By Shannon Martinez, Attorney in the Creditors’ Rights & Bankruptcy and Litigation Practice Groups
House Bill 4204 (HB 4204) was signed into law on June 30, 2020, after a short, special session of the legislature. House Bill 4204 is known as the “Foreclosure Moratorium;” however, that name is a misnomer because it does a lot more than halt foreclosures in the State of Oregon. The language of HB 4204 has been the subject of debate since its passage and has caused a lot of confusion and concern for lenders. Below is my “top 10 list” of things everyone should know about this bill, regardless of whether or not you are a lender.
- It voids foreclosure sales that already occurred between March 8 and its passage on June 30, 2020. Unless the sale falls within one of the very limited exceptions, prior sales are automatically void. Any purchaser at a foreclosure sale that occurred during this time does not have a title or any rights to the property, as if the sale never happened. The party being foreclosed (the borrower) retains all rights to the property. There are some exceptions, but they are very technical and limited. The following are exempted from this rule: judgments of foreclosure and sale, writs of execution or notices of a trustee’s sale that: (A) were “issued or given” prior to March 8; (B) occur in connection with a tax foreclosure; or (C) occurs after a person recorded a notice of intent to abandon real property or a judicial order that authorizes abandonment of real property. The last exception must meet the requirements under Oregon Revised Statutes (ORS) 93.770.
- It does more than stay foreclosures in Oregon. Subsection (3) of HB 4204 contains a lot of restrictions that apply if the borrower provides the required notice. Some examples include prohibiting lenders from calling the loan in default, requiring the lender to defer payments and prohibiting the following: imposing a default interest rate, imposing or collecting any fee or charge for the default (such as late charges, other penalties, and attorney fees) and requiring or charging for an inspection or appraisal. These restrictions apply during the “Emergency Period” which is March 8 to September 30, 2020 (unless extended by the Governor). In addition to its prohibitions, HB 4204 also imposes an affirmative duty on the part of the lender to send written notice by mail to the borrower by no later than August 29, 2020 (which is a Saturday) informing the borrower of their rights under HB 4204. Regardless of these prohibitions, it does allow a lender and borrower to otherwise reach an agreement to modify the loan, or forbear or defer payments.
- It doesn’t just apply to Oregon loans or real property. HB 4204 applies to any “Financing Agreement.” A Financing Agreement includes any contract under which a borrower must make payments to a lender to satisfy an obligation secured by “subject property” and retail installment contracts where the subject matter is personal property used as a residence. “Subject Property” includes any real property located in Oregon and personal property that is used as a residence in the state (for example, a mobile home). This, arguably, could also include items such as RVs, floating homes, and boats.
- It doesn’t just apply to financial institutions or banks. HB 4204’s prohibitions apply to any person or entity that has an outstanding “Financing Agreement” including beneficiaries and trustees under trust deeds, mortgage holders, and a seller under a land sale contract and agents and employees of these parties. There is one exception – the notice requirement from the lender to borrowers only applies to lenders “registered to do business in Oregon,” which appears to mean any company or organization registered in the state and does not just include financial institutions.
- It allows a person to sue and recover damages for violating the statute. A borrower can sue a lender that took an action prohibited by HB 4204 if the borrower suffers “an ascertainable loss of money or property” because of the lender’s action. It also allows the prevailing party to recover its attorney fees and costs. It does not provide for any deadline or time frame for filing such a lawsuit.
- It does not just stay a foreclosure but could dismiss a lawsuit altogether. A court cannot enter a judgment of foreclosure or issue a writ of execution during the Emergency Period. If you have a pending foreclosure case, or the court issued one of these (even before HB 4204 went into effect), then the court must dismiss your case and you would have to refile after the Emergency Period is over unless you otherwise meet one of the exceptions I explained in Item 1 above.
- It does not require written notice for a borrower to get the accommodations under the statute. With regard to foreclosures, these prohibitions apply regardless. In other words, no foreclosure can be started or completed during the Emergency Period. If the borrower wants to avoid default, and delay payments and other charges, the borrower is required to give “notice” to the lender. The notice must say that the borrower is unable to make the payments due and must attest that their inability to pay is a result of the loss of income due to COVID. Additionally, if the Subject Property is a commercial or residential property with more than four units, then the borrower must provide financial statements with the notice or other evidence that demonstrates a loss of income due to COVID and disclose if the borrower received any funds under the Paycheck Protection Program (PPP loan). Notably, none of these notice requirements say “written” notice.
- Borrowers have a different deferment schedule than tenants. HB 4213 (known as the “eviction moratorium”) also passed on the same day as HB 4204. HB 4204 gives borrowers relief until September 30, 2020. Borrowers will need to begin paying their lenders in October 2020 and the past due payments during the Emergency Period are then due at the end of the loan. HB 4213 halts evictions from the same period of time. Tenants are required to begin paying monthly rent again in October 2020 and also gives tenants the additional benefit of deferring rental payments due during the Emergency Period for another six months, or until March 30, 2021.
- It does not stop tax foreclosures. Counties who are foreclosing for past due property taxes are exempt from all requirements of HB 4204. Practically speaking, this means that someone could still be foreclosed from their home for failure to pay taxes. The lender has no recourse to stop this during the Emergency Period other than choosing to pay the past-due taxes. However, if the lender pays the taxes, they would not be allowed to recover them from the borrower until after the Emergency Period expires.
- It does not give any time limitations for the borrower’s notice or response. As explained above, HB 4204 requires that the borrower provide notice to the lender in order to gain the protections of the statute. However, the statute does not say when the notice needs to be provided and does not give the lender a deadline to respond or take any action after receiving the notice. It also provides no guidance or rules for the scenario where the lender denies the borrower relief under the statute, or where the borrower sends notice after the lender has taken action on the default.
If you have questions about HB 4204 or need help navigating the law in your particular case, please contact Shannon Martinez or another member of the Saalfeld Griggs’ Creditors Rights team for guidance.
Shannon Martinez is a partner in the Litigation and Creditors’ Rights & Bankruptcy practice groups and a member of the Financial Services and Construction Industry Groups. The information in this article is not intended to provide legal advice. For professional consultation, please contact Shannon at Saalfeld Griggs PC. 503.399.1070. firstname.lastname@example.org © 2020 Saalfeld Griggs PC