Oregon has long been a state that uses Trust Deeds for real estate transactions. With the ease and low cost of foreclosure for banks, it was the instrument of choice for many years here in Oregon...well as long as you follow the state laws. You've heard the terms, judicial foreclosure, non-judicial foreclosure, deficiency state, non-deficiency state. Like all things to do with law, nothing is black and white. There are some huge changes with serious implications headed the way of homeowners facing foreclosure.
I chatted about the MERS problem Oregon was having and the backlog of foreclosures this was going to cause. Not a good thing for anyone, in my opinion. In the Oregonian a couple of weeks ago, Brent Hunsberger wrote an article about the shift that banks were making, taking foreclosures to the courtroom. Left with little choice , due to legal issues, the lenders that can actually produce the original note are headed to chat with a judge about getting the property in a judicial foreclosure. I was curious to see if we would have any of these converted foreclosures head our way in Salem. Sure enough, I looked through the notices this week and there it was...a nice list of attorney names, including the firm mentioned in the Oregonian article, Kelly Sutherland. Salem homeowners that have been in limbo due to the MERS debacle are going to find their way into a courtroom and standing in front of a judge.
What this means is that the building shadow inventory will once again start working its way down the foreclosure pipeline as banks start to push their way through the system. There are so many implications with judicial foreclosures. A HUGE one for homeowners facing foreclosure is ORS 86.705(3). This statute can convert a residential trust deed to a non-residential one which allows for a deficiency judgment. This could be financially disastrous for many people out there who are facing foreclosure and end up in a judicial proceeding. I am personally appalled that banks could break Oregon laws by failing to record note transfers properly, then have an "out" for a judicial proceeding which may open up some families to deficiency judgments that they would have been protected from before. That just isn't right.
If all banks decide to follow Wells Fargo's plan for MERS held loans and go the judicial route, homeowners facing foreclosure MUST talk to an attorney before they move out of their home. It is imperative because the game just changed.
This was originally posted on Get Real Estate.