

• When mailing the first notice of delinquency for past-due assessments to a unit owner in a CIC, an association of unit owners is required to include a first preforeclosure notice that follows a specific format and contains certain information about housing counseling and legal assistance that may be available to the unit owner.
• If the first preforeclosure notice has not yet been mailed to the unit owner by the time the delinquent account is referred to the association's attorney, the association or the association's attorney must mail the first preforeclosure notice to the unit owner.
• Before an association may commence an action to foreclose a lien on a unit for past-due assessments, an association must mail a second notice of delinquency and second preforeclosure notice to the unit owner containing the same information as the first notice.  The second notice of delinquency and second preforeclosure notice must be mailed to the unit owner on or after the date that the assessments have become past due for at least 90 days but no sooner than 60 days after the first preforeclosure notice is mailed.
• The unit owner must owe at least three months or more of assessments or $2,000 of assessments, whichever is greater.  The required minimum amount of past-due assessments owed does not include fines, late charges, interest, attorneys' fees, or costs incurred by the association in connection with the collection of an owner's delinquent account.
• An association must wait 90 days from the date the minimum required amount of past-due assessments has accrued before commencing an action to foreclose a lien.  
• The board of the association must approve commencement of the foreclosure action against the specific unit.

Foreclosure Mediation Program. 

Beginning January 1, 2026,  the Program is expanded to apply to CIC associations seeking to foreclose liens or deficiencies via nonjudicial or judicial foreclosure and to CIC unit owners who are delinquent or who may become delinquent on their assessments.  Unit owners may receive housing counseling services and may contact a housing counselor or attorney to request referral to mediation under the Program.  The process for mediation related to foreclosure of association liens is similar but not identical to the process for mediation related to nonjudicial foreclosures of deeds of trust.

Meet and Confer Requirement.

For foreclosures of association liens, prior to referring a unit owner to mediation under the Program, the unit owner and the association must meet and confer within 30 days of the unit owner contacting the housing counselor or attorney for assistance.  The meet and confer session may be held by telephone or videoconference.  Legal representation is not required for either party, and each party is responsible for its own respective attorneys' fees.  If the association refuses to meet and confer, then the unit owner can request that the housing counselor refer the matter to mediation within 30 days of the association's refusal.  During the 30-day time period between the unit owner contacting the housing counselor and the meet and confer session, the association may not charge the unit owner for any attorneys' fees that the association incurred attempting to collect a past-due assessment.  

The meet and confer requirement applicable to nonjudicial foreclosures of deeds of trust is not changed.

Mediation Referral Timeline.

For foreclosures of association liens, the referral to mediation may be made at any time but no later than 90 days before the date of sale listed in an NOTS provided to the unit owner, or no later than 25 days before the date of sale listed in an amended NOTS.  If the unit owner does not elect to mediate within this timeframe, the unit owner and the association may still agree in writing to engage in mediation through the Program. 

The mediation referral timeline applicable to nonjudicial foreclosures of deeds of trust is not changed.

Referral Notices.

An attorney or housing counselor may refer a borrower or unit owner to mediation under the Program by sending a referral notice to the borrower or unit owner and Commerce stating that mediation is appropriate.  Within 10 days of receiving the referral notice, Commerce must select a mediator and send a notice that the parties have been referred to mediation to the beneficiary or association, the borrower or unit owner, the housing counselor or attorney who referred the borrower or unit owner, and the trustee. 

Required Documents.

For foreclosures of association liens, within 23 days of Commerce's notice that the parties have been referred to mediation, the association must transmit certain documents required for mediation to the mediator and unit owner, including:  (1) an itemized ledger for the preceding 12 months, or since the assessments became past due, whichever is longer; (2) copies of all association liens placed against the property; and (3) copies of the the current association declarations, bylaws, and any other governing documents for the association.  

Within 20 days of the unit owner's receipt of the association's documents, the unit owner must transmit the documents required for mediation to the mediator and the association, including:  (1) evidence of any unit owner payments to the association that are not reflected on the association ledger, if any; (2) a statement of hardship, if relevant; and (3) a proposed schedule of payments to resolve the arrears, if the unit owner is interested in a payment plan.

The types of required documents applicable to nonjudicial foreclosures of deeds of trust are not changed.

Mediation Session.

Within 70 days of receiving the referral from Commerce, the mediator must convene a mediation session in the county where the property is located, unless the parties agree on another location.  The mediator must send written notice of the time, date, and location of the mediation session to the borrower or unit owner, the beneficiary or association, and Commerce at least 30 days before the mediation session. 

The notice must contain statements related to the following mediation session requirements: 

• the borrower or unit owner may be represented in the mediation session by an attorney or other advocate; 
• for foreclosures of deeds of trust, the borrower, beneficiary or authorized agent, and the mediator must meet in person for the mediation session; for foreclosures of association liens, the unit owner, association, and mediator are encouraged to meet in person for the mediation session, but may meet by telephone or videoconference; however, for both types of foreclosures, a person with authority to agree to a resolution on behalf of the beneficiary or association may be present over the telephone or by videoconference during the mediation session; and
• the parties have a duty to mediate in good faith, and failure to mediate in good faith may impair the beneficiary's or association's ability to foreclose on the property or the borrower's or unit owner's ability to modify the loan, modify obligations relating to payment of assessments, or take advantage of other alternatives to foreclosure.

For foreclosures of association liens, the participants in mediation must address the issues which led to foreclosure that may enable the unit owner and the association to reach a resolution, including, but not limited to, a delinquent assessment payment plan, waiver of late fees or attorneys' fees imposed by the association, or any other workout plan.  For foreclosures of deeds of trust, the issues that participants in mediation must address are not changed.

Generally, payment of the mediator's fee must be divided equally between the beneficiary and the borrower, or between the association and the unit owner.

For foreclosures of association liens, the unit owner and the association are responsible for their own respective attorneys' fees if any are incurred during mediation.

Mediator's Written Certification.

Within seven business days after the conclusion of the mediation session, the mediator must send written certification to Commerce, the trustee, and parties of:  (1) the date, time, and location of the mediation session; (2) the names of all persons in attendance; (3) whether resolution was reached by the parties, including whether the default or delinquency was cured by reinstatement, modification, or restructuring of the debt, repayment plan, or some other agreed upon alternative to foreclosure; (4) whether the parties participated in the mediation in good faith; and (5) for foreclosures of deeds of trust, if a written agreement was not reached, a description of any net present value test used, along with a copy of the inputs.

Options after Mediation.

If the parties are unable to reach an agreement, or if the borrower or unit owner failed to act in good faith during the mediation, the beneficiary or association may proceed with the foreclosure after receipt of the mediator's written certification.  

Mediation's Impact on Timing of a Trustee's Sale.

If a borrower or unit owner has been referred to mediation before an NOTS has been recorded, a trustee may not record the NOTS until the trustee receives the mediator's certification stating that the mediation has been completed.  If the trustee does not receive the mediator's certification, the trustee may record the notice of sale after 10 days from the date the certification to the trustee was due.  If the mediator subsequently issues a certification finding that the beneficiary or association violated the duty of good faith, the certification constitutes a basis for the borrower or unit owner to enjoin the foreclosure. 

If a borrower or unit owner has been referred to mediation after the NOTS was recorded, the sale may not occur until the trustee receives the mediator's certification stating that the mediation has been completed. 

Mediation's Impact on Timing of Judicial Foreclosure of Association Liens.

If a unit owner has been referred to mediation before the filing of a judicial foreclosure, the association may not file a complaint for judicial foreclosure until the association receives the mediator's certification stating that the mediation has been completed.  If the the association does not receive the mediator's certification, the association may file for judicial foreclosure after 10 days from the date the certification to the association was due.

Duty to Mediate in Good Faith.

A violation of the duty to mediate in good faith may include:  (1) failure to timely participate in mediation without good cause; (2) failure of the borrower, the unit owner, the beneficiary, or the association to provide the documentation required before mediation or pursuant to the mediator's instructions; (3) failure of a party to designate representatives with adequate authority to fully settle, compromise, or otherwise reach resolution with the borrower or unit owner in mediation;  (4) a request by a beneficiary that the borrower waive future claims he or she may have in connection with the deed of trust, as a condition of agreeing to a modification, except for certain rescission claims; however, a beneficiary may request that a borrower dismiss with prejudice any pending claims against the beneficiary, its agents, loan servicer, or trustee, arising from the underlying deed of trust, as a condition of modification; and (5) a request by the association that the unit owner waive future claims against the association; however, an association may request that a unit owner dismiss any filed civil claims against the association related to the present delinquency.

The mediator's certification that the beneficiary or association failed to act in good faith constitutes a defense to the nonjudicial foreclosure.  In any action to enjoin the foreclosure, the beneficiary or association is entitled to rebut the allegation that it failed to act in good faith.  The mediator's certification that the beneficiary or association failed to act in good faith during mediation does not constitute a defense to a judicial foreclosure or a future nonjudicial foreclosure action if a modification of the loan or delinquent assessment payment plan is agreed upon, and the borrower subsequently defaults or the unit owner fails to pay assessments.

Housing Counselor Duties and Limitations on Liability.

Housing counselors have a duty to act in good faith to assist unit owners by:  (1) preparing the unit owner for meetings with the association; (2) advising the unit owner about what documents the unit owner must have to seek a modification or resolution of an assessment; (3) informing the unit owner about the alternatives to foreclosure; and (4) providing other guidance, advice, and education as the housing counselor considers necessary.  Housing counselors are not liable for civil damages resulting from any acts or omissions in providing this assistance, unless the acts or omissions constitute gross negligence or willful or wanton misconduct.

Housing counselors must provide certain information to Commerce to assist with the annual Program report to the Legislature.

Annual Report to Legislature.

Beginning December 1, 2026, Commerce's annual report to the Legislature on the performance of the Program must also include:

• the number of unit owners who are referred to mediation by a housing counselor or attorney;
• the number of unit owners and associations who failed to mediate in good faith, and the reasons for the failure to mediate in good faith if known;
• the number of debts for delinquent assessments restructured or modified;
• the change in the unit owner's periodic assessment payments including any reductions in late charges or interest rates; and
• to the extent practical, the number of unit owners who report a delinquency within a year of restructuring or modification.

Online Resource Center.

Commerce is required to create an online CIC resource center to distribute information about the housing counseling program, meet and confer process, the Program, language translations of the notice of delinquency form, and any other programs and resources that Commerce determines are relevant.  Such information must be made available in language translations that Commerce provides in its other programs.  When the information is requested verbally, Commerce must use a phone-based or other similar interpretive service.

Notice of Delinquency for Past Due Assessments.

The notice of delinquency form for past due assessments in each of the four CIC statutes is modified to include information about the meet and confer process and the mediation referral process.  The association should inform unit owners who are delinquent on their assessments of the opportunity to contact a housing counselor before the first preforeclosure notice is mailed.

Definitions.

Definitions for the following CIC terms are added to the DOTA:  assessment, association, notice of delinquency, and unit owner.

Foreclosure Fairness Account. 

A new fee is created, required distributions from the Account are modified, and a new report is required.

Foreclosure Prevention Fee Remittance.

A foreclosure prevention fee of $80 must be assessed for each residential mortgage loan originated, except for reverse mortgage loans issued to seniors over the age of 61.  This fee must be remitted into the Account at the time of closing by the escrow agent or other settlement or closing agent.  This fee may be financed in the loan and paid from the loan proceeds or from any borrower cash contribution at the time of closing.

Distributions.

Account funds must be distributed as follows:

• 50 percent for housing counseling activities;
• 8 percent to the Consumer Protection Division of the Attorney General's Office to enforce the DOTA;
• 16.5 percent to the Office of Civil Legal Aid to contract with legal aid programs for the representation of homeowners in foreclosure matters;
• 15 percent to fund the foreclosure prevention hotline;
• 0.5 precent to fund outreach; and
• 10 percent to Commerce to implement and operate the Foreclosure Fairness Program. 

Report to Senate Housing Committee.

By December 31, 2025, Commerce must provide a report to the Senate Housing Committee on the types, numbers, and amounts of fees that are remitted to the Account for revenue collected from July 1, 2025, through November 30, 2025.  Annually thereafter, Commerce must post this information on its website.