Oregon Foreclosure Mediation Bill Passes Senate; Governor Expected to Sign Into Law

Drew Hagedorn

By Drew Hagedorn, Tonkin Torp, UTA Oregon Lobbyist

UTA has we've battled the foreclosure issue for four consecutive sessions.  In the prior three, we were able to defeat the proposals advanced by proponents.  This session, we were no longer able to stem the tide after it became clear to many vulnerable House Republicans that this issue would be a principal thematic during the 2012 election cycle.  As you may recall, the Oregon House is tied among 30 Republicans and 30 Democrats and the upcoming election will be hotly contested.

At the end of the day, the passage of SB 1552 had absolutely nothing to do with prudent policy.  With UTA members’ help and with the help of our opposition coalition that included the Oregon Bankers Association, the Independent Community Banks of Oregon, the Oregon Credit Union Association, MERS Inc. among others, we worked throughout the 35-day 2012 session to defeat this proposal advancing sound and well-reasoned policy arguments. 

At many points during the session, we were assured the bill would die.  However, in the session's waning moments, the Friday before adjournment, we learned a contingent of House Republicans in vulnerable seats who were working on language with the proponents that ultimately emerged as the -25 amendments to Senate Bill 1552.  The amendments were hastily crafted and ill-conceived.  Despite our strong objections, the committee pushed the amendments and the bill through in the final moments of the 2012 session as part of close-of-session negotiations.

I encourage members to consult with OTA legal counsel, but the basic elements of the bill and the approved amendment are as follows:

• The legislation provides a definition for “foreclosure avoidance measure” under statutes governing mortgages, trusts, and deeds. [Section 2(1)].
  
  
• It requires beneficiary or beneficiary's agent under residential trust deed to send notice of mediation and enter into mediation with grantor for purpose of agreeing to foreclosure avoidance measure. [Section 2(2)(a)].
  
  
• The bill requires the Oregon Attorney General (AG) to establish by rule a schedule of mediation fees and professional requirements of mediation service providers. [Section 2(2)(b)].
  
  
• The AG must contract with mediation service providers to provide the mediation services between the grantors and the beneficiaries, payment to mediation service providers would be split between grantors and the beneficiaries with a $200 limit placed on the grantor’s portion. The contracts are exempted from state procurement statutes. [Section 2(2)(b)].
  
  
• The measure creates the “Foreclosure Avoidance Mediation Fund” (FAMF) that the payments to mediation service providers would flow through and would allow for administrative expenditures by the AG. [Section 4].
  
  
• Note that specified entities recording more than 250 actions to foreclose would be required to pay an additional $100 fee for each subsequent filing, the proceeds of which would be deposited in to the FAMF. [Section 4(3)(a)].
  
  
• The measure creates an actionable cause (circuit court action for $500) for failure on the part of beneficiaries to complete certain filings and notifications related to determination of ineligibility or non-compliance of grantors to participate in any foreclosure avoidance measure. [Section 4a(5)].
  
  
• The bill makes changes to the statutory provisions that are requirements allowing for foreclosure and adds the filing of mediation compliance certificate to that list. [Section 6(4)].
  
  
• The measure requires a separate 60 day notice of mediation prior to the notice of sale and that a minimum 15 day notice of a new sale date be provided in the event that a trustee sale is postponed more than two calendar days or more than once without notice. [Section 7(b)].
  
  
• The bill declares emergency, effective on passage, with operative date 91 days after effective date.

• The amendment permits a mediator to waive homeowner’s portion of fee in accordance with rules promulgated by Attorney General. [Section 2(c)].
  
  
• The amendment  changes the term “beneficiary” to “financial institution” (as defined in ORS 706.008) for purposes of exemption from the mediation requirement.
  
  
• The amendment  expands the exemption from the "mediation requirement" to include mortgage bankers and licensees as defined in ORS 86A.100 and 725.010, respectively. [Section 2(2)(d)].
  
  
• The amendment modifies language providing for the exemption and clarifies how the exemption may be sought for 2012 calendar year. [Section 2(2)(d)(A)(i)].
  
  
• The amendment changes the deadline that homeowner is required to confirm mediation, from 15 to 30 days before the mediation date. [Section 2(3)(c)].
  
  
• It further requires a homeowner who confirms mediation to consult with a housing counselor prior to scheduled mediation. [Section 2(4)].
  
  
• It also requires a homeowner to notify the beneficiary if mediation cancelled. [Section 2(4)].
  
  
• It provides mediator discretion to determine if good cause exists to permit beneficiary to appear by any means other than in-person. [Section 2(4)].
  
  
• The amendment stipulates that distance alone insufficient to constitute good cause and requires a beneficiary to notify homeowners of ineligibility for foreclosure avoidance and of noncompliance with terms of foreclosure avoidance, as applicable. [Section 2(4)].
  
  
• It sets forth what constitutes proper notice and service. [Section 3].
  
  
• It adds proper notice and homeowner’s noncompliance with foreclosure avoidance to the list of conditions that must be met prior to foreclosure. [Section 6(4)].
  
  
• The amendment requires a separate notice of mediation 60 days prior to notice of foreclosure sale, when a foreclosure is undertaken by a beneficiary that is required to meet with homeowner. [Section 7(1)(b)].
  
  
• Finally, the amendment changes the deadline for notice to be given of postponement of foreclosure sale, from 30 days to 15 days prior to new sale date. It also permits one postponement without notice, if not for more than two days. [Section 9].