OREGON FINANCE
An alternative to forbearance is recasting of the loan. This involves rewriting the terms of the loan for the balance owed as a new loan.
If forbearance or recasting is not feasible and the borrower cannot sell the property to pay off the loan or have someone assume his debt, he could voluntarily offer the lender a deed in lieu of foreclosure. In the deed (called an estoppel deed), the borrower relinquishes all rights in the property in return for the lender's agreement to take no further legal action against him. The deed will state that the loan is in default and subject to foreclosure, the deed is being delivered in order to avoid foreclosure, and the consideration for the deed is full cancellation of the debt and release from further recourse against the borrower. The deed will convey title subject to all existing encumbrances, so the lender will be obligated to handle these as if he were the borrower.
Upon payment of the full amount of the bid, the high bidder at the foreclosure sale is issued a certificate of sale from the sheriff, showing the price paid for the property, the date of the sale, and his rights. The certificate does not give him title to the property. He has the right to use and possess the property and can live in it or even rent it out. However, he must keep the property in a reasonable state of repair and cannot permit or commit acts of waste.
If the property is not redeemed, the certificate holder is entitled to keep the rents and profits earned from the property during the redemption period and will receive a sheriff's deed, conveying the title to him. If the mortgage foreclosed upon was a junior mortgage, the certificate holder's rights are subject to all other prior encumbrances. This means, if he does not make payments on those encumbrances, the prior lienholders would be able to foreclose and take the property from him.
After a borrower defaults, a lender will consider: the borrower's equity in the property. the current state of the real estate market. the positions of junior lienholders. the circumstances causing the default. the borrower's attitude and willingness to cure the default.
If the reason for the default is reasonable, the lender can enter into a forbearance agreement, or moratorium, with the borrower. In a forbearance agreement, the lender agrees to delay taking legal action in return for the borrower's agreement to satisfy certain arrangements to cure the default. A moratorium is a type of forbearance agreement in which the lender waives collection of all or part of the mortgage payments for a reasonable period of time to help the borrower cope with financial difficulties. Once the period is over, the borrower would be required to make up the postponed amounts through higher payments, more payments, or a balloon payment at the maturity date of the loan.
To begin a mortgage foreclosure process, the lender will issue a notice of default to the defaulted mortgagor. This is official the notification of the act that constitutes the default and activates the acceleration clause, which declares the entire principal balance and delinquent interest due and payable at once. At that point, the lender has the right to refuse back payments. He may then file a petition with the court to sue for foreclosure and request an order for foreclosure and sale.
Once the suit is filed, it will be placed on the court calendar. When the suit is filed, the mortgagee may ask that a notice of lis pendens be recorded, giving notice of the pending suit and protecting its claim against the property. The lis pendens can be recorded in any county or counties in the state to limit any transactions on other properties owned by the mortgagor in those counties. A title search may also be done to determine the identities of all parties having an interest in the property so notice may be sent to them and they can have the opportunity to redeem the mortgage or appear in court to defend their interests.
He may have his entire loan right restored and obtain another loan for up to the current maximum loan limit if the original loan has been paid in full or transferred to another and if his original home was:
destroyed by fire, flood or other natural hazard. taken through condemnation. lost or disposed of for a compelling reason, through no fault of the veteran (e.g., a job transfer or change of employment to another locality).
Oregon is a lien theory state. In Oregon, a mortgage or a trust deed will create a voluntary contractual lien, and that lien is a specific lien against the property as security for the promissory note. During the period of the indebtedness, the borrower holds the title, retaining legal ownership while the property is encumbered by the lien.
Because the mortgage and trust deed create a lienholder's interest in real estate, the Statute of Frauds requires that they be in writing and signed by the owner of the property. They need not be signed by a lender or be recorded to be valid between the parties. However, lenders will record them, so they can establish priority of their lien and provide constructive notice of their lien right.
A default is a breach of any of the terms or conditions of a loan agreement. Default may result from any of the following:
Failure to make the periodic payments specified in the note or contract when they are due Failure to obtain the lender's permission to allow the loan to remain in effect prior to alienating the property Failure to maintain the property such that its value was seriously reduced Removal of improvements from the property Sale of a portion of the land without the lender's permission Failure pay the amounts due for reserves for taxes and insurance Failure to pay for other liens having priority over this one Failure to keep an adequate amount of property insurance in force to cover the lien Use of the property for an illegal purpose, e.g., in violation of a zoning ordinance Misrepresentation on the loan application, such as stating the property would be used as a residence and immediately renting it out, or lying about income, work status, or the like
Following a judicial foreclosure and sale, the borrower must give up possession of the property but retains legal title until the end of a statutory redemption period. Under the statutory right of redemption, the mortgagor, or his heir, devisee, or even a grantee who has acquired the legal title to the property by any other means, can at any time within 180 days after the date of sale, redeem the property, by paying an amount equal to the total of the following:
The amount of the price bid by the certificate holder The amount of any property taxes the purchaser may have been required to pay Any money necessarily expended by him to prevent waste All sums he may have been required to pay on prior liens 9% annual interest on every payment made by the purchaser Minus the amount of rents and profit the purchaser obtained from the property while it was in his possession At the time of redemption the judge or the court would determine the exact amount necessary to redeem.
In a trust deed there are three parties: the borrower (grantor), the lender (beneficiary), and the third party (trustee). If a grantor defaults, the beneficiary may sue on the note, foreclose through judicial foreclosure, or foreclose through a trustee's sale. number_3.png A trustee can only be an attorney, a bank, trust company, or savings and loan association, a title insurance company, a licensed escrow agent, or a federal government agency. The trustee cannot be the borrower or the beneficiary. This is because the trust deed gives the trustee a power of sale, which allows the trustee to foreclose and sell the property on behalf of the beneficiary without the need to go through judicial foreclosure procedures in court.
The power of sale is not the legal title to the property. It is only the right to foreclose out of court.
Strict foreclosure would be used by a vendor who wants to regain clear title to the property rather than have the court force the sale of the property. It requires litigation to ask the court to declare the buyer's interest null and void and to allow the lender to take all rights to the title of the property without a judicial sale of the property. To begin the foreclosure process, the vendor, through his attorney, issues and records a notice of default, stating that if the default is not corrected the vendor will seek a remedy in court. If the default is not cured, the court will determine whether or not the vendee has actually defaulted on the contract terms and whether or not the contract was reasonable. It may then issue an interim decree (called an interlocutory decree), stating the amount due on the contract.
The vendee is given a specified time (generally 90 days to one year) to pay that amount due before the property would be foreclosed. This right to pay off the debt prior to foreclosure is called an equitable right of redemption. If the vendee fails to redeem within the specified period, the court will issue a final decree, foreclosing the vendee's interest in the property and giving the vendor full legal title. From that point, the vendee is allowed no further redemption right.
To get the loan, the veteran must reside in Oregon at the time of application, be buying a home in Oregon and be an honorably discharged veteran who served on active duty: for at least 210 consecutive days (unless released earlier because of a service- connected disability), or for less than 210 consecutive days but served in an area for which a campaign or expeditionary medal was authorized. He must apply for the loan within 30 years from the date of release from active duty.
To qualify for the loan, the veteran must give the ODVA a copy of his military separation report (Form DD-214) and an eligibility application. He must get from the ODVA an eligibility certificate, listing the maximum amount he may borrow, and take it to the ODVA office or an approved lender to apply for the loan.
One legal remedy is called rescission. Rescission is an agreement between the parties to the contract or a court order to cancel and no longer recognize the validity of the agreement. With a rescission, both parties are restored to the same position as if they had never entered into the contract at all. This would be the remedy when:
the parties to an installment contract agree that there has been a serious misunderstanding about some element in the contract; or when a court declares a contract void on the basis that fraud or misrepresentation improperly induced one of the parties into the agreement in the first place; or when a vendor is unable to deliver marketable title to a vendee.