"Enormous Increase" in Foreclosure Meditation Requests

The new Oregon Foreclosure Avoidance Program has received over 450 mediation requests since its inception on August 4, 2013. What is most compelling about this number is that the vast majority of mediation requests have come from lenders. In the first 13 months of the prior Oregon mediation program, only 286 cases were referred to mediation. However, the prior program was overhauled by Senate Bill 558, which came into law last spring. Under Senate Bill 558, both non-judicial and judicial foreclosures are now subject to the mediation requirement. Under the prior program, only non-judicial foreclosures required mediation. As a consequence, many lenders simply stopped using nonjudicial foreclosures and moved to judicial foreclosures instead. This unintended loophole virtually gutted the "mediation requirement" under the old mediation program. 

Under the new program, a lender who intends to foreclose (whether the vehicle is a judicial or nonjudicial foreclosure) must first request a meeting with the homeowner. A representative from the Oregon Foreclosure Administration Program--the agency responsible for administrating the mediation program--will notify the homeowner of the request. The homeowner has 25 days to respond and must pay a fee -- $50 or $200 depending on income -- and provide some financial information to the lender. The lender must provide payment history and a copy of the loan documents to the homeowner. 

According to Oregon Attorney General Ellen Rosenblum, indications are that hundreds of additional cases could be referred to the new program in the upcoming weeks.

“No one’s happy about impending foreclosures, but we’re delighted with these numbers because, unlike the earlier program, it means this one is working the way it’s supposed to,” said Rosenblum. “We worked hard to close the loophole that allowed banks to avoid face-to-face meetings with borrowers. We remain hopeful that getting lenders and borrowers together at the same table will help prevent foreclosures and keep Oregonians in their homes.”

The mediation requirement will not end the foreclosure problem. Almost 29,000 Oregonians still remain more than 90 days in arrears on their mortgages. Many embattled homeowners have moved and cannot be located. Others lack the resources to pay even a modified mortgage. However, the recent change to the mediation law will result in a significant upswing in the number of face-to-face meetings between homeowners and lenders and that is certainly a step in the right direction.

If a foreclosure action has been initiated against you after August 4, 2013 and you are uncertain about whether or not your lender has complied with the requirements of the new mediation program, we would encourage you to contact us immediately. Alternatively, visit the Oregon Foreclosure Avoidance Program website for more information about the new mediation program. 

Know Your Rights: No More "Dual Tracking"

What is "dual tracking?"

Dual tracking is an ugly, insidious (and therefore unsurprisingly commonplace) practice where Big Bank X (insert name here) is actively negotiating a loan modification with a homeowner while pursuing a foreclosure against that same homeowner...at the same time.  The glaring inequity to this practice has long been a topic of vociferous objection among foreclosure defense attorneys and consumer rights advocates. Thankfully, corrective legislative protections are on the horizon.

Created by the Dodd-Frank Wall Street Reform and Consumer Protect Act of 2010, the Consumer Financial Protection Bureau (or CFPB for short) will have broad--some say unparalleled--regulatory authority to create rules and enforce consumer protection laws that restrict unfair, deceptive or abusive acts and practices (commonly known as UDAAPs). One UDAAP that the CFPB is seeking to forever eliminate is the practice of dual tracking. Consequently, beginning in January of 2014, new CFPB rules will:

• Require a lender or servicer to establish "live contact" with a delinquent borrower within 5 weeks of delinquency and inform the borrower in writing about available loan modification and other loss mitigation options by the 45th day following delinquency.
• Prevent a lender or servicer from filing for foreclosure unless the borrower is more than 4 months delinquent.  
• Prevent a lender or servicer from beginning a foreclosure once a delinquent homeowner submits a loan modification until after a written denial is sent to the homeowner and a 14-day appeal period has run or an appeal has been denied.  The new rules also require the lender or loan servicer “exercise reasonable diligence in obtaining documents and information to complete a loss mitigation" and for the lender/servicer to give the specific reasons for a denial in the denial notice.
• Allow the homeowner to submit an application for a loan modification or other loss mitigation option at any time after the foreclosure process has commenced up to the 37th day before a scheduled foreclosure sale. Once the application is submitted, the servicer may not go through with a foreclosure sale until: (1) the servicer has notified the homeowner that he, she or they are not eligible for loss mitigation (and any appeal or appeal time has been exhausted); (2) the homeowner has rejected all proposals or offers of loss mitigation; or (3) the homeowner has violated or failed to comply with terms of a loss mitigation option such as making required payments under a trial modification plan.

In sum, these new CFPB rules are designed to ensure that lenders and servicers negotiate in good faith and in a timely manner before commencing a foreclosure action. Will these rules stop foreclosures? No. Will these rules have a positive impact on the number of foreclosures? One would hope so.

If nothing else, these new CFPB rules are certainly a step in the right direction.

For more information, please visit the CFPB website at consumerfinance.gov or visit our dedicated foreclosure defense website at garlandgriffiths.com.
 

Foreclosure 101: What do you mean I don't have a mortgage?

Understanding the foreclosure process in Oregon begins with understanding one very basic fact.

A basic fact that a surprisingly high percentage of homeowners do not realize until faced with foreclosure.

That basic fact is this:

If you bought property here in the great State of Oregon, it is almost certainly the case that...

You do not have a mortgage.

Surprised?

Then you are not alone.

************ 

When you close on a piece of residential property, there seem to be a staggering number of documents to sign. If you are reading this blog, you have probably been there, done that. You are directed to an enormous pile of official looking documents, handed a pen and asked to sign here, and here, and here, and here and here. This goes on for about an hour until you’re sitting there with writer’s cramp and a glazed look on your face completely befuddled about what you’re signing, why you’re signing it, and why it takes as stack of paper the size of a Volkswagen Beetle to buy something that doesn’t move.

We get it.  The process can be mind-numbing.

But at the end of day, all of these papers really boil down to two key documents.

A promissory note.

And a deed of trust.

 ************

A promissory note, in the simplest terms, is a glorified IOU. You (the borrower) promise to pay Big Evil Bank (the lender) the sum of X at an interest rate of Y in monthly payments of Z. That’s it. Pretty straight-forward.

But what happens if you don’t pay?

That’s where the second document comes in....a security instrument. A security instrument, in the simplest terms, is a document that “secures” your payment obligation under a promissory note by doing one of two things: (1) actually transferring title to the property to someone else until the promissory note is paid-in-full (known in the law as the “title theory” because title actually changes hands until the underlying obligation is satisfied) or (2) by creating a “lien” or “security interest” in the property until the promissory note is paid-in-full (known in the law as the “lien theory” because the borrower actually keeps title to the property subject to the borrower’s lien). Oregon is what is referred to a “lien-theory” state.” So when you purchase a home here in Oregon, you receive title to the property but then you immediately transfer a “security interest” (a lien) in the property to another party until the promissory note has been paid.

Understood? Very good.

Now here are the two $24 million questions. First, who holds this “security interest” while you’re paying off your loan? Second, and most importantly, what does holding a “security interest” in a piece of property lawfully allow you to do? Let’s address the first question.

Traditionally, the person (or entity) holding the “security interest” was the lender and the typical security instrument was a mortgage. A mortgage involved two parties. The mortgagee (the lender) held a security interest (a lien) in the property until the loan was fully paid by the borrower (the mortgagor). Upon full payment of the obligation, the lien was released and the homeowner would own the property free and clear.

In 1959, the Oregon legislature passed the Oregon Trust Deed Act (OTDA). Unlike a mortgage, which involves a mortgagor (borrower) and a mortgagee (lender), a trust deed involves three parties: the “grantor” of the trust (the borrower), the “beneficiary” of the trust (the lender) and an independent trustee. When a borrower purchases a piece of property in Oregon using a trust deed as opposed to a mortgage, the borrower (1) receives title to the property but then concurrently executes a deed of trust which transfers a security interest to a trustee who then holds—”owns” if you will—this security interest for the benefit of the lender until the loan is fully paid or goes into default.

Since 1959, the security instrument of choice in Oregon has been the deed of trust, not a mortgage. Which brings us to the second question. What does holding a security interest in a piece of property lawfully allow the trustee of a trust deed to do in the event of a default?

The answer to this question lies in understanding the difference between a “judicial foreclosure” and a “non-judicial foreclosure” and how the OTDA dramatically changed the foreclosure process.

Next: The good, the bad and the ugly: Understanding foreclosures under the Oregon Trust Deed Act