foreclosure after separation agreement

[SeattleDad]

What is the name of your state? WA

My ex and I divorced in 2007. She desperately wanted to keep the home and had no interest in my retirement funds. She could not afford to refi the home to take my name off the mortgages.

So, in exchange for a quit-claim deed to her, she agreed in our separation agreement to take over payments and if she were in default or failed to refinance within one year, I'd have the right to reinstate the loan, and execute a power of sale over the house with proceeds distributed by my attorney of record.

Well, she is in default (killing my credit rating). I've taken steps to reinstate the loan (just waiting for an accurate reinstatement figure with funds ready to be wired). But, my attorney has been vague about the next steps. Does the separation agreement let me execute a non-judicial foreclosure? It mentions power of sale but not a trustee. My attorney says we have to get a court to "approve" the "power of sale". Why? Does that not mean that we have to proceed with a judicial foreclosure?

I already have $3k in liens against the home, and with the reinstatement of the notes on it, will have a total of about $20k against it. There is about $140k in equity in it if it sold at FMV, but a foreclosure sale rarely occurs at FMV: the occupant has one year to redeem after a judicial foreclosure and can continue to occupy the residence! (Not so after a non-judicial one).

The lender can execute their own non-judicial foreclosure (and is obviously a more-senior lienholder than me). But, they seem to be willing to work with me.

What I'd like to do is offer her 80% of FMV (if I can get financing). Then our kids could still use it as a home, disrupting their lives as little as possible.

UPDATE (on edit):

Well, I just read WA RCW 61.24.090
"Curing defaults before sale — Discontinuance of proceedings — Notice of discontinuance — Execution and acknowledgment — Payments tendered to trustee."

In particular: "(1) At any time prior to the eleventh day before the date set by the trustee for the sale in the recorded notice of sale, or in the event the trustee continues the sale pursuant to RCW 61.24.040(6), at any time prior to the eleventh day before the actual sale, the borrower, grantor, any guarantor, any beneficiary under a subordinate deed of trust, or any person having a subordinate lien or encumbrance of record on the trust property or any part thereof, shall be entitled to cause a discontinuance of the sale proceedings by curing the default or defaults set forth in the notice, which in the case of a default by failure to pay, shall be by paying to the trustee:

(a) The entire amount then due under the terms of the deed of trust and the obligation secured thereby, other than such portion of the principal as would not then be due had no default occurred, and

(b) The expenses actually incurred by the trustee enforcing the terms of the note and deed of trust, including a reasonable trustee's fee, together with the trustee's reasonable attorney's fees, together with costs of recording the notice of discontinuance of notice of trustee's sale."

I am in the process of doing this.

Now, (2) is interesting: "(2) Any person entitled to cause a discontinuance of the sale proceedings shall have the right, before or after reinstatement, to request any court, excluding a small claims court, for disputes within the jurisdictional limits of that court, to determine the reasonableness of any fees demanded or paid as a condition to reinstatement. The court shall make such determination as it deems appropriate, which may include an award to the prevailing party of its costs and reasonable attorneys' fees, and render judgment accordingly. An action to determine fees shall not forestall any sale or affect its validity."

(5) is interesting as well: "(5) Any person having a subordinate lien of record on the trust property and who has cured the default or defaults pursuant to this section shall thereafter have included in his lien all payments made to cure any defaults, including interest thereon at eight percent per annum, payments made for trustees' costs and fees incurred as authorized, and reasonable attorney's fees and costs incurred resulting from any judicial action commenced to enforce his or her rights to advances under this section."

If I understand this correctly, it means I can add the expenses to reinstate the mortgage to my existing lien. O.K., following court approval. Makes sense.

But, the question then becomes, having done that, can I execute a non-judicial power of sale? Or, do I have to resort to a judicial power of sale? I doubt that my attorney would have messed up the wording of the separation agreement to require the latter.

I'm fairly sure I can line up 80% financing for the purchase (from the existing lender), recover my $20k, provide my ex with $50k to start a new life (and even provide an appartment where she can live), and retain the house as a home for the kids, If she fails to accept that, I can take my chances at auction as a bidder (and under WA law, as a beneficiery of the foreclosure I can finance the purchase). Given the "as is" nature of forclosure properties, I doubt other bidders would offer 80% FMV.