HB 2009 Analysis – RETROACTIVE MORATORIUM
The most visible and immediate impact of HB 2009 is the imposition of a moratorium on judicial and nonjudicial foreclosures. As a threshold matter, HB 2009 applies to “Subject Property” that is subject to a “Financing Agreement” which are defined as follows: “’Financing Agreement’ means a contract under which a borrower must make payments to a lender to satisfy an obligation that is secured by a mortgage, a trust deed or a land sale contract for subject property.”
“Subject Property” means real property upon which is situated four or fewer dwelling units, as defined in ORS 90.100, used primarily and designed solely for residential use.” Notably, Oregon’s previous foreclosure moratorium HB 4204 also included personal property used as a residence (mobile homes) as well as commercial property. Mobile homes do not appear to be covered by HB 2009 and commercial
properties are not mentioned at all.
The legislation is ambiguous as to whether commercial Trust Deeds would be included so we recommend erring on the side of caution, especially with mixed-use or non-exclusive use properties. The critical components of the moratorium are set forth in sections 4, 5, 6 and 7 of HB 2009. Pursuant to section 4, “Except as provided in subsection (10) of this section, with respect to subject property, a lender or trustee may not, at any time during the emergency period: (a) Foreclose a trust deed by advertisement and sale; (b) Bring an action or suit to foreclose a mortgage or trust deed; or (c) Enforce a forfeiture remedy.”
In other words, any files that reached 1st legal during the period of January 1, 2021 to now are prohibited and will have to be redone. Under subsection 5, “if a lender or trustee recorded a notice of default and served a notice of sale for a foreclosure b advertisement and sale, commenced a suit under OR 88.010 or otherwise initiated a foreclosure with respect to subject property on or after March 8, 2020, the foreclosure is stayed during the emergency period. After the emergency period expires a trustee’s sale may occur if the lender or trustee complies with the provisions of ORS 86.782(12).” This section appears to cover foreclosures which reached 1st legal during the *PRIOR* moratorium period under HB 4204 whose emergency period began on March 8, 2020 and expired on December 31, 2020. Bluntly, section 5 appears in direct conflict with section 4 which provides that a lender may not bring an action or suit to foreclose a mortgage or trust deed during the emergency period.
We interpret Section 5 as providing a tolling period for files that reached 1st legal from March 8, 2020 to December 31, 2020 and were not prohibited by emergency period moratorium under HB 4204 enacted but were unable to reach sale under that moratorium and have been unable to proceed. Those files will not require a full restart and can be tolled and re-noticed for sale in accordance with ORS 86.782(12), however, there will not likely be many files that fall in that bucket. Files that reached first legal during 2021 will NOT be tolled under subsection 5 and will instead be prohibited by subsection 4 and will require a full restart. Subsection 5 also eliminates the 180 day limit on postponements and allows postponement for the entire emergency period.
Subsection 6 provides that “a court may not enter a judgment of foreclosure and sale or issue a writ of execution with respect to subject property that secures an obligation on which a mortgagor, a grantor or a purchaser in a land-sale contract has failed to make a periodic installment payment or other payment.” Subsection 6(b) also provides that “A court shall dismiss without prejudice any action or suit commenced during the emergency period that seeks to foreclose a lien upon subject property.” Subsection 7 provides that “a trustee’s sale of subject property may not occur during the emergency period. Any purported trustee’s sale of subject property during the emergency period is void and does not transfer or foreclose any rights to the subject property.” In other words, any sales that are completed from January 1, 2021 to June 30, 2021 (and potentially through December 31, 2021) are void and of no force or effect.
SERVICER REQUIREMENTS – NOTIFICATION REGARDING COVID-19 HARDSHIP, FORBEARANCE, DEFERRAL
In addition to the retroactive moratorium described above, HB 2009 also imposes new notice and deferral requirements on servicers and Lenders in subsections 3, 8 and 9. Subsection (3) provides as follows: “During the emergency period, a lender may not treat as a default a borrower’s failure to make a periodic installment payment or failure to pay any other amount that is due to the lender on or in connection with an obligation that is subject to a financing agreement if, during the emergency period, the borrower notifies the lender that the borrower cannot make the periodic installment payment or other payment because of a loss of income that is related to the COVID-19 pandemic. In lieu of treating the failure to pay as a default, and only if the lender and borrower do not otherwise agree to modify, defer or otherwise mitigate the obligation . . . the lender shall: (A) Defer during the emergency period, from collecting the periodic installment or other payment; and Permit the borrower to pay an amount the borrower owes to the lender as a result of a deferral under this subsection at the scheduled or anticipated date on which full performance of the obligation is due…” In other words, IF a borrower makes a request for COVID assistance or otherwise advises the lender (or servicer) that they cannot make an upcoming payment, the lender / servicer shall defer the amounts that come due during emergency period IF the borrower and lender/servicer cannot reach another loss mitigation option.
Under subsection 3(e)(A), “a borrower does not need to provide a notice to a lender . . . more than once. IF a borrower provides the notice orally, a lender may request confirmation in writing that the borrower does NOT own more than five subject properties [more than 5 disqualifies them from the application of the Act] and that the borrower cannot make a periodic installment payment or other payment because of a loss of income that is related to the COVID-19 pandemic. (B) A borrower’s notice to a lender before the effective date of this 2021 Act is not effective as notice under paragraph (a) of this subsection. The borrower must notify the lender as provided in this subsection to receive the protections described in paragraph (a) of this subsection.”
Once a borrower gives notice under the Act during the emergency period a lender may not “(A) Impose or collect charges, fees, penalties, attorney fees or other amounts that, but for the provisions of this section, the lender might have imposed or collected from a borrower for failing, during the emergency period, to make a periodic installment payment or to pay another amount due on or in connection with the borrower’s obligation; (B) Impose a default rate of interest that, but for the provisions of this section, the lender might have imposed or collected from a borrower for failing, during the emergency period, to make a periodic installment payment or to pay another amount due on or in connection with the borrower’s obligation; (C) Treat in any manner the borrower’s failure during the emergency period to make a periodic installment payment or to pay another amount due on or in connection with the obligation as an ineligibility for a foreclosure avoidance measure; or (D) Require or charge for an inspection, appraisal or broker opinion of value during the emergency period.”
Subsection 8 of the Act provides that “a borrower that suffers an ascertainable loss of moneys or property because a lender or trustee took an action prohibited under this section may bring an action in a circuit court of this state to recover the borrower’s actual damages [and attorney fees.]” Lenders and Trustees are not liable for violations of the provisions of subsection (3)(a) or (f) if the action occurred before the lender received a notice from the borrower under subsection (3)(a) of this section or (B) the lender sent to the borrower a periodic statement, billing notice of other communication that appeared to seek payment for an obligation the lender deferred in compliance with subsection (3) if: the Communication was a bona fide error or inability to provide a correct notice due to a billing system issue; the lender does not attempt any substantive action to collect any amount the lender deferred in compliance with subsection (3) of this section; and the lender confirms in writing that the amount show in the communication remains deferred.
Subsection 9 of the Act requires that each lender “shall notify all of the lender’s borrowers who cannot make a periodic installment payment or other payment on an obligation because of a loss of income related to the COVID-19 pandemic that the borrowers may be entitled to relief under this section. The notice must state that the borrower must provide notice under subsection (3)(a) even if the borrower has provided notice previously and must include the following text: “If you have experienced a loss of income related to the COVID-19 pandemic, Oregon law allows you to place your mortgage loan in forbearance until June 30, 2021, or later if the law is extended, and defer the missed payments until the end of the loan term. Forbearance is not automatic. You must notify us that you have a hardship to qualify for the forbearance. IF you notified us before (the effective date of this 2021 Act), you must notify us again if your hardship has continued and you cannot make payments due on your mortgage loan. Contact us at (contact information) for further information and to request a forbearance. If you have a federally backed mortgage loan, you might also be eligible for forbearance under the federal CARES Act. Please contact us for questions or to request either forbearance option.” The Act provides that a lender complies with this require IF the lender notifies by mail: (A) All of the lender’s borrowers within 60 days after the effective date of this 2021 Act; or (B) Every borrower who fails to make a periodic installment payment or other payment in connection with the borrower’s obligation within 30 days after the borrower fails to make the payment. In other words, the lender can comply by sending the above notice to EVERY borrower in Oregon within 60 days of the Act; OR just to those borrowers who fail to make a payment within 30 days of such failure. To simplify matters, I would recommend simply sending the Notice to everyone within 60 days to avoid piecemeal notification and avoid missing borrowers.
SUBSTANTIAL CHANGES TO BENEFICIARY EXEMPTION AFFIDAVITS AND REMOTE HEARING PROCESS FOR
OREGON FORECLOSURE AVOIDANCE PROGRAM
While less noticeable and visible than the retroactive foreclosure moratorium, HB 2009 also makes substantial changes to the Beneficiary Exemption Affidavit process for opting-out of the Oregon Foreclosure Avoidance Program. The Act makes new allowances for remote appearances and teleconference procedures in response to the COVID-19 pandemic, but far more substantively, the Act makes enormous changes to the eligibility requirements for the Beneficiary Exemption Affidavit process. Under the old version of the law, a beneficiary could seek exemption from the Oregon Foreclosure Avoidance Program (mandatory mediation program) if the beneficiary (defined as the beneficiary, their agents, affiliates and subsidiaries) collectively conducted fewer than 175 Oregon foreclosures in the preceding calendar year. To date, MANY beneficiaries filed Beneficiary Exemptions for 2020 based on the old statute. Under HB 2009, NONE of those exemption affidavits are valid because the eligibility requirements change dramatically under HB 2009. Under HB 2009 is determined by whether the beneficiary (including their agents, affiliates and subsidiaries) conducted fewer than THIRTY (30) Oregon foreclosures in *2019*. This change invalidates every extant beneficiary exemption affidavit even if the beneficiary still meets the criteria because all existing beneficiary exemption affidavits are based on the number of foreclosures conducted in 2020 (per the old statute). As such, any existing beneficiary exemption affidavit is void and will not serve as a basis for a beneficiary exemption affidavit. Lenders that no longer qualify will have to engage in the mediation program.
HB 2009, except for the Oregon Foreclosure Avoidance Program changes, does NOT apply to Judgments of foreclosure and sale, writs of execution, notices of a trustee’s sale or forfeitures under land sale contracts where a trustee’s sale or execution sale was concluded or an affidavit of foreclosure was recorded before June 30, 2020; that occur in connection with tax foreclosures; or that dispose of vacant or abandoned property or that result from a borrower’s waste, destruction, or illegal use of the subject property or the borrower’s failure to prevent another person’s waste, destruction or illegal use of the property. The Act also does not appear to apply to personal property used as a residence (mobile homes), but is ambiguous as to its applicability to commercial trust deeds. Vacant properties, abandoned properties, properties which are subject to waste, destruction or illegal use and commercial properties are all exempt from the Act (except for the Oregon Foreclosure Avoidance Program changes).