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The Oregon legislature passed a bill in the February 2008 special session that is now in effect in all sections. There were three separate sections in the bill. The first two sections are called the Mortgage Rescue Fraud Protection Act. The third section creates a new notice required on all residential (1 to 4) trust deed foreclosures.

Sections 2 to 6: Foreclosure Consultants

            Anyone who assists a homeowner who is in default to prevent, postpone or stop a foreclosure sale, or assists with redemption rights, extensions, waivers or assists in obtaining a loan or advance of funds or helps protect the owner’s credit rating may be covered by this section. Certain parties, including a real estate broker licensed in Oregon and acting within the scope of their license are exempt. Under the new law a written contract is required for any of the described services unless the assisting party is exempt. The contract must be presented to the homeowner at least 24 hours before it is signed. It must be in a language that is spoken by the homeowner and contain certain information required by law. Rights of the homeowner under this law cannot be waived. The contract must contain a statutory right to cancel at any time and contains provisions for cancellation. The foreclosure consultant may not act under a power of attorney for the homeowner.

Sections 9 to 14: Equity Conveyances

            Anyone who obtains a transfer of the seller’s equity where the equity seller is in foreclosure and is allowed to remain in possession or retain further rights after the conveyance is subject to this section of the statute. It requires a written equity conveyance contract and at that least a memorandum of the contract be recorded no later than the time of the equity conveyance being recorded. It identifies the funds to be included in an equity recapture payment. The contract must be presented to the homeowner at least 24 hours prior to signing and contain certain statutory provisions. It prohibits a power of attorney from the equity seller to the purchaser. It must contain a three-day rescission period and provide that the seller may cancel upon sale in foreclosure. The purchaser is required to provide the seller with a statutory cancellation form upon both of them signing. If the property is resold within 24 months after entering into the contract, the equity purchaser must pay the equity seller at least 82% of the equity recapture payment from the sale.

Section 20: Notice of Danger of Losing Property

            If a notice of default is recorded, the sender of the notice must give a newly required notice (in addition to all other notices previously required) on or before the date the notice of sale is served or mailed. The new notice is specifically set forth in the statute and is required to go to the grantor of the trust deed. It is entitled: NOTICE; YOU ARE IN DANGER OF LOSING YOUR PROPERTY IF YO DO NOT TAKE ACTION IMMEDIATELY. It requires contact information for the lender and for legal and other assistance. If the occupant is not the grantor, a copy must also be sent to the occupant. This notice must be actually received by the grantor at least 25 days prior to the date the sale is conducted, or the grantor has the rights of a junior lienholder in a judicial sale. That right could extend to a right to recover the property up to five years after the date of the sale.

Title companies are requiring proof that all grantors have been actually notified where the notice of sale was sent June 9, 2008 or later. They may require an affidavit of notice to be recorded, and they may require affirmation that the statute has been complied with in the trustee’s deed. Proposed legislation for the 2009 session would statutorily require the recording of an affidavit and shorten the period of time in which an objecting owner may assert his/her rights.

Some attorneys have asked for the ORS statute number containing this new law. The law has not been incorporated into the statutes since it was passed in a special session and will not be until the statutes are updated with the 2009 laws. Until that time, the proper reference is the chapter of the 2008 laws shown in the title of this article.

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House Bill 3630, Chapter 19, Oregon Laws 2008 – see sections for effective date

Sections 2 to 6 and 9 to 14 may be cited as the Mortgage Rescue Fraud Protection Act.

Beginning June 9, 2008

Sections 2 to 6: Foreclosure Consultants

Section 2: Definitions:

a. A loan is considered to be in default if a notice of default could properly be recorded against a residence.

b. Defines “foreclosure consultant” as anyone who solicits or performs a service for a homeowner intended to prevent, postpone or stop a foreclosure sale, assist with rights of redemption, obtain extensions, waivers, assist in obtaining a loan or advance of funds, or help protect their credit rating resulting from a foreclosure.

c. Law applies only to one to four single-family dwelling units on which the owner occupies a unit and against which a notice of default has been recorded (conflicts with “a” above).

Section 3: Excluded parties

a. An attorney representing a client.

b. A party having a secured lien against the property if performing services in connection with the lien.

c. A bank, trust company, savings and loan, credit union, insurance company, consumer finance, or lending institution operating under federal or state regulation, or their affiliate or agent.

d. A judgment creditor if prior to a notice of sale.

e. A title insurer licensed in Oregon.

f. A mortgage broker or mortgage lender licensed in Oregon.

g. A real estate or escrow licensee if acting within the scope of their license.

h. A tax-exempt organization that offers counseling or advice to homeowners in foreclosure that is not directly related to a for-profit lender or foreclosure purchaser and does not contract with them.

i. A party under the jurisdiction of a bankruptcy court.

j. A person that is a member of the homeowner’s family or controlled by one.

Section 4: A written foreclosure consulting contract is required for any services that a foreclosure consultant provides to a homeowner. A copy must be provided to the homeowner at least 24 hours before he/she signs it. The contract must:

a. be in writing in the language spoken by the homeowner and used in discussions to describe services or negotiate the contract.

b. Fully disclose the nature and extent of the services.

c. Fully disclose the terms and amount of compensation.

d. Be dated and personally signed by the homeowner and foreclosure consultant.

e. Show on the first page the name, address, fax number and email address of the foreclosure consultant to which a notice of cancellation may be delivered.

f. Contain a statutory notice of right to cancel at any time.

The foreclosure consulting contract provision is void if it provides for the homeowner to:

a. Waive any rights under the Act.

b. Consent to jurisdiction for litigation or dispute resolution, in any other state.

c. Consent to a choice of laws provision applying laws of any other state.

d. Consent to venue in any county other than the county where the property is located.

e. Pay any costs or fees incurred by the consultant to enforce the contract other than court costs and filing fees if successful in a circuit court action.

Section 5: Cancellation

Cancellation is effective if it is given to the address, fax number, email address, or in writing by mail. If in writing by mail it is effective when deposited in the mail. There is a rebuttable presumption that the notice was received if by fax or email. The homeowner has an obligation to pay for services provided up to cancellation within 60 days. Failure to pay does not revoke the notice to cancel. When both parties have signed a foreclosure consulting contract, the consultant must provide the homeowner with a signed and dated copy along with a cancellation form as proscribed in the statute. The contract may not require the homeowner to use the form, and a written notice however expressed is sufficient.

Section 6: A foreclosure consultant may not:

a. Claim, demand, charge collect or receive compensation unless he has performed in good faith under the contract each service contracted to be performed.

b. Receive in excess of 9% per year interest on any services performed, loan advanced or monies paid or advanced to the homeowner under the contract.

c. Take a wage assignment, lien on real or personal property as security.

d. Receive compensation from a third party in connection with the services unless it is fully disclosed to the homeowner.

e. Directly or indirectly acquire an interest in a residence in foreclosure or default from a homeowner with whom they have contracted for services.

f. Receive compensation from a third party for facilitating an equity conveyance under Section 9 with a homeowner with whom they have contracted.

g. Take a power of attorney from a homeowner except for the purpose of obtaining or inspecting documents.

h. Induce or attempt to induce a homeowner to enter into a foreclosure consulting contract that is not in compliance with this Act.

i. Make any false or misleading statements regarding their service, the contract, or the residence.

Sections 9 to 14: Equity Conveyances

Beginning March 18, 2008

Section 9: Definitions

a. Defines “equity conveyance” as the transfer of an interest in a residence in foreclosure from a equity seller to an equity purchaser or another acting in association with them that allows the equity purchaser or other person to obtain legal or equitable title to all or party of the residential property. It includes a conveyance or agreement for one from the equity purchaser or its agent to the equity seller to allow him/her to remain in possession of the property during or after termination of the foreclosure process.

b. “Equity conveyance contract” means a written contract between an equity seller and an equity purchaser that contains an agreement for an equity conveyance.

c. “Equity recapture payment” means the resale price of the property less:

a. Amounts owing for liens or encumbrances created by the equity seller.

b. Amounts paid after the transfer to the equity purchaser on encumbrances created by the equity seller.

c. Cash received by the equity seller from the equity purchaser under the equity conveyance contract.

d. Title, escrow and other customary closing costs incurred by the equity purchaser under the contract or because of the resale.

e. Real estate commissions and charges incurred by the equity purchaser under the contract or because of the resale.

f. Prorated charges for taxes and HOA dues for the period prior to the transfer by the equity seller.

g. Attorneys fees incurred by the equity purchaser under the contract or because of the resale.

h. Reimbursement for actual repairs and maintenance.

i. Reimbursement for construction improvements.

d. “Resale” is defined as the sale to a bona fide purchaser of residential real property that is subject to an equity conveyance contract. The property must be residential one to four units which is owner occupied and a notice of default has been recorded.

Section 10: Parties who are not “equity purchasers” under this act: a party to a deed in lieu of foreclosure; a creditor’s committee, trustee or debtor in possession under jurisdiction of the bankruptcy court; a person whose employment for a qualified property is under jurisdiction of the bankruptcy court; a family or living trust in which the equity seller is the beneficiary or a member of the beneficiary.

Section 11: A written contract is required for every equity conveyance. An equity purchaser shall provide an equity seller with a copy of the equity conveyance contract at least 24 hours before the equity seller signs the contract. The contract must:

a. Be written in a language spoken by the equity seller and used in discussions to describe the service or negotiate the terms of the contract.

b. Contain the entire agreement of the parties.

c. Be dated and personally singed by both equity seller and purchaser and notarized.

d. Contain on the first page the name and contact information for the settlement agent to which notice of cancellation may be delivered; the name and contact information of the person to whom the equity seller will transfer an interest in the residence in foreclosure; the address of the residence; the total consideration being given; the time at which the interest is to be transferred to the equity purchaser or other person and the terms of the transfer; any financial or legal obligations that the equity seller may remain subject to including mortgages liens or other obligations that will remain in place; the terms of any post-transfer conveyance or agreement for a conveyance that will allow the equity seller to remain in the home; any provisions for a recapture of equity should the equity seller not return to title among other matters.

e. The equity conveyance contract provision is void if it provides for an equity seller to:

i. Waive any rights under sections 9 to 14; consent to a change in jurisdiction or choice of law; pay fees to enforce the contract other than court costs and filing fees.

f. An equity conveyance may not be carried out using a power of attorney from the equity seller to the equity purchaser or anyone acting in association with them.

Section 12: In addition to any other cancellation or recission right, an equity seller may cancel an equity conveyance contract before the earlier of:

a. Midnight of the third business day after the equity seller signs a document purporting to transfer an interest in the residence in foreclosure; or

b. A foreclosure sale of the residence in foreclosure

A notice of cancellation is effective on the earlier of delivery to the physical address of the equity purchaser or the settlement agent; or actual receipt by the equity purchaser or the settlement agent. The notice may be by fax, email or letter. The purchaser is required to provide the seller with a statutory cancellation form immediately upon their both signing the equity conveyance contract.

The equity purchaser is required to verify that equity seller’s ability to repurchase or if the contract provides for a lease with an option, to make lease payments and repurchase.

The equity purchaser must arrange for the equity seller and the settlement agent to complete a settlement conference before the equity seller transfers any interest under the contract.

If a residential real property is resold within 24 months after the equity seller enters into an equity conveyance contract, the equity purchaser must pay the equity seller cash or consideration in an amount equal to at least 82 percent of the equity recapture payment from the resale no later than 15 days after the receipt of cash or consideration from or on behalf of the purchasers of the property.

The equity purchaser may not:

a. Enter into terms that are unreasonable or unfair to the seller.

b. Represent that they are acting as a financial advisor or foreclosure consultant to the seller or otherwise acting on their behalf.

c. Make a false representation regarding their own professional credentials.

d. Represent that the purchaser is assisting in preventing a foreclosure if the contract does not provide for the seller to completely redeem or regain title.

e. Make false or misleading statements about:

a. The value of the property

b. The proceeds the seller would receive after foreclosure

c. An equity conveyance contract term

d. The equity sellers rights or obligations arising out of the conveyance

f. Before their right to cancel has expired

a. Record or cause to be recorded any document the seller signed

b. Transfer any interest in the property to a third party

c. Encumber or purport to encumber any interest in the property

Section 14: For purposes of determining whether an equity purchaser has violated Section 13 (1) a of the Act, there is a rebuttable presumption that:

a. An equity seller has or will have a reasonable ability to pay for a subsequent Reconveyance of the property if on the date they sign the contract the monthly payments for primary housing expenses do not exceed 60% of the seller’s monthly gross income.

b. If the property is resold within 24 months after an equity seller enters into an equity conveyance contract, the purchaser must provide the seller with a detailed accounting.

c. A bona fide purchaser that enters into a transaction with an equity seller or equity purchaser receives good title to the property, free and clear of:

The rights of the parties to an equity conveyance contract or memorandum of agreement; or any cancellation of the equity conveyance contract.

Sections 9 to 14 of this Act do not impose a duty on the property purchaser, settlement agent, title insurer or title insurance producer regarding the application of the proceeds of a resale of property by an equity purchaser. (However one would be hard pressed to assert that the equity seller was entitled to nothing without total ignorance of the law.)

At the time of presenting an equity conveyance for recording, the equity purchaser shall present a memorandum of agreement for recording in the county where the residential property is located. The memorandum of agreement must be signed by the equity purchaser and the equity seller, witnessed by a notary and in the form provided for by this statute.

The seller also has the right to assert that the equity conveyance is actually an equity mortgage.

Section 20: Additional notice to grantor and occupant by Trustee conducting non-judicial sale. Applies to properties where the notice of sale is sent on or after June 9, 2008.

If a notice of default is recorded for property that is subject to a residential trust deed, the sender of a notice of sale shall, on or before the date the notice of sale is served or mailed, give notice under this section to the grantor by both first class and certified mail with return receipt requested. The form of the notice is set forth in the section. It is titled NOTICE: YOU ARE IN DANGER OF LOSING YOUR PROPERTY IF YOU DO NOT TAKE ACTION IMMEDIATELY. Another section is titled THIS IS WHEN AND WHERE YOUR PROPERTY WILL BE SOLD IF YOU DO NOT TAKE ACTION. And a third section is titled THIS IS WHAT YOU CAN DO TO STOP THE SALE. Information required in the form includes the amount needed to bring the loan current, telephone numbers for parties who can give them details on the loan, and who can personally consult with them to discuss the loan (authorized by the beneficiary). If the occupant is not the grantor, a copy must also be sent to the occupant.

Section 21: Failure to send the notice

If the notice is not sent and/or not actually received by the grantor at least 25 days prior to the date the sale is conducted, the grantor has the same rights as a junior lien or interest holder who was omitted as a defendant in a judicial foreclosure. The purchaser at the trustee’s sale has the same rights as a purchaser at a sheriff’s sale following a judicial foreclosure. We are not certain how far the grantor’s rights extend, but it is possible that they might be able to redeem for up to five years after the date of the sale. If a residential property is insured without proof that this notice was actually received, exception should be made to the rights of the grantor under this Act.

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