This Bulletin is sent to advise you that on April 11, 2012, Senate Bill 1552 ("SB 1552") was signed into law. SB 1552 amends ORS 86.705, ORS 86.735, ORS 86.740, ORS 86.742 and ORS 86.755. SB 1552 contains an emergency clause rendering it effective 91 days after it is signed by the governor.
SB 1552 requires a beneficiary pursuing a non-judicial foreclosure of a trust deed to enter into mediation with the borrower for the purpose of negotiating a foreclosure avoidance measure. A foreclosure avoidance measure includes a deference/forbearance, a modification of payment terms, a Deed in Lieu of Foreclosure, a short sale or some other assistance. It is the responsibility of the office of the Attorney General to appoint a mediation service provider to coordinate the mediation service program and arrange for payment to the mediator utilizing proceeds from the Foreclosure Avoidance Mediation Fund (as established by SB 1552).
A beneficiary may be exempt from the requirements under SB 1552 if they provide the Attorney General a sworn affidavit which states that during the preceding calendar year the beneficiary did not commence more than 250 actions to foreclose. This affidavit must be recorded in the public records. A general affidavit may be recorded in order to claim the exemption for the entire calendar year, or a beneficiary may record the affidavit at the time they record their Notice of Default. If a general exemption affidavit is recorded, it must be recorded within 30 days after the operative date of SB 1552 to be eligible for 2012. Starting 2013, the general exemption affidavit must be recorded by January 31st to be eligible for the calendar year.
The foreclosing beneficiary is required to send a notice of mediation to the borrower at least 60 days before the Notice of Sale is mailed. Within 30 days of this mailing, the mediation service provider must send a notice to the borrower and the beneficiary that schedules a date, time and location for the mediation. The mediation will be held not earlier than 45 days and not later than 90 days after the date on which the notice of mediation was mailed. The notice submitted by the mediation service provider will also specify a date at least 30 days before the scheduled date of the mediation by which the grantor must contact the mediation services provider to confirm that they will enter into mediation. If the grantor fails to confirm the mediation service provider will deem the grantor to have declined mediation.
A borrower who is at risk of default has the right under SB 1552 to request mediation prior to actually being in default. The beneficiary or trustee is required to respond to this request within 15 days and notify the Attorney General and the mediation service provider. In this scenario, the beneficiary is subject to the same mediation requirements as if the borrower was in default.
The borrower is required to consult with a housing counselor approved by the United States Department of Housing and Urban Development prior to the scheduled date of the mediation. This requirement will be outlined on the notice of mediation that the beneficiary sends to the borrower. If, after this consultation, the borrower decides not to mediate, the borrower is required to notify the mediation service provider. The mediation service provider will notify the beneficiary and issue the certificate of compliance. If the borrower is unable to obtain an appointment with a housing counselor within 30 days after receiving the notice of mediation the borrower is no longer required to consult with the housing counselor. In this scenario, the borrower is required to obtain an affidavit from the mediation service provider that attests that the grantor could not obtain the appointment with the housing counselor.
If the beneficiary determines that the borrower is not eligible for a foreclosure avoidance measure or if the borrower does not comply with the terms of a foreclosure avoidance measure to which they have agreed, the beneficiary must notify the borrower in writing at least 30 days prior to the date established for the foreclosure sale. A copy of this notice of determination must also be submitted to the Department of Justice on the same date.
At the conclusion of the mediation the mediation service provider shall provide the beneficiary with a certificate of compliance stating that the beneficiary has complied with all requirements under SB 1552. If the borrower failed to confirm that they would enter into the mediation the mediation service provider will provide the beneficiary with a certificate of compliance noting the borrower's failure to confirm. The certificate of compliance is required under amended ORS 86.735 to be recorded at least 20 days before the dates specified for the foreclosure sale, and a copy of the affidavit must be mailed to the Department of Justice.
The affidavit must:
Identify the property that is the subject of the foreclosure sale.
- Identify the grantor.
- Identify the current trustee.
- Identify the current beneficiary.
- State that the beneficiary has complied with the mediation requirements set forth in SB 1552.
- Include proof of service on the grantor for the notices described in SB 1552
Other relevant changes to the non-judicial foreclosure process under SB 1552 are as follows:
ORS 86.755 is amended to state that if a foreclosure sale is postponed the trustee must serve written notice of the new time, date and place for the sale on the borrower and any person to whom the notice of sale was previously given. The notice must be given at least 15 days before the new sale date. The trustee may postpone the sale once for not more than two calendar days without serving this written notice. The sale may not be postponed more than two calendar days without fulfilling this noticing requirement and it may not be postponed more than once without fulfilling this noticing requirement.
This bill amends ORS 86.705 to define a "Residential Trust Deed" as a trust deed on property upon which are situated four or fewer residential units, one of which the grantor, the grantor's spouse or the grantor's minor or dependent child occupies as a principal residence "...at the time a default that results in an action to foreclose the obligation secured by the trust deed first occurs". Previously, the definition stated "...at the time a trust deed foreclosure is commenced".
If you are asked to insure a post-foreclosure sale transaction and the foreclosure commenced on or after July 11, 2012, you must confirm that the affidavit of compliance with SB 1552 described above was recorded at least 20 days prior to the date of the foreclosure sale. The affidavit claiming exemption to SB 1552 is an acceptable alternative. If neither affidavit is recorded please consult with an underwriter prior to closing your transaction.
If you issue a preliminary title report for a property with a pending foreclosure on or after July 11, 2012, please include the following exception on your report:
"Pursuant to ORS 86.735, an affidavit evidencing compliance with the terms of Oregon Laws 2012, Chapter 112 must be recorded at least 20 days prior to the foreclosure. Alternatively, an affidavit evidencing exemption from the terms of Chapter 112, 2012 Oregon Laws must be recorded."
If you issue a foreclosure guarantee product on or after July 11, 2012, please include the following informational note on your report:
"An affidavit evidencing compliance or exemption with the terms of Oregon Laws 2012, Chapter 112 is required to be recorded pursuant to ORS 86.735."
It is anticipated that this change in Oregon foreclosure law will prompt an increased volume of judicial foreclosures. Please ensure that you are familiar with judicial foreclosure laws and consult underwriting with any questions.
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