at the payment owed immediately prior to the discharge of a borrower’s personal liability in bankruptcy, because after discharge, a borrower no longer has forthcoming installments that he must pay.” alert the lender that the limitations period to foreclose on a property held as security has commenced” and that “he last payment owed commences the final six-year period to enforce a deed of trust securing a loan. In Jarvis, the court actually granted the borrowers motion for summary judgment and quieted title pursuant to RCW 7.28.300 in borrowers’ favor and against Fannie Mae, finding that the borrowers’ bankruptcy discharge order triggered Washington’s statute of limitations for foreclosure. Accordingly, the court held that the six-year limitations period accrued at the time of the borrowers’ last missed payment preceding their discharge of personal liability. In Silvers, the court reasoned that because the bankruptcy discharge relieved the borrowers’ personal liability on the note, no future payments were owed and no installments capable of triggering the limitations period remained. The same outcomes were reached by the Federal Courts in Silvers and Jarvis.
The court reasoned that since the borrowers owed no future payments after the discharge of their personal liability, the date of their last-owed payment kick-started the deed of trust’s final limitations period. In Edmundson, the Court of Appeals held that the borrowers’ bankruptcy discharge, which terminated their personal liability under the promissory note, triggered the statute of limitations within which the lender was entitled to foreclose. 24, 2017) ( Jarvis), Washington’s State and Federal Courts addressed the impact of a bankruptcy discharge on the lenders’ ability to foreclose within the purview of RCW 7.28.300. The applicable statute of limitations within which a lender can foreclose for purposes of RCW 7.28.300 is six years from the date of acceleration of the debt. deed of trust would be barred by the statute of limitations, and, upon proof sufficient to satisfy the court, may have judgment quieting title against such a lien. deed of trust on the real estate where an action to foreclose such. The record owner of real estate may maintain an action to quiet title against the lien of. Washington RCW 7.28.300 permits title owners-not necessarily borrowers-to commence quiet title actions against secured lenders to eliminate liens secured by the property based on the lender’s failure to timely foreclose: The potential of these lawsuits-and given the result discussed above-creates a significant risk to the mortgage industry, which should be addressed, assessed, and mitigated by lenders and servicers.
Indeed, in at least one instance, the borrowers who obtained a bankruptcy discharge order successfully quieted title to their home against Fannie Mae based on Fannie Mae’s failure to foreclose with the six-year period. However, based on recent case law, we foresee a real danger of an increase in the amount of lawsuits brought by borrowers who have had their debts discharged in bankruptcy and either continued to make their monthly payments following their discharge, or engaged in a game of cat-and-mouse with the servicer, as result of which the servicer did not commence foreclosure within the six-year period following the discharge. Historically, these lawsuits allege that the foreclosure is time-barred because Notice of Acceleration letters have been issued more than six years prior to the initiation of the foreclosure process. Over the past several years, those who service loans in the State of Washington have seen a dramatic rise in the number of lawsuits in which delinquent borrowers seek to quiet title to their homes on the grounds that lenders are barred from foreclosing based on Washington’s six-year statute of limitations.
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