August 1, 2016
by John M. Thomas
RCO Legal, P.S.
USFN Member (Alaska, Oregon, Washington)
Oregon’s legislature was relatively quiet during its non-regular 2016 session with regard to foreclosure legislation. On the other hand, there is judicial news to address. Two notable Oregon appellate cases have been issued in the past year: Hucke set forth certain parameters to prevail on MERS assignment challenges; and Wolf partially opened the door to certain post-sale challenges in potentially requiring some trial court evidentiary record to be made in the face of a borrower’s lawsuit challenging a nonjudicial foreclosure – specifically as to who held the promissory note or, alternatively, MERS’s authority to act for the loan beneficiary.
Hucke — In this case, the Court of Appeals reversed the trial court’s judgment voiding a trustee’s sale, holding that the fact that an assignment of the trust deed was not recorded did not preclude nonjudicial foreclosure. [Hucke v. BAC Home Loans Servicing, L.P., 272 Or. App. 94 (2015)]. Background: the borrower filed suit, asserting that the recorded assignment of the trust deed from MERS, as beneficiary, to Fannie Mae was not effective because MERS was not a “beneficiary” under the Oregon Trust Deed Act (OTDA). However, because the trial court record demonstrated that the originator (GreenPoint Mortgage Funding, Inc.) assigned the trust deed to Fannie Mae when it transferred the promissory note to Fannie Mae, and because that transfer was not a formal, recordable assignment, it did not need to be recorded. Applying the Oregon Supreme Court’s 2013 rulings in Niday and Brandrup on the issue, the appellate court found that transfers of promissory notes need not be recorded before nonjudicial foreclosures can proceed.
As a result, the appellate court determined that Fannie Mae was a successor beneficiary under the OTDA. Fannie Mae, therefore, could appoint a successor trustee and initiate foreclosure proceedings, and the MERS assignment to Fannie Mae was inconsequential to the validity of the foreclosure sale.
Wolf — ORS § 86.797 (1) provides that the property interest of a person, such as a borrower, who received proper notice of a trustee’s sale is foreclosed and terminated by the trustee’s sale. A number of Oregon state and federal courts have concluded that the statute bars post-sale challenges by borrowers who had proper notice of the sale but did not file suit to challenge it pre-sale. Recently, however, the Oregon Court of Appeals held that this statutory bar applies only to a “trustee’s sale” and, thus, does not necessarily preclude a post-sale challenge to the sale of a borrower’s property by someone who was not, in fact, the trustee. [Wolf v. GMAC Mortgage, 276 Or. App. 541 (2016)].
The borrower in Wolf filed suit after the sale but during the eviction efforts, contending that the appointment of LSI Title Company by MERS was invalid because MERS was neither the beneficiary nor did it have authority to make the appointment. The borrower also asserted that LSI was not qualified as a “trustee.” In initially ruling for the lender, the trial court appeared to rely solely on the post-sale statutory bar, and not an analysis of whether the trustee had authority to foreclose. Arguably, though, Wolf is limited to its facts, as the appellate court stated: “We need not resolve, however, whether [ORS 86.797] requires strict compliance with every provision of the [Oregon Trust Deed Act] before a person’s property interests will be terminated by a trustee’s sale.”
Notably, the appellate court did not address the rights of bona fide purchasers in post-sale challenges. Wolf’s contours may be refined further before the end of 2016 because there is at least one other case in the Oregon Court of Appeals concerning the scope of the statutory bar to post-sale challenges.
Hucke and Wolf underscore the importance for trustees, servicers, and lenders of ensuring that the standing of the foreclosing entity can be established and withstand judicial scrutiny. These cases also demonstrate that it is possible to establish the validity of a nonjudicial foreclosure challenged post-sale through other evidence that may not have been apparent in the public title records.
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Summer USFN Report
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