June 26, 2015
by John Thomas
RCO Legal, P.S.
USFN Member (Oregon, Washington)
Oregon Senate Bill 368 was recently signed into law by the state’s governor and became effective on June 8, 2015. Generally, the bill is a positive legal development, making the completion and entry of judicial foreclosure judgments more streamlined and uniform throughout Oregon.
As background, the increase in Oregon judicial foreclosure actions in the recent past has revealed a technical flaw with Oregon foreclosure statute ORS § 88.010 (1). Some Oregon state court trial-level judges have interpreted this statute to require that a money award against the borrower be included in a judgment of foreclosure, regardless of whether the lender/servicer desires that form of relief in addition to the customary in rem foreclosure relief against only the collateral property involved. However, some Oregon judges have not interpreted the foreclosure judgment statute that way, resulting in inconsistent foreclosure judgment standards within Oregon.
There are several situations where imposing a money award against a borrower would be problematic or troublesome, for example: (a) bankruptcy discharges; (b) deceased borrowers; (c) transfers of the property to non-obligors; (d) certain purchase money loans; and (e) expired statute of limitations on the underlying debt. Moreover, a money judgment can inappropriately adversely affect the debtor’s credit and cloud title (as a judgment lien) to other property owned by the debtor by operation of law. Furthermore, the servicer may wish to enter into a compromise or other non-retention agreement with the borrower that prohibits, directly or indirectly, a money award against him.
By enacting SB 368, inconsistent rulings in this area will hopefully be avoided. The bill amends ORS § 88.010 and a number of related statutes, and eliminates the need to include a money award in a foreclosure action when taking a money judgment is inappropriate, contrary to law, or simply not desired by the lender. It is a way to address some courts’ refusals to grant in rem judgments, which have been forcing lenders and their counsel to go through additional, unnecessary procedural steps. That is the most important aspect of this bill for lenders — it smooths out the uneven, county-by-county, judge-by-judge treatment of judicial foreclosures and should streamline the process to allow judgments to enter more readily.
To summarize, the legislative change is viewed as positive and it is not anticipated that there will be significant process changes for servicers. Compliance will generally rest with a servicer’s counsel in formulating the form of foreclosure judgment.
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