Most Oregon foreclosures have historically been nonjudicial. However, over the past year or so, almost all banks started filing foreclosures through the courts for two reasons that pertain to nonjudicial foreclosures:
- First, an appellate court ruled that loan ownership changes must be recorded.
- Second, the state implemented a foreclosure mediation program.
Things are about to change again. Last week the Oregon Supreme Court reversed the appellate court’s decision and the legislature changed the mediation law. As a result, foreclosures will probably shift back to being primarily nonjudicial in Oregon.
Understanding Why Oregon Foreclosures Went Judicial
In 2012, an Oregon appellate court ruled that lenders must record loan ownership changes (when the lender or servicer transfers your mortgage to another company) with the county before starting a nonjudicial foreclosure. The effect of this ruling was that foreclosure cases involving Mortgage Electronic Registration Systems (MERS) had to go through the courts.
Also in 2012, Oregon implemented a mediation law that only applied to nonjudicial foreclosures. In order to avoid the mediation program, many lenders stopped filing out-of-court foreclosures and instead chose to proceed judicially.
Oregon Supreme Court Rules on MERS Cases
In the cases of Niday v. GMAC Mortgage and Brandrup v. ReconTrust Company, the Oregon Supreme Court held that all transfers in ownership of a loan do not need to be recorded in the county records before a nonjudicial foreclosure can proceed, reversing the appellate court’s earlier decision.
This means that MERS may remain as the holder of record acting as nominee for the lender, tracking mortgages as they are transferred, thereby eliminating the need to record every assignment with county clerks. The effect of this ruling is that lenders are free to move forward with nonjudicial foreclosure proceedings, even if MERS is involved.
Oregon’s Mediation Program Was Expanded to Cover Judicial Foreclosures
On June 4, 2013, Oregon enacted SB 558 and closed the loophole that allowed lenders to bypass the foreclosure mediation program. The new law expands the program to cover judicial foreclosures, which takes away the incentive for banks to proceed judicially rather than nonjudicially.
The new mediation program is set to begin on August 4, 2013. (Unfortunately, those in foreclosure prior to August will not be eligible for the mediation program, unless it’s a nonjudicial foreclosure.)
The bottom line is that, based on both of these recent events in Oregon, the path has been cleared for banks to go back to using the nonjudicial foreclosure process in that state.
(To learn more about Oregon’s mediation program and other foreclosure procedures in Oregon, visit Nolo’s Oregon Foreclosure Law Center.)
by Guest Blogger & Nolo Contributing Editor Amy Loftsgordon