On June 4, Governor Kitzhaber signed Senate Bill 558 which now requires mortgage lenders to offer a “resolution conference” with the homeowner before recording a “Notice of Default” to initiate a non-judicial foreclosure or before filing a lawsuit to initiate a judicial foreclosure. (A “non-judicial” foreclosure is an out-of-court process where the lender advertises the property for a foreclosure sale on a specified date. A “judicial” foreclosure involves the filing of a lawsuit by the lender seeking a foreclosure of the property. If successful, a “sheriff’s sale” is scheduled where any interested person can bid on the property.) Before the change in the law, only lenders seeking a non-judicial foreclosure were required to offer mediation with the homeowner. That requirement prompted most lenders to change to judicial foreclosure. This new law closes that loophole.
The following is a basic outline of the new law:
1. The law pertains to “residential trust deeds” defined as a trust deed on property upon which are situated four or fewer residential units, one of which the homeowner, the homeowner’s spouse or the homeowner’s minor or dependent child occupies as a principal residence at the time a trust deed foreclosure is commenced.
2. Before initiating a foreclosure, the lender must request a resolution conference with the homeowner through the Oregon Foreclosure Avoidance Program (“OFAP”) to seek a mutually acceptable foreclosure avoidance measure. Alternately, if the homeowner is either 30 days in arrears on the loan, or is experiencing a financial hardship that may qualify for a foreclosure avoidance measure, the homeowner can request a resolution conference with the lender.
3. “Foreclosure avoidance measures” under this law include a refinance, repayment plan, forbearance, loan modification, deed-in-lieu of foreclosure, and a short sale.
4. Upon receipt of a request for a resolution conference, OFAP must schedule a conference within 75 days and provide notice of the time and place at which the conference will be held.
5. Within 25 days after issuance of the notice, the homeowner must pay a fee to OFAP not to exceed $200, and also must provide OFAP with Information about the homeowner’s income, expenses, debts and other obligations, a description of the financial hardship, if any, and documents that verify the homeowner’s income. OFAP will forward that information to the lender. The homeowner must also consult with a housing counselor prior to the resolution conference.
6. Within 25 days after OFAP forwards the information to the lender, the lender must pay a fee to OFAP not to exceed $600 and provide OFAP with numerous documents showing (among other things) that the lender does in fact own the loan, what the balance owing on the loan is, the amount needed to bring the loan current, and an appraisal or price opinion valuing the property.
7. The lender must appoint an agent to attend the resolution conference who has complete authority to negotiate on the lender’s behalf and commit the lender to a foreclosure avoidance measure or must have someone available by phone with complete authority.
8. The homeowner must also attend the conference unless there are compelling circumstances that prevent attendance in person.
9. If the lender and the homeowner agree to a foreclosure avoidance measure, both parties shall sign a written document that sets forth the terms of the foreclosure avoidance measure.
10. If the parties do not come to an agreement, OFAP will issue a certificate of compliance to the lender (assuming that it has complied with all applicable laws and rules) which will allow the lender to institute foreclosure proceedings against the property.
For more information, log on to OFAP’s web site.
This post is intended to be purely informational in nature, and cannot be considered legal advice. If you have questions related to foreclosure mediation, please call our office at (503) 545-1061 (Oregon cases) or (360) 836-4238 (Washington cases) to schedule a free initial consultation.