After not taking action and allowing the 2020 foreclosure moratorium to expire on December 31, 2020 (“2020 Act”), the Oregon legislature took action in May to pass House Bill 2009 (the “2021 Act” or the “Act”), reinstating the foreclosure moratorium with respect to “residential” real properties in the State of Oregon. The 2021 Act was signed into law by Oregon Governor Kate Brown on Tuesday, June 1, and, retroactively, to December 31, 2020, reinstates the moratorium on foreclosures as to residential properties only, and reimposes restrictions on certain default remedies. The 2021 Act is effective at a minimum through June 30, 2021. However, the Governor may, by Executive Order no later than June 14, 2021, opt to extend the emergency period during which the moratorium is in effect, through September 30, 2021. The 2021 Act further allows the Governor to issue an executive order no later than August 16, 2021, to extend the emergency period a second time, through December 31, 2021.
Many of the borrowers that the 2021 Act seeks to protect may already be protected from foreclosures by the federal foreclosure moratorium under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, as extended through June 30, 2021. The Oregon moratorium, however, will have a broader reach because it applies to non-federally backed mortgages that are not covered under the CARES Act, and the 2021 Act will likely be extended by the Governor at least through the end of September, if not also through the end of December 2021.
It is important to note, however, that the 2021 Act is less expansive in its reach than the 2020 Act, as it only applies to residential real property. It is thus designed primarily to help consumers impacted by the COVID-19 pandemic, but as it applies to single family residential real property as well as to multifamily units consisting of up to four dwelling units, its impact will not be wholly limited to consumer loans.
Like the prior moratorium, the 2021 Act generally prohibits lenders from commencing, continuing, or concluding nonjudicial or judicial foreclosure sales of properties subject to the 2021 Act during the pendency of the emergency period defined by the Act, which will last at a minimum through June 30, 2021, but may be extended through the end of the calendar year. In addition, there is a provision tolling notices issued in a nonjudicial foreclosure action commenced prior to the retroactive effective date of the Act are tolled until the end of the emergency period, and the 180-day limit for continuance of a nonjudicial foreclosure sale is also is included in the tolling provision during the emergency period defined in the 2021 Act.
The extension also generally gives borrowers the right to give notice any time up to the end of the emergency period that they are unable to make installment payments as a result of the COVID-19 pandemic, and the lender may thereafter precluded from requiring additional monthly payments during the emergency period or invoking many default remedies that could otherwise be available under the loan, including imposition of default interest, late fees, penalties and attorneys’ fees, denying foreclosure avoidance remedies as a result of the default, or charging a borrower for a new appraisal or inspection. Any missed payments may also be deferred to maturity unless the borrower and lender otherwise agree. The 2021 Act provides that even if the borrower previously gave notice of COVID-19-related hardship, the borrower must provide notice again to seek accommodation under the 2021 Act. If a borrower gives oral notice of hardship, the lender may require confirmation in writing that the hardship is due to loss in income related to the COVID-19 pandemic, and also that the borrower does not own more than five subject properties. However, borrowers may not be required to show evidence of their loss of income in order to be eligible for payment forbearance under the 2021 Act.
The 2021 Act also creates new notification requirements for lenders with eligible borrowers in the State of Oregon, and these requirements are in addition to the notifications that were required by the 2020 Act. The 2021 Act generally requires lenders to either (1) notify all borrowers within 60 days of the effective date of the 2021 Act of their right to seek accommodation, or (2) notify all borrowers who fail to make a periodic installment payment of their right to seek accommodation within 30 days of any missed payment. Unlike the 2020 Act, the 2021 Act provides specific language to be included in the notice, which is set forth below:
“If you have experienced a loss of income related to the COVID-19 pandemic, Oregon law allows you to place your mortgage loan in forbearance until June 30, 2021, or later if the law is extended, and defer the missed payments until the end of the loan term. Forbearance is not automatic. You must notify us that you have a hardship to qualify for the forbearance. If you notified us before (the effective date of this 2021 Act), you must notify us again if your hardship has continued and you cannot make payments due on your mortgage loan. Contact us at (contact information) for further information and to request a forbearance. If you have a federally backed mortgage loan, you might also be eligible for forbearance under the federal CARES Act. Please contact us for questions or to request either forbearance option.”
Finally, as with the 2020 Act, the 2021 Act creates a private right of action for damages sustained by borrowers as a result of a violation of the Act, potentially allowing borrowers to recover their actual damages as well as attorneys’ fees. Unlike the 2020 Act, the 2021 Act contains a safe harbor provision for communications sent before the lender received notice of the borrowers’ hardship request, or sent as a result of a bona fide clerical error, provided that the lender does not take any substantive action to collect amounts that are deferred by virtue of the 2021 Act and confirms in writing that the amount for which demand was made remains deferred pursuant to the 2021 Act. Given these provisions, it is unknown whether the safe harbor will be effective at shielding lenders from inadvertent liability under the 2021 Act.
At the time of its passing, the 2021 Act gives the Governor a limited time period in which to decide whether to extend the moratorium past the current expiration date of June 30, 2021, so we expect that the Governor will issue notice of the extension later this month.