The Washington Department of Financial Institutions (Department) issued a caselaw update on foreclosures for Home Equity Lines of Credit (HELOC). Per the update, the Department announced that on April 30, 2026, the Washington State Supreme Court held that a HELOC note is a nonnegotiable instrument and therefore, does not qualify for non-judicial foreclosure under the Washington State Deed of Trust Act. The decision in the case of Vargas v. RRA CP Opportunity Trust 1, et al, concludes that only a “holder” of a negotiable instrument can conduct a nonjudicial trustee’s sale of a property under the DTA. The Vargas case specifically discussed a foreclosure of a HELOC secured by a residential property of four units or less. Lenders, servicers, investors, and foreclosure trustees may not pursue non-judicial foreclosure through a trustee’s sale when attempting to enforce HELOC obligations secured by deeds of trust. The caselaw update prohibiting non-judicial foreclosures on a HELOC in Washington went into effect on April 30, 2026.
Click to view the WA Case Law Vargas v RRA CP Opportunity Trust 1, et al: https://www.tenaco.com/wp-content/uploads/2026/07/WA-Case-Law-Vargas-v-RRA-CP-Opportunity-Trust-1-et-al-04-30-26.pdf
