my house "sold" at auction. no one bid.it goes back to the bank. letter said someone bought it by "credit bid" not the original lender. Is this Legal?
Typically it is the lender that is foreclosing on the property that purchases the property at auction with a "credit bid" when no other buyer is willing to pay the opening bid price. The idea is that since the lender is the one who is owed the money, they do not have to make a cash bid, but rather can bid up to the full amount that is owed on the note plus interest, attorney's fees and foreclosure costs. This is a legal method for the lender to take title to the collateral where no one else is willing to pay the minimum bid price (usually what is owed plus fees and costs). The "someone" referenced in your letter is most likely the entity or group of investors that are the beneficiaries of the note that was the basis for the foreclosure. These days most banks simply service loans and are not the actual beneficiary of the note.
Michele McNeill, Esq.
Here are some Quick Facts about foreclosure in Washington:
- Judicial Foreclosure Available: Yes
- Non-Judicial Foreclosure Available: Yes
- Primary Security Instruments: Deed of Trust, Mortgage
- Timeline: Typically 120 days
- Right of Redemption: Yes, but may be precluded.
- Deficiency Judgments Allowed: Yes
In Washington, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process.
The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, the property will be auctioned off to the highest bidder.
The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee.
If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:
The notice of sale must be transmitted both by regular mail and by certified mail, return receipt requested, to the borrower at their last known address, and by regular mail to the attorney of record for the borrower, if any, not less than thirty (30) days prior to the day of sale.
The sheriff must publish a notice of the sale once a week, consecutively, for four (4) weeks, in any daily or weekly legal newspaper of general circulation published in the county in which the property is located. Additionally, the sheriff must also post the notice in two public places, one of which must be the courthouse door, in the county where the sale is to take place for a period of not less than four weeks prior to the day of sale.
Said notice must contain the time and place of the foreclosure sale, the names of the parties to the deed, the date of the deed, recording information, a property description, the terms of the sale, and the borrowers rights (or lack of) redemption.
The borrower has up to eleven (11) days before the sale stop the foreclosure process by paying the past due payments, plus expenses, including trustee and attorney fees.
The sale must be made by auction between 9:00 am in the morning and 4:00 am in the afternoon at the courthouse door on Friday unless Friday is a legal holiday and then the sale must be held on the next following regular business day. The sale may not be conducted less than 190 days from the date of default and the highest bidder will receive a certificate of sale.
If the non-judicial foreclosure process is used by the lender, then it cannot sue for a deficiency judgment. On judicial foreclosure sales, the borrower can be sued for a deficiency, unless the property is found to be abandoned for six (6) months before the decree of foreclosure.
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Disclaimer: This answer does not constitute legal advice. I am admitted in the States of New York, New Jersey and Massachusetts only and make no attempt to opine on matters of law that are not relevant to those three States. This advice is based on general principles of law that may or may not relate to your specific situation. Facts and laws change and these possible changes will affect the advice provided here. Consult an attorney in your locale before you act on any of this advice.
A little bit of background on mortgages may help. You have the servicer who is the company that you have been dealing with. The investors actually own the mortgage which is part of a pool of mortgages. A trustee operates the trust on behalf of the investors. The trust actually owns the loan. This may help explain a little bit more the first answer and who the parties are.
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