by Erich Paetsch, Chair, Financial Services Industry Group
At the outset of the Covid-19 pandemic, public health measures designed to save lives also dramatically impacted the economy. Concerned about the unprecedented economic impact of public health measures, Oregon’s legislature rapidly created laws with limited public input intending to blunt the economic impacts of public health measures. The Oregon legislature limited the duration of some of these emergency laws because of the uncertain duration of the pandemic. The limits were created by referencing a defined emergency period. Two prominent and controversial examples of legislation using this approach are Oregon House Bill 4204 (Special Session 2020) and Oregon House Bill 2009 (Regular Session 2021).
Both HB 4204 and HB 2009 include language constituting Oregon’s so-called pandemic foreclosure moratorium. Each law limited judicial or non judicial foreclosure activity upon real property in Oregon. Each law could be extended if the public health emergency continued by executive order. HB 4204 was extended by Governor Brown through December 31, 2021, at which time the defined emergency period expired. HB 2009 could also be extended by Governor Brown. HB 2009’s emergency period was extended by executive order several times until it expired on December 31, 2021.
Both HB 4204 and HB 2009 also include corollary requirements in addition to the foreclosure moratorium. The House Bills include restrictions on the contractual rights of a lender if a lender is informed by a protected borrower it cannot pay due to Covid-19. Examples of restrictions include mandating a lender defer missed payments to the maturity date of the loan instead of collecting deferred payments at the end of the emergency period. Both HB 4204 and HB 2009 also restrict lenders from collecting late fees, charging, and collecting default interest or requiring an inspection, appraisal or broker’s price opinion.
To ensure compliance, each Bill also includes a private right of action to recover ascertainable damages and attorney fees for the prevailing party. HB 4204 does not include an exception clause to the private right of action. HB 2009 includes an exception for inadvertent administrative errors.
With the end of the foreclosure moratorium, lenders are free to initiate foreclosure activity in Oregon. However, the end of the foreclosure moratorium is raising questions about whether and how the lender restrictions in HB 4204 and HB 2009 apply. For example, was notice given under either statute or was the notice sufficient? Is a lender at risk issuing payoff statements after April 1, 2022 that include prohibited charges assessed during the emergency period of the Bills, if paid.
Importantly, because HB 4204 and HB 2009 were created to respond to a public health emergency, the laws are expressly limited in duration. Both include language limiting the duration of the foreclosure moratorium and the corollary provisions, including the private right of action. Each House Bill includes the following language: “Section 1 of this…Act…is repealed 90 days after the expiration of the emergency period…”.
Consequently, on April 1, 2022, the remaining provisions of Section 1 of HB 2009 were repealed. The use and inclusion of a repeal statement in both HB 4204 and HB 2009 is unusual. Applying a traditional legal definition, the term repeal suggests that the Oregon legislature intended to rescind and revoke all of HB 4204 and Section 1 of HB 2009. What is less clear is the impact of a repeal means on claims or alleged violations including the private right of action.
Including the express repeal statement is consistent with the purpose of emergency legislation. Upon expiration of the emergency period, the need for the legislation is removed. In the case of HB 2009, the foreclosure moratorium expired before the remaining protection of HB 2009 expired on April 1, 2022. In contract, other sections of HB 2009 were not repealed. For example, the reduction in numbers triggering mandatory resolution conferences before a foreclosure can occur remain.
Increasingly, the enforceability of the lender restrictions in HB 4204 and HB 2009 are being used to prevent or delay the exercise of lender default rights. Considering the emergency nature of the legislation and its stated purpose, the repeal language should be raised by lenders impacted by HB 4204 and HB 2009 to give effect to the legislatures intent and deny efforts to use the legislation to create further delays.
Erich Paetsch is a partner in the Creditor’s Rights and Bankruptcy Practice Group and chair of the Financial Services Industry Group. The information in this article is not intended to provide legal advice. For professional consultation, please contact Erich at Saalfeld Griggs PC. 503.399.1070. © 2022 Saalfeld Griggs PC