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Oregon: Borrower Cannot Bring a Post-Sale Challenge that the Trustee’s Notice of Sale Did Not Correctly Identify the Beneficiary

Posted By USFN, Tuesday, November 29, 2016
Updated: Friday, November 18, 2016

November 29, 2016

by John Thomas
RCO Legal, P.S. – USFN Member (Oregon, Washington)

The Oregon Court of Appeals recently held that a borrower cannot challenge a completed nonjudicial foreclosure based on an allegation that the trustee’s foreclosure notice did not correctly identify the beneficiary. DiGregorio v. Bayview Loan Servicing, LLC, 281 Or. App. 484 (Oct. 12, 2016).

The borrower defaulted on her mortgage (trust deed) in 2010. There were two assignments of the mortgage recorded. First, from MERS to the original lender First Horizon; and, second, from First Horizon to Bayview Loan Servicing LLC (the holder and servicer of the promissory note). Bayview appointed a successor trustee, Quality Loan Service Corporation (QLS), who conducted a nonjudicial foreclosure at Bayview’s direction. The borrower received QLS’s notice of sale, which identified the beneficiary as it was described in the mortgage; i.e., MERS as nominee for First Horizon.

The property reverted to Bayview at the trustee’s sale in 2012. Following the sale, in 2013, Bayview filed an eviction action against the borrower. The borrower separately filed an action for declaratory relief against Bayview claiming that the foreclosure notice was invalid because it did not reflect the current beneficiary. Both actions were consolidated.

ORS 86.771 (1) requires that a trustee’s notice of sale list the beneficiary “in the trust deed.” The trial court did not reach the issue of whether the trustee’s notice of sale identified the correct beneficiary but, instead, granted summary judgment in Bayview’s favor on the basis that the borrower received the foreclosure notice and did not bring suit until after the sale. ORS 86.797 (1) specifies that a borrower’s interest is terminated by a trustee’s sale provided that the borrower had notice, among other requirements.

Appellate Review
The Oregon Court of Appeals affirmed the trial court’s decision, opining that a borrower cannot undermine a completed trustee’s sale based on a single asserted defect in the content of the trustee’s notice of sale under ORS 86.771, which the borrower received (and did not challenge) prior to the sale. The court of appeals harmonized its ruling with its prior holding in Wolf v. GMAC Mortgage, LLC, 276 Or. App. 541, 546, 370 P.3d 1254 (Feb. 18, 2016) (declining to resolve whether ORS 86.797 “requires strict compliance with every provision of the OTDA before a person’s property interests will be terminated by a trustee’s sale”).

As of this writing, the borrower could still petition the Oregon Supreme Court for review, so the recent outcome on appeal may change.

DiGregorio further defines the contours of emerging foreclosure law in Oregon following the Wolf decision, which had permitted a post-sale challenge based on the borrower’s assertion that the foreclosure trustee was not validly appointed and did not meet the statutory definition of a trustee. DiGregorio is positive for the industry and should promote greater certainty and finality of nonjudicial foreclosures.

Editor’s Note: The author’s firm represented the respondent Bayview Loan Servicing, LLC in the summarized case.

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