Foreclosures and Loan Modifications

Often our homes and property, after our families and jobs, are the most precious things to us. I have previously held an active real estate license and can guide you through the details of a purchase or sale transaction.  I have both drafted agreements to create easements and tried court cases to preserve the right and value of easement access.  I have litigated numerous cases regarding defective construction workmanship and fraudulent real estate investments.  During the foreclosure crisis, my primary emphasis has been advising clients regarding loan modifications, predatory lending, and their options when facing foreclosure.  Real estate law is often complex and fraught with traps for the unwary.  Before making a major and costly economic decision, you may want to first obtain some seasoned legal advice.

Trust Deed Foreclosure

Foreclosure is the legal process to remove a person’s right to own and possess real property. In Oregon, most security interests in real property are by a trust deed. The holder of a trust deed can foreclose without going to court by “advertisement and sale.” The trustee mails a notice to the owner, and any others with interests in the property, of the amount of the debt and the sale date, and publishes notice of the sale in a newspaper. The trustee then auctions off the property to satisfy the amount of the debt, plus attorney fees and foreclosure costs.

If the foreclosure by a first mortgage holder is on the owner’s residence or the residence of the owner’s spouse or child, then the owner merely loses the property but does not have to pay a deficiency judgment if the foreclosure price is less than the amount of the debt. However, action may be commenced against other security interests that secure the same debt, such as other trust deeds or liens on vehicles. A “Residential trust deed” is a trust deed on four or fewer residential units, one of which is occupied as the principal residence of the grantor, their spouse, or their minor or dependent child. ORS 86.705(3). In this kind of foreclosure, the owner can stop the foreclosure by paying all delinquent payments together with trustee’s and attorney fees and costs at any time up to 5 days before the scheduled sale date.

Under legislation passed in 2008, a lender must give a special notice to the homeowner specifying the amount to bring a loan current, a phone number to get additional details, and what you can do to stop the sale. The notice must also provide information on legal services and government agencies and nonprofits who provide information on foreclosures. If such notice is not provided, the homeowner may file an action for damages and will be required to prove that they could have cured the default and reinstated the trust deed.

Judicial Foreclosure

A trust deed can also be foreclosed judicially by a lawsuit in the circuit court of the county where the property is located. The party holding the lien asks the court for a judgment against the owner for the  unpaid amount of the debt together with attorney fees and foreclosure costs. If the owner does not pay that full amount to the holder of the lien, then the sheriff of that county will auction off the property to the highest bidder for cash. Anyone who guaranteed payment of the debt (a co-signer) will have to pay any deficiency and cannot thereafter collect against the debtor. ORS 86.770(4).

After the sale, the owner has 180 days to buy the property back from the purchaser at the sale for an amount equal to the auction price paid plus interest and any anything the purchaser had to pay for such items as taxes and maintenance. This is known as a right of redemption.

Deed in Lieu of Foreclosure
If you are unable to pay your mortgage, your lender may be willing to accept a deed in lieu of foreclosure to avoid the expenses of foreclosure. A lender may be unwilling to do so if there is a second mortgage or junior liens that need to be cleared off in the foreclosure process.

Loan Modifications
If your current payment exceeds 38% of your income, you may qualify for the HAMP mortgage modification program. You may be able to get your interest rate lowered to as little as 2% or have the term extended to up to 40 years to get the payment  (including taxes and insurance) down to 31% of your gross monthly income.  In some cases, a principal forbearance may be available.  A second mortgage may also be included in the modification.  Complex computations are involved, so it is best to get legal and financial advice related to your specific circumstances.

If you’d like more detailed information, please email our office () and we will send a PDF document with more detail as an attachment in an email. When you contact us, please make sure to include your name. We will NEVER give or sell your name or email address to any third party for any reason. We will only use your email address to provide additional, no obligation information.

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