A Washington State lender is deciding between pursuing a judicial foreclosure through the court system versus a non-judicial trustee's sale under RCW 61.24 on a defaulted deed of trust. The outstanding loan balance is $380,000 and the current market value of the property is only $310,000. Which of the following best describes a key trade-off the lender should consider?
Correct Answer
D) Choosing judicial foreclosure may allow the lender to pursue a deficiency judgment for the $70,000 shortfall, but the borrower will also have a post-sale right of redemption; non-judicial foreclosure bars deficiency judgments but eliminates post-sale redemption rights.
Under Washington law, the choice between judicial and non-judicial foreclosure involves a significant trade-off. Judicial foreclosure (through the courts) may allow the lender to pursue a deficiency judgment for the shortfall between the sale price and the outstanding debt, but it also grants the borrower a statutory post-sale right of redemption. Non-judicial trustee's sale under RCW 61.24 is faster and eliminates the borrower's post-sale redemption rights, but RCW 61.24.100 generally bars the lender from obtaining a deficiency judgment. The lender must weigh the value of a potential deficiency judgment against the benefit of eliminating redemption rights.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
A comparison of the major mortgage loan types—conventional, FHA, VA, and USDA—covering their eligibility requirements, down payment amounts, mortgage insurance rules, and best use cases.
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