Senate Bill 1552B Passed March 5th Provides Strong Foreclosure Protection to Oregon Homeowners

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Senate Bill 1552B (passed by the House Rules committee unanimously) would provide key protections toOregonhomeowners. The B engrossed bill includes most provisions of SB 1552 and SB 1564 as passed by the Senate and would provide strong foreclosure protection toOregonhomeowners. The B engrossed bill contains the following elements:

  • Mandatory Meeting with Distressed Homeowners – Requires lenders to meet with homeowners who are underwater to discuss alternatives to foreclosure with a third party mediator upon borrower request.
  • Mediation for Homeowners in Default – Requires lenders to meet face to face with homeowners in default to negotiate possible alternatives prior to foreclosing, unless homeowner chooses to opt-out. 
  • Housing Counseling – Requires a homeowner visit a housing counselor prior to proceeding with mediation.
  • Fast Track to Mediation – If the homeowner is unable to get an appointment with a housing counselor within 30 days, the housing counselor requirement is waived so the homeowner can proceed directly to mediation.
  • Advance Notification – Notice of mediation must be sent 60 days prior to the notice of sale, which is 180 days before a bank can sell a home in foreclosure. The existing 120 day timeline from notice of default to foreclosure sale remains.
  • Authority to Negotiate – Banks must send someone to mediation that has the authority to accept or reject proposals for foreclosure avoidance measures. If good cause is shown, the mediator may allow the lender’s representative to attend the mediation by other means.
  • Attorney General Oversight – Directs the Attorney General to draft rules and oversee the foreclosure mediation program.
  • No Cost to Homeowner – Allows mediator to waive cost of mediation to homeowner.
  • Exception for Small Lenders – Lenders doing fewer than 250 foreclosures a year (including those filed by affiliates or agents) are exempt from the mediation requirements.
  • End to “Dual Tracking” – Prohibits banks from “dual tracking” homeowners (renegotiating loan terms with homeowners while at the same time  pursuing foreclosure) by only allowing a lender to foreclose if:
  1. The borrower has violated a current foreclosure avoidance agreement, or;
  2. The borrower is not eligible for any foreclosure avoidance measure.
  • Proper Notice – Once a lender has determined it can foreclose, it must provide the homeowner with notice 30 days before the foreclosure date is scheduled. If the sale is postponed, the lender must provide the homeowner at least 15 days’ notice of the new date.                                                                                                                                                                  
  • Right to Damages – A violation of dual tracking provision is liable for a $500 fine, actual damages incurred by the homeowner, and reasonable attorney fees to the prevailing plaintiff.
  • Cloud on the Title – Violation of either mediation or dual track provisions would create a cloud on the home’s title that would prevent a bank from selling an illegally foreclosed upon property.

The  Oregon senate bill 1552 is expected to be signed by Governor Kitzhaber.  Once that happens, these new provisions become effective 91 days thereafter.  

The main thing this does is set up a whole new state-run system of foreclosure workout mediation, which is a pre-requisite to all non-judicial foreclosures by any lending institution which conducts at least 250 of them in a year (so all big banks/servicers are subject).  It requires them to be physically present at the mediation together with authority to negotiate a deal and information such as borrower’s complete payment history, copy of actual note, and chain of title of trust deed.  Interestingly, it also appears to allow for a borrower who is in danger of defaulting to pro-actively make a request for this loan workout mediation ahead of any foreclosure notice being filed by the lender.   This could potentially open up a whole new avenue to getting loan modifications, short sales, and other workout options accomplished.

One other significant new provision is the new law will eliminate any possibility for deficiency in a residential trust deed foreclosure action so long as the borrower (or immediate family) lives in the property at the time of the initial DEFAULT leading to the foreclosure.  This is significant because under the current law, in order to receive this protection, the borrower must live in the property at the time the foreclosure action is commenced, which could be a lot later.  This will make it a lot easier for people to abandon properties to foreclosure without worry of deficiency if they wish to do so.

Two more really significant things in here I forgot to point out earlier:

1)      No more “dual tracking” – basically designed to stop lender from negotiating a workout while at the same time pursuing foreclosure – people will know one way or the other and should reduce those situations where the servicer says everything is coming along great, and then they find out the house was foreclosed on the same day, etc.

2)      This one is similar – lender must re-notify by serving a written notice of any postponement of auction which is either greater than 2 days from initial date or more than one postponement.  This will also eliminate the situation where borrower thinks the auction was cancelled, but really was just postponed by oral proclamation at the time, and no further notice ever required to be given.  This will change that quirky and dangerous system of the past.

The remainder appears to be a lot of language and syntax cleanup of the existing statute.