If you default on your home loan payments in Oregon, the servicer (on behalf of the loan owner, called the “lender” in this article) will eventually begin the foreclosure process. The method will most likely be nonjudicial, although judicial foreclosures are also allowed.
Because most foreclosures in Oregon are nonjudicial, this article focuses on that process. Oregon law specifies how nonjudicial procedures work, and both federal and state laws give you rights and protections throughout the foreclosure.
If you get a loan to buy a home in Oregon, you'll likely sign two documents: a promissory note and a deed of trust. The promissory note is the document that contains your promise to repay the loan along with the repayment terms. The deed of trust, which is very similar to a mortgage, is the document that gives the lender a security interest in the property and will probably include a power of sale clause. If you fail to make the payments, the power of sale clause gives the lender the right to sell the home nonjudicially so it can recoup the money it loaned you.
If you miss a payment, the servicer can usually charge a late fee after the grace period expires. Most mortgage loans give a grace period of ten to fifteen days, for example, before you’ll incur late charges. To find out the grace period in your situation and the amount of the late fee, review the promissory note or your monthly billing statement.
If you miss a few mortgage payments, the servicer will probably send letters and call you to try to collect. In most cases, federal mortgage servicing laws require the servicer to contact you (or attempt to contact you) by phone to discuss foreclosure alternatives—called “loss mitigation” options—no later than 36 days after a missed payment and again within 36 days after each following missed payment. No more than 45 days after a missed payment, the servicer must let you know in writing about loss mitigation options that could be available, and assign personnel to help you. Some exceptions to a few of these requirements exist, like if you file for bankruptcy or tell the servicer not to contact you under the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.39).
Many deeds of trust in Oregon have a provision that requires the lender to send a breach letter if you fall behind in payments. This notice tells you that the loan is in default. If you don’t cure the default, the lender can accelerate the loan (call it due) and go ahead with the foreclosure.
Federal law generally requires the servicer to wait until the loan is over 120 days delinquent before officially starting a foreclosure. But in a few situations, like if you violate a due-on-sale clause or if the servicer is joining the foreclosure action of a superior or subordinate lienholder, the foreclosure can begin sooner. (12 C.F.R. § 1024.41).
Again, most foreclosures in Oregon are nonjudicial. Here's how the process works.
In most cases, before the lender can foreclose a residential deed of trust in Oregon—either nonjudicially or judicially—it must first offer you the opportunity to have a face-to-face mediation meeting, called a “resolution conference,” with the lender and a neutral mediator. The purpose of the meeting is to explore options to avoid a foreclosure. (Or. Rev. Stat. § 86.726).
The servicer will send a notice about the resolution conference to you. To participate 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. The conference will occur within 75 days after the lender sends the notice. (Or. Rev. Stat. § 86.729).
If you don't work out an alternative to foreclosure at a resolution conference or otherwise, the foreclosure will go ahead. Under Oregon law, the trustee has to provide three types of foreclosure notices: a notice of default, a notice of sale, and a "danger" notice.
To begin the foreclosure, the trustee records a notice of default in the county records. (Or. Rev. Stat. § 86.752).
After recording the notice of default, and at least 120 days before the sale, the trustee must serve or mail a notice of sale to you by both first class and certified mail with return receipt requested. (Or. Rev. Stat. § 86.764).
The trustee must also serve the notice of sale to the occupant of the property at least 120 days before the sale. The trustee must attempt to serve the occupant personally and, if the first attempt fails, post the notice in a conspicuous place on the property. The trustee must make a second attempt to serve the notice to the occupant and, if that attempt fails, post the notice in a conspicuous place on the property again. The trustee must make a third attempt and, if that attempt fails, mail a copy of the notice to “occupant” at the property address. (Or. Rev. Stat. § 86.774).
Also, the trustee has to publish the notice of sale in a newspaper. (Or. Rev. Stat. § 86.774).
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 the borrowers that they’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).
The sale is an auction, open to all bidders. The lender bids on the property using a "credit bid" rather than bidding cash. With a credit bid, the lender gets a credit up to the amount of the borrower’s debt. The highest bidder at the sale becomes the new owner of the property.
“Reinstating” is when a borrower pays the overdue amount, plus fees and costs, to bring the loan current and stop a foreclosure. Oregon borrowers can reinstate at any time prior to five days before the sale. (Or. Rev. Stat. § 86.778).
Sometimes, a foreclosure sale doesn’t bring in enough money to pay off the full amount owed on the loan. The difference between the sale price and the total debt is called a “deficiency balance.” Many states allow the lender to get a personal judgment, called a “deficiency judgment,” for this amount against the borrower.
In Oregon, the lender can't get a deficiency judgment against you after a nonjudicial foreclosure. (Or. Rev. Stat. § 86.797).
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. In Oregon, however, you don't get a post-sale redemption right after a nonjudicial foreclosure. (Or. Rev. Stat. § 86.797).
Foreclosure laws are complicated. Servicers and lenders sometimes make errors or forget steps. If you think your servicer or lender failed to complete a required step, made a mistake, or violated state or federal foreclosure laws, you might have a defense that could force a restart to the foreclosure or you might have leverage to work out an alternative.
Consider talking to a local foreclosure attorney or legal aid office immediately to learn about your rights. A lawyer can also tell you about different ways to avoid foreclosure. Likewise, a HUD-approved housing counselor can provide helpful information (at no cost) about various alternatives to foreclosure.