Before the foreclosure crisis, federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited and tended to favor foreclosing lenders. However, many federal and state laws now give protections to borrowers. Servicers generally must provide borrowers with loss mitigation opportunities, account for each foreclosure step, and carefully comply with foreclosure laws.
Also, most people who take out a loan to buy a residential property in Oregon sign a promissory note and a deed of trust, which is like a mortgage. These documents usually give homeowners certain contractual rights after a home loan default.
So, don't get caught off guard if you're a homeowner behind in mortgage payments. Learn about foreclosure laws in Oregon and how the foreclosure process works, from missing your first payment to a foreclosure sale.
In an Oregon foreclosure, you'll most likely get the right to:
Once you understand the Oregon foreclosure process and your rights, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible.
The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. (Sometimes, people refer to the period before a foreclosure sale happens as "preforeclosure," too.)
During the preforeclosure period, the servicer can charge you various fees. Also, in most cases, federal law requires the servicer to let you know how to avoid foreclosure, and most mortgage contracts require the servicer to send you a breach letter.
Under federal law, the servicer usually can't officially begin a foreclosure until you're more than 120 days past due on payments, subject to a few exceptions. (12 C.F.R. § 1024.41). This 120-day period provides most homeowners ample opportunity to submit a loss mitigation application to the servicer.
If you default on your mortgage payments in Oregon, the lender may foreclose using a judicial or nonjudicial method.
A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. If you don't respond with a written answer, the lender will automatically win the case. But if you choose to defend the foreclosure lawsuit, the court will review the evidence and determine the winner. If the lender wins, the judge will enter a judgment and order your home sold at auction.
As of January 1, 2020, Oregon law (SB 11) requires anyone who buys a property that's in a judicial foreclosure, like in a short sale, to give the seller (the homeowner) a notice about the loss of certain rights, including the relinquishment of redemption rights, if they go through with the sale. The law also requires foreclosure documents to include a general warning about being careful when fielding offers from third parties who offer to buy certain homeowner rights, like the right to surplus funds.
If the lender chooses a nonjudicial foreclosure, it must complete the out-of-court procedures described in the state statutes. After completing the required steps, the lender can sell the home at a foreclosure sale.
Most lenders in Oregon opt to use the nonjudicial process because it's quicker and cheaper than litigating the matter in court.
Again, most residential foreclosures in Oregon are nonjudicial. Here's how the process works.
Before filing a notice of default, the lender provides you (the borrower) with notice about participating in a resolution conference (mediation), which may be by remote audio or video communication. To take part in the program, you have to, among other things, agree to the meeting, meet with a housing counselor beforehand unless you can't get an appointment before the conference, and pay a fee (a fee-reduction waiver is available for some households). The conference will occur within 75 days after the lender sends the notice. (Or. Rev. Stat. § 86.726, § 86.729).
If you don't work out a way to avoid a foreclosure through the resolution conference process, the lender then records the notice of default in the county records and serves a notice of sale on you 120 days before the sale, either by personal service or mail. (Or. Rev. Stat. § 86.752, § 86.764).
On or before the date the trustee serves or mails the notice of sale, the trustee must mail what's called a "danger" notice to you. This notice warns you that you're at risk of losing the property to foreclosure and includes information about what you can do to try to save the home. (Or. Rev. Stat. § 86.756).
Notice of the sale must also be published in a newspaper for four weeks. (Or. Rev. Stat. § 86.774).
The trustee's sale must occur after 9:00 a.m. and before 4:00 p.m. in the county or one of the counties where the property is situated. (Or. Rev. Stat. § 86.782). At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less.
In some states, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower. In Oregon, deficiency judgments usually aren't allowed.
The property becomes "Real Estate Owned" (REO) if the lender is the highest bidder. But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds (over and above what's needed to pay off all the liens on your property), you're entitled to that surplus money.
A few potential ways to stop a foreclosure and keep your home include reinstating the loan, redeeming the property before the sale, or filing for bankruptcy. Working out a loss mitigation option, like a loan modification, will also stop a foreclosure.
Or you might be able to work out a short sale or deed in lieu of foreclosure and avoid foreclosure. (But you'll have to give up your home with a short sale or deed in lieu of foreclosure transaction.)
Oregon law provides you with the right to reinstate your loan at any time prior to five days before the sale in a nonjudicial foreclosure. State law also limits the amount borrowers can be charged in attorneys' fees or trustee fees. (Or. Rev. Stat. § 86.778).
One way to stop a foreclosure is by "redeeming" the property. To redeem, you have to pay off the full amount of the loan before the foreclosure sale.
Some states also provide foreclosed borrowers a redemption period after the foreclosure sale, during which they can buy back the home. Oregon law doesn't provide a post-sale redemption period after a nonjudicial foreclosure. (Or. Rev. Stat. § 86.797). (If the foreclosure is judicial, the homeowners may redeem the home within 180 days after the sale (Or. Rev. Stat. § 88.106, § 18.964)).
But state law says that the trustee may rescind the foreclosure sale and void the deed within ten calendar days after the sale if the borrower and lender agreed to a foreclosure avoidance measure that would postpone or discontinue the sale or if the lender accepts funds to reinstate the loan. (Or. Rev. Stat. § 86.782).
If you're facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy.
Once you file for bankruptcy, something called an "automatic stay" happens. The stay functions as an injunction, prohibiting the lender from foreclosing on your home or trying to collect its debt, at least temporarily.
In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy might be the answer. To find out the options available, speak with a local bankruptcy attorney.
Violations of the federal Servicemembers Civil Relief Act are an unlawful practice under Oregon law. (Or. Rev. Stat. § 646.605, § 646.608(LLL)). The lender can't initiate a suit to foreclose a mortgage if the land covered by the mortgage is owned by a servicemember called into active service during war. (Or. Rev. Stat. § 408.440). The "danger" notice must include information on how veterans can obtain assistance. (Or. Rev. Stat. § 86.756, § 408.515).
The borrower's total mortgage debt sometimes exceeds the foreclosure sale price in a foreclosure. The difference between the total debt and the sale price is called a "deficiency." For example, say the total debt owed is $600,000, but the home sells for $550,000 at the foreclosure sale. The deficiency is $50,000.
In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount—in our example, $50,000—from the borrower.
Deficiency judgments are allowed only after some Oregon foreclosures; here are the rules.
In Oregon, the lender can't get a deficiency judgment after a nonjudicial foreclosure. (Or. Rev. Stat. § 86.797).
Deficiency judgments are allowed in judicial foreclosures, but not in foreclosures of residential trust deeds. (Or. Rev. Stat. § 86.797). A "residential trust deed" means a trust deed on property that is residential, consists of four or fewer residential units, and the borrower, the borrower's spouse or the borrower's minor or dependent child occupies the property as a principal residence at the time the trust deed is recorded or, in the case of a purchase money loan, the property is intended to be the principal residence of the borrower, the borrower's spouse or the borrower's minor or dependent child after the trust deed is recorded. (Or. Rev. Stat. § 86.705).
Most people who lose their homes to foreclosures in Oregon don't have to pay deficiency judgments.
A foreclosure will also affect your ability to purchase another home in the future. Generally, you'll have to go through a waiting period before getting another mortgage. Exactly how long you'll have to wait depends on the type of loan and your financial circumstances.
For more information on federal mortgage servicing laws and foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Get tips on what to do—and what not to do—if you're facing a foreclosure.
Find out if foreclosures are on the rise.
If you have questions about Oregon's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.
Talking to a HUD-approved housing counselor about different loss mitigation options is also a good idea.