Oregon foreclosures of residential properties will likely be shifting from nonjudicial to judicial process, and the shift has already begun with some servicers, namely Wells Fargo and its subsidiaries. Oregon is one of 24 states that provides a nonjudicial foreclosure process, which is how most delinquent residential mortgages are foreclosed since this has been a faster and cheaper process for lenders.

One reason for the shift to more judicial court actions is because judges have started blocking nonjudicial foreclosures for failure of lenders to record ownership history of the trust deeds, as required for nonjudicial foreclosure. The shift will mean that the process will possibly take longer to clear titles following the sheriff sales. It will also take lenders considerable time to review and shift gears on pending foreclosures. Lenders may decide the cost and time expense are worth more certainty with the judicial process.

The good news for borrowers subject to the judicial foreclosure process is they will now have a judge to hear their complaints, if they challenge the filing. This right is currently unavailable unless a lawsuit is filed by the borrower to stop a nonjudicial process from continuing forward. However, under a judicial foreclosure, if homeowners don’t challenge a filing, the lenders could get a sale date more quickly and possibly expedite the process. It also does not require the recordation of beneficiary history, so it can result in cleaning up any messy title situations the lender may face. This means a defaulting borrower will need a good defense in order to realistically challenge a judicial foreclosure, but the court will have to make a decision before the foreclosure can happen. There could be more opportunities for workouts and settlements too.

One huge risk is that, currently, Oregon law protects homeowners from being pursued by lenders for their losses for homes that sold for less than the balance on the loan. However, if a lender pursues judicial foreclosure, if someone moves out of the home before the foreclosure complaint is filed, they could lose this protection and may be personally liable for the deficiency. (This problem is going to be fixed by a new law that goes into effect soon). Homeowners will also lose the right to cure, which gives them up to 5 days prior to a nonjudicial auction sale date to pay the missed payments and lender fees to end the foreclosure; but they will gain the right of redemption under the judicial process which gives them up to six months to repurchase the home for what it sold for at the foreclosure sale. This could mean homes will be vacant for longer periods and be difficult to immediately resell.


With nearly 3 million homes lost to foreclosure and an expected additional 10 million homes in the near future, what is a troubled homeowner to do?

In February 2012, the National Consumer Law Center published its fourth report on foreclosure mediation .

They found that:

  • Foreclosure mediation programs and conferences provide substantial community benefits at little or no cost. Mediation fees average from none to less than $1,000. Yet, investors lost an average $145,000 per home foreclosure in 2008, and foreclosures just in California have resulted in nearly $500 billion in aggregate costs.


  • Effective mediation programs do not prolong foreclosures.


  • Foreclosure mediation programs should connect borrowers with housing counselors. Borrowers who receive housing counseling are much more likely to avoid foreclosure, and obtain affordable as well as sustainable loan modifications.


  • Not all foreclosure mediation programs are equal. All states should adopt foreclosure mediation programs with enforceable standards and robust outreach as permanent features of state foreclosure laws as quickly as possible.


  • Mediation programs must ensure that the FHFA’s new servicing guidelines do not lead to unnecessary foreclosures.


  • Strong foreclosure mediation programs can work hand-in-hand with other tools to rebuild the nation’s broken mortgage market and should be used to maximize HAMP modifications. The modified loans’ default rate over 1 year dropped from 56.2% in 2008 to 25.7% in 2010. HAMP loan modifications were the most sustainable of all with a 17.3% (2011) redefault rate after 1 year.


  • Policymakers can use mediation programs to help preserve minority homeownership; gains made over the last decade are vanishing.


Borrowers in mediation must receive accurate information about an increasingly unaffordable rental market. Renters, especially those who are low-income, are more than twice as likely as homeowners to spend more than 50% of income for housing. Mediation programs should refer all homeowners to housing counselors to evaluate the costs of renting before giving up on saving a home.

Bank of America is starting a pilot program that will allow homeowners at risk of foreclosure to stay in their homes. Essentially, it entails handing over the deed to the house to the bank and signing a lease that will allow them to rent the house back from the bank at a market rate. Borrowers will agree to a “deed in lieu” of foreclosure, which is less costly to the bank and damages the borrower’s credit less than a foreclosure. Former owners will be offered a one year lease with options to renew every two years at or below the current market price.

The initial breadth of the program has been released to 1,000 homeowners in Arizona, Nevada, and New York-and only homeowners who receive letters from the bank can participate. It is unclear yet how widespread the program will become.  Some have suggested a deterrent may be the need for the bank to comply fully with the Oregon and Washington landlord-tenant act in becoming a  landlord, which includes an obligation to maintain the habitability of the housing unit.  Are banks really ready to become landlords?  My guess is, not really.

For the full story, please visit: http://online.wsj.com/article/SB10001424052702304724404577297904070547784.html?mod=WSJ_myyahoo_module

Most of the $26 billion or so in this national settlement is designed to help current homeowners keep their homes. But $1.5 billion of it will go to about 750,000 who have already lost their homes to foreclosure. That’s about $2,000 each.

Who’s included?

  • The entire settlement—including this foreclosure cash restitution payment—applies only to mortgages held by the five biggest home mortgage holders and their subsidiaries: Bank of America, Wells Fargo, J.P. Morgan Chase, Ally Financial/GMAC and Citi. To contact these banks to find out if your mortgage is included, go to the special website for this settlement for their toll-free phone numbers and websites. (See the right column, under “Settlement Parties.”)
  • Your home must have been “finally sold or taken in foreclosure between and including January 1, 2008 and December 31, 2011.”
  • One state–Oklahoma—did not join in this settlement, so foreclosed homeowners in Oklahoma are not eligible for this payment.

 What are the conditions for receiving the money?

  • Although one section of the settlement website states that there’s “no requirement to prove financial harm,” the Executive Summary on the same website adds that eligible borrowers are those “who were not properly offered loss mitigation or who were otherwise improperly foreclosed on.” Sounds like some showing of improper servicing or foreclosure behavior by the bank will be required, without a need to prove that this behavior necessarily caused you financial harm. But exactly what information or evidence will be required is not clear yet.  
  • What is clear is that former homeowners will not need to release any potential claims against their mortgage holder in order to receive the money. The payment received would, however, be credited as an offset against any such other claim against the bank.

What’s the procedure and timetable?

  • Within about 90 days, a Settlement Administrator will be selected “to administer the distribution of cash to individual borrowers.”
  • Over the following six to nine months, that Administrator will work with the banks to identify the eligible former homeowners, and send out letters to them to apply for the payment.
  • If you are concerned about the Administrator having your current address, you should contact your Attorney General’s Office to have it send your address to the Administrator.
  • The amount to be distributed to each foreclosed homeowner will depend on how many people qualify and apply. And since the $1.5 billion or so pool of money paid by the banks towards these for payments also pays for “all the costs and expenses of the Administrator,” that reduces what will be available for the homeowners. (The actual amount of the pool, by the way, is actually exactly $1,489,813,925.00—I do not know the reason for that odd amount!).

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.


A federal judge has yet again issued a ruling that effectively questions the validity of scores of foreclosures in Oregon, a crisis the Legislature could resolve in the mortgage industry’s favor this week if bank lobbyists and House Republican leaders have their way.

In an opinion issued Wednesday, U.S. District Court Judge Michael Simon rejected a magistrate judge’s finding and rulings by two of his colleagues that big banks could avoid recording notices in local land records each time a loan is sold to other lenders or investors.

 Simon sided with two other federal judges in Oregon in ruling that lenders have violated state recording law. They’ve done this, they say, by logging sales within its nationwide Mortgage Electronic Systems Inc. and declaring MERS a “beneficiary” of the loan.

The mortgage industry created MERS to reduce the need for recording loan sales, or assignments. That enabled mortgages to be quickly bundled and sold to investors. MERS does not loan money, collect loan payments or invest in mortgages. It is, however, named in certain loan documents as the mortgagee or beneficiary of record.

Simon ruled that under state law, lenders must file a notice in county records each time they sell or transfer a note, or a promise from a borrower to pay.

MERS, he ruled, can file those notices on the lenders’ behalf, if a lender has authorized it to do so. MERS cannot, however, simply log those notices within its own database without also recording it publicly, he found. In millions of loans nationwide, it has.

In acting as he did, Simon overruled lower Magistrate Janice Stewart’s previous findings and recommendations in the case. His ruling also conflicts with opinions in other cases issued by his equals in Oregon — Judge Michael Mosman and Judge Marco A. Hernandez.

But it aligns with rulings in other cases by Judge Owen Panner and U.S. Bankruptcy Judge Frank Alley. Panner’s ruling, which also came last year as lawmakers debated the MERS issue, is on appeal to the U.S. Ninth District Court of Appeals.

-Excerpt taken from  Brent Hunsberger, The Oregonian @ OregonLive.com

See full story here

Both Chapter 7 and Chapter 13 stop a foreclosure of your home. One or the other COULD be better for you, but which one is it?

Many considerations come into play in deciding whether a Chapter 7 or 13 is better medicine for you.  I could list literally dozens of possible ones. Focusing here just on factors involved in saving your house, there are still lots of advantages and disadvantages to each one. The answer turns on your unique circumstances. Lawyers are sometimes given a bad time for seemingly answering every question with “it depends.” But when it comes to your home and your financial well-being, the fact is that what you want and deserve are what is best for you in your unique circumstances. You don’t want a cookie-cutter answer but rather one that does in fact “depend” on your individual facts and on your personal financial goals.

Let’s assume that after looking at all the other aspects of your financial life, the choice between the two Chapters comes down to how that choice impacts on your house. And let’s also assume that this is a house in distress, where a foreclosure is already scheduled or is just around the corner.

In one sentence, the key difference between Chapter 7 and Chapter 13 is that the first one generally buys you a relatively short time while the second one buys you a much longer time.

So that leaves as the main question whether—in your unique situation—a Chapter 7 would buy you enough time, or if you instead need the much stronger medicine of Chapter 13.

Chapter 13 deservedly has the reputation of being the home-saving chapter of bankruptcy. But every day of the week Chapter 7 bankruptcies are filed which save people’s homes. If you have a sale pending on your house but you’ve run out of time with a scheduled foreclosure; if you have some money coming to cure the arrearage but again have run out of time; if you are very close to getting a mortgage modification approved or are more likely get it approved after discharging you debts in bankruptcy; or if you’ve decided to surrender the house but need a little more time to get into another home—these are possible circumstances where Chapter 7 could well buy you enough time to do what you need to do for your home.

Admittedly, these are relatively rare situations. The much more common one is that you had lost some income or had emergency expenses, making it impossible to keep up the home mortgage payments. And then you regained that income, but maybe not all of it, and now you owe a whole lot in missed payments, late charges and other fees. No way can you catch up all that in just a few months. Chapter 13 can give you as much as five years to do so. Chapter 13 can also buy you much more time to sell your home, such as to get to a better selling season, or even maybe to allow a kid to finish high school. Chapter 13 can also be much better at dealing with other house-related debts, such as property taxes, second mortgages, and income tax liens. As I said, these choices depend on your unique set of circumstances.

You can build a nice gingerbread house out of cookie-cutters. But when it comes to your home, and you and your family’s well being, get the advice of an experienced attorney. Nothing gives me more satisfaction than helping save a family home. Let me help you make the very best choices about yours.

In August, mortgage lenders started so many home foreclosures that the month-to-month increase was the biggest since August of 2007. For nearly a year the number of foreclosures has been relatively low as lenders have reacted to an explosion of challenges to the legality of their mortgage and foreclosure practices. But this new surge in foreclosure starts may reflect that the lenders think they have worked through these problems.

According to RealtyTrac, mortgage default notices–the first step in the foreclosure process—increased by 33% from July to August.

That increase has to take into consideration that July’s numbers had been relatively low. Not only had the number of foreclosure filings come down modestly—by 4%–from the prior month. They were also down significantly—by 18%–from a year earlier. In fact, July 2011 had the lowest foreclosure activity in 44 months.

Now with this 33% increase in August, the tide seems to be turning. But is it going to turn into a new wave of foreclosures?

That’s impossible to tell. Not only are there countless factors at play here, they shift all the time, reacting to the constantly changing environment.

Just take a look at one of the factors affecting how many foreclosures are filed: the ongoing legal challenges to foreclosures. These challenges are making their way through the court appeals systems. For example, just a couple days ago the Supreme Court of Alabama ruled that the embattled MERS (Mortgage Electronic Registration Systems) has standing to foreclose. That ruling will presumably open the foreclosure spigots in Alabama, because some lenders undoubtedly had held off on foreclosing while awaiting that ruling. Similar dynamics are at play in just about every state.

This means is that foreclosure trends can be very much a local and dynamic affair. This means you need local advice. Day in and day out I constantly deal with mortgage lenders, and help local homeowners make good decisions about their homes. Give me a call so that I can help you, too.