Rebooted Foreclosure Avoidance Program Passed into Law

Lawmakers close judicial loophole, forcing bank participation

Oregon Attorney General Ellen Rosenblum invites homeowners who fear they may fall into foreclosure to participate in the new and improved Oregon Foreclosure Avoidance Program.

The program should become available in early August, 61 days after Gov. John Kitzhaber on Tuesday signed into law Senate Bill 1552. The new program, just like the old, requires banks to meet with homeowners face-to-face before foreclosing.

However, the new legislation closes the so-called “judicial loophole” that had crippled the state’s earlier foreclosure mediation efforts. It also allows the Attorney General to take legal action against banks that do not comply with the law.

Rosenblum gave thanks to Gov. Kitzhaber, legislators from both sides of the aisle as well as the tireless consumer advocates whose support saved this program. “With the new legislation, the result will be more mediated settlements and fewer home foreclosures, a win-win for homeowners and banks alike.”

The prior mediation program went active last July. It required banks to mediate with homeowners only in the case of non-judicial foreclosures, which up till last summer was the dominant form of foreclosure. But at that point, most banks moved to judicial foreclosures.

There were extenuating circumstances. An Oregon Appeals Court decision raised questions about the validity of an electronic mortgage registration system that was widely used by large mortgage lenders. Facing that uncertainty, most banks moved to judicial foreclosures conducted in court and overseen by judges.

But in the process, the banks also dodged the mediation requirement.

As a result, Oregon’s Foreclosure Avoidance Mediation Program fielded just 538 cases. Most of them – 340 – were requested by homeowners who were hard-pressed to make their mortgage payments. Of those 340 requests, 94 percent were ignored by the lender. To put those numbers in context, banks filed more than a thousand judicial foreclosures in Oregon in March 2013 alone.

The legislation enjoyed bipartisan support. It passed the House 45-12 and the Senate 22-7.

The legislation also streamlined some recording requirements included in the original program that the banks considered burdensome.

More information is available at http://www.doj.state.or.us/consumer/pages/foreclosure_mediation.aspx

Oregonians who want to participate in the program should contact a housing counselor for initial screening, a required first-step. A list of counselors sorted by zip code is available at www.oregonhomeownersupport.gov.