Home Loan Changes in Oregon County
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UPDATED: Oct 16, 2012
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Home loan servicing banks have been avoiding non-judicial foreclosures in Oregon due to the passing of a recent foreclosure mediation law. An Oregon Court of Appeals ruled against lenders that used an electronic database to record mortgage transfers which has made banks a little gun shy to pursue non-judicial foreclosures. The ruling concluded that electronic registries are not lawful beneficiaries and thus have no power to send out disclosure notices.
After the recent law took effect, the Oregon Appeals Court ruled in favor of a woman against a home loan lender that used an electronic registry. This registry began foreclosure proceedings after declaring her in default, but it failed to accurately record each transfer in her mortgage history. Naturally, this computer error proved costly for the bank and highlighted just how flawed electronic registries can be when monitoring borrower payments.
Since banks are now flooding into the courts with their foreclosure rulings, the circuit court’s scheduling of foreclosure hearings nearly doubled since 2011 and increased six-fold since 2010. Unfortunately, more foreclosure trials mean that judges have less time to work on other types of cases.
“If there are more contested trials, then those are trials that will take place on our docket. There could be an increase in the overall volume of trial work for us, but we have to handle whatever cases come our way,” said Judge Alta Brady in an interview with the Bulletin newspaper of Bend.
Lenders—mostly banks—have traditionally used non-judicial foreclosure against defaulting Oregon homeowners. Banks benefitted from this process since it was far less expensive than taking a filing to the state’s court system. In non-judicial foreclosure, a lender first notifies a tardy borrower that they are in default on their home loan. The lender then forecloses out-of-court if the borrower does not catch up on payment within 90 days.
However, in response to this recent ruling, banks have halted non-judicial foreclosure, while at the same time trying to prove that their home loan recording systems can be accurate and reliable.
Subsequently, Deschutes County has seen a disappearance of default notices.
In September, the county only recorded the issuance of three home loan default notices. This is a massive drop from the 119.5 average notices seen in each of this year’s first six months.
While the court expects more cases in the coming months, experts recognize that, until the state legislature meets next year, a long-term solution is unlikely.
Kevin Christiansen, a government affairs director with the Oregon Bankers Association, told the Statesman Journal that Oregon has now become “a de factor judicial foreclosure state.”