In its closing hours, the 2012 Oregon Legislative Assembly enacted Senate Bill 1552, which generally requires larger volume home lenders to enter into mediation with defaulting borrowers prior to commencing trust deed foreclosure by advertisement and sale. In addition, the bill gives the Attorney General broad power to create rules which will govern the mediation process and a short timeline to implement them.
The new mediation requirements are quite complex. They will significantly lengthen the foreclosure process; and for larger lenders, may well create a powerful incentive to pursue judicial, as opposed to non-judicial foreclosure of residential trust deeds. This brief sketch is meant to put those lenders and creditors involved in foreclosures in Oregon on notice that the landscape is changing. For a more complete picture, including guidance on compliance and ongoing updates, please contact our office.
Here are a few noteworthy components of the bill:
Definition of “Residential Trust Deed” Changed – The definition of “residential trust deed” (ORS 86.705(5)) is changed significantly by this bill to focus on the date the default occurred, as opposed to its current emphasis on the status of the property at the time the foreclosure was first commenced.
Mediation Requirement Exemption – The mediation requirement does not apply to individuals, financial institutions, mortgage bankers and consumer finance companies that give the Attorney General a sworn affidavit stating that during the preceding calendar year, they did not commence or cause an affiliate or agent to commence more than 250 actions to foreclose residential trust deeds by advertisement and sale under ORS 86.735 or to foreclose residential mortgages by suit under ORS 88.010. The mediation requirement also doesn’t apply where the grantor on the trust deed doesn’t confirm the grantor’s willingness to mediate.
Appointment of Mediation Service Provider – The bill requires the Attorney General to appoint a mediation service provider to coordinate the mediation program. The provider is to be paid out of the Foreclosure Avoidance Mediation Fund established under section 4 of the bill. The bill provides that the appointment of the mediation service provider is not subject to the public contracting laws of ORS chapters 279A and 279B.
Costs of Mediation – Section 2(c) provides that the beneficiary and the grantor will share the cost of the mediation, “except that the grantor’s portion of the cost may not exceed $200”, and the mediator can waive the grantor’s share of the fee entirely pursuant to rules to be adopted by the AG.
Notice of Mediation – Section 7 of the bill amends ORS 86.740 to provide that with respect to residential trust deed non-judicial foreclosures where the foreclosing party is not exempt from the mediation requirements, a separate notice of mediation must be served upon the grantor pursuant to ORCP 7D(2) and 7D(3) or mailed by both first class and certified mail, return receipt requested.
Other Requirements – The bill has a number of other specific requirements addressing the mediation itself, including: requests for mediation by grantor, scheduling, attendance, conduct, evidence of compliance, and postponement of Trustee’s Sale. Many of these requirements will be subject to further rulemaking by the Attorney General.
The bill will become effective immediately after it is signed by the Governor, which is expected later this week, and key provisions will become operative 91 days later, which is likely to be on or around June 8.
Ken assists clients in solving everyday legal issues in the areas of estate planning and administration, real estate and land use, and business transactions. In addition, Ken serves as counsel to the Oregon Banker’s Association and he works directly with many of Oregon’s community banks on operational and transactional issues.