Passed in 2023, HB 1420 (effective July 23, 2023) clarified that all sums secured by a mortgage or deed of trust in Washington have priority over all subsequently recorded encumbrances (except as provided by mechanics’ lien statutes, RCW 60.04), regardless of when the sums are disbursed or whether the disbursements are obligatory or optional.  This clarification is stated in a new section (RCW 61.12.190) of Washington’s foreclosure statute. 

The clarification was necessary to overrule a 2022 Washington Supreme Court case (Commencement Bank v Epic Solutions).  In that case, the court held that a similar provision, because it was set out in the mechanics’ lien statute, only applied to subsequent construction loan advances. 

Largely because the language of the provision in question does not expressly state that it applies solely to construction loans – to the contrary, it refers to “all liens, mortgages, deeds of trust, and other encumbrances” (emphasis added), real estate lenders and their attorneys have long understood that it applied to all loans secured by real estate.  The court did not seem to recognize how its holding would affect a multitude of existing loans.  Thus, a legislative fix was appropriate.