Oregon remains one of the more reliable markets in the country for homeownership. While many states saw homeownership plummet in the wake of the recent market downturn, Oregon saw only slight fluctuations and unlike most other states, Oregon is seeing growth today. That success is in part related to a number of special programs the state has put in place to help homeowners purchase and in some cases, keep their homes during financially challenging times. Buyers in the market for a home or to renovate a property to sell it will sometimes look for alternative financing options to standard mortgage loans from the big banks. Hard money loans, where the buyer uses owned property or real estate as collateral, is becoming a popular option for many. Hard money loans can fund much faster than a typical loan offered by a bank or mortgage lender and they can also require less paperwork.
Oregon Foreclosure Laws
Oregon allows for both judicial and non-judicial foreclosure. A judicial foreclosure is one that is managed almost 100% by the court system. Banks and lenders wanting to sell a property in foreclosure would file a lawsuit and all matters in the process would be managed by the courts. In non-judicial foreclosure, the courts are only involved at the very end, to make the final sale official, and as this description makes clear - these foreclosure can move much faster because the lender just has to make sure they give proper notice to the borrower that the home is in jeopardy, follow the rules of foreclosure sales in Oregon and very quickly, the house can be lost to a foreclosure auction buyer. In recent past, Oregon only allowed judicial foreclosures - allowing homeowners that had fallen behind a little bit of time to catch up on payments and to make arrangements to keep their homes. About half of the foreclosures in Oregon are now managed through the judicial process - so the other half are moving much faster, with the non-judicial process in place.
Power of Sale Clause
In Oregon, any home loan that contains a "power of sale" clause will also allow for a non-judicial foreclosure process, should the borrower fall behind on payments. The power of sale clause specifies the time, place and terms of sale if the foreclosure process begins. There are very clear guidelines, in Oregon, for this type of foreclosure:
- A notice of default must be recorded in the county where the property is located and the borrower and/or occupant of the property must be served with a copy of the notice at least 120 days before the scheduled foreclosure sale date.
- A copy of the notice must be published once a week for four (4) successive weeks, with the last notice being published at least twenty (20) days prior to the foreclosure sale.
- Said notice must contain a property description, recording information on the trust deed, a description of the default, the sum owing on the loan, the lender's election to sell and the date, time and place of sale.
- The borrower may cure the default at any time prior to foreclosure by paying all past due amounts, plus costs.
- The sale must be at auction to the highest bidder for cash. Any person, except the trustee, may bid at the sale, which takes place between 9:00 am and 4:00 pm at the location stated in the notice of record.
- The sale may be postponed for up to 180 days from the original sale date if at least twenty (20) days advance notice is given, by mail, to the original recipients of the notice.
A deficiency judgment cannot be obtained through a non-judicial foreclosure, but may be pursued when other foreclosure methods are used.
Property Redemption after Foreclosure Sale
In some states, you can redeem (repurchase) your home within a certain period of time, even after a foreclosure sale has taken place. This is called a right of redemption. But in Oregon, homeowners who lose their property in a non-judicial foreclosure do not have a guaranteed right redeem the home. If the process is managed through the courts, in a judicial foreclosure, there is a 180 day redemption period after the sale of the home where a borrower does have a chance to catch up and re-purchase the home.
In some states, when a home is sold in a foreclosure, the borrower can still be charged with any monies still owed if the home does not sell for enough to cover the total past due at the time of the auction. This is called a deficiency judgment. In Oregon, however, deficiency judgments are not allowed, and the homeowner is protected from these additional costs whether they lost the property in a judicial or a non-judicial foreclosure. Or. Rev. Stat. § 86.797. The only time a homeowner can be charged with a deficiency judgment in Oregon is following a Deed in Lieu of Foreclosure settlement with the lender.
Deed in Lieu of Foreclosure
A Deed in Lieu of Foreclosure is a special agreement that is made between a delinquent homeowner and the mortgage lender. Both sides must agree to the terms, but it usually comes down to the homeowner volunteering to move out, giving possession over to the lender instead of forcing a court battle over the pending foreclosure sale. This option is also sometimes called "cash for keys" because homeowners can also negotiate a small financial settlement to help cover the unexpected costs of moving out of the home. This option saves the lender time and money on an expensive foreclosure process and can also save the borrower time and money too. Depending on the agreement between the two parties, there can sometimes be a deficiency judgment, meaning the homeowner still has to pay some fees or back payments. But in most cases, a Deed in Lieu of Foreclosure agreement leaves both parties whole, walking away without additional dispute.
Grace Period Notice
Homeowners are officially in default on a loan just one day after missing a payment. Some lenders build in a small grace period to allow for slight delays in payment and to help homeowners avoid unnecessary worry about foreclosure. This is noted in the mortgage documents and is usually explained when the documents are signed to complete the initial purchase. When a homeowner falls way behind, by 30-60 days, things will get a little bit more serious. Some states have a built-in grace period for homeowners that forces a lender to delay foreclosure proceedings by a little bit of time, to allow the borrower a chance to catch up or to seek out assistance with the situation. Oregon does not have a built-in grace period, but all lenders are required to follow standard notification procedures according to the type of foreclosure process in play on the property. There are several steps along the way that provide an opportunity to catch up and make things right with the lender. But it does require catching up on payments in full, in order to keep the home.
Protection for Military Personnel
In Oregon, a violation of the Servicemembers Civil Relief Act constitutes an unlawful practice under state law. Or. Rev. Stat. § 646.605, 646.608(LLL). Oregon law states that the lender cannot initiate a suit or action to foreclosure a mortgage if the land covered by the mortgage is owned by a service member called into active service during war. Or. Rev. Stat. § 408.440.
High Risk Mortgage Protections
In the face of rising foreclosure rates, 29 states have enacted limits on prepayment penalties, 27 now require lenders to underwrite the entire life of a loan and 25 have banned loans that permit interest-only payments. Oregon is not one of them. In Oregon, there are not special protections for homeowners in what is considered a high risk mortgage. It is important for buyers to understand their rights and the risks associated with the mortgage agreement they accept when purchasing a home.
Additional State Laws
The maximum legal interest rate on a loan in Oregon is 9%. In Oregon, lenders may charge up to nine percent interest unless otherwise agreed, which also applies to interest rates on judgments. However, lenders making business loans of less than $50,000 and certain financial institutions are exempt from these limits.
Oregon is a homestead state. Under the Oregon exemption system, a property owner may exempt up to $40,000 of his or her real property, or floating, manufactured or mobile home. Married couples may exempt up to $50,000. If your homestead is located outside of town or city limits, you may protect up to 160 acres.
Lender Licensing Requirements
Mortgage Lender License
A License is required of any company (including sole proprietorship) that for compensation or gain, or in the expectation of compensation or gain: (a) assists or holds itself out as being able to assist a person in obtaining or applying to obtain an Oregon residential mortgage loan, (b) makes an Oregon residential mortgage loan or (c) offers to sell or sells residential real estate paper or accepts funds for investment in real estate paper. An Oregon residential mortgage loan is any loan secured by a 1-4 dwelling unit made to an Oregon consumer, on Oregon property, or from a place of business located in Oregon.
Mortgage Servicer License
This license will become available in NMLS starting November 1st, 2017. Any company that will be servicing an Oregon residential mortgage loan that is not exempted by law is required to have a mortgage servicer license prior to engaging in servicing activity per Section 3 of SB 98 passed during the 2017 Oregon legislative session.
Hard Money Legal Issues In the News in Oregon