What is foreclosure?
Foreclosure is the legal process a lender initiates to force the sale of
a mortgaged property when the borrower has not met the terms of the mortgage.
Foreclosures can also be initiated by others having a lien on your property
such as the county if you don't pay property taxes.
How does the foreclosure process work?
There are two common types of foreclosure processes in Oregon - judicial
and non-judicial. The most regularly used process in this state is the non-judicial,
where the document securing the loan is a deed of trust. The parties involved
are the financial institution or beneficiary, which is the institution you
owe the money to; the trustee, which is the neutral party to whom you conveyed
or transferred temporarily the title of your house to be held in trust until
your loan is paid off; and you as a borrower or trustor/grantor.
One of the most important components of the foreclosure process is the proper
procedures of notification. For purposes of illustration, we will briefly
discuss the process of foreclosure by "advertisement and sale,"
which will start if you, the homeowner, are not making your mortgage payments
as agreed and they have been continuously late for at least 60 to 90 days.
After trying to contact you to have you bring your mortgage payments current,
the financial institution will give instructions to the trustee to start the
foreclosure process or, in lending jargon, "accelerate" the loan.
First, the trustee will send out a notification of sale to you and all parties
with an interest in the property. This notification lets you know your home
is in the foreclosure process and it will be filed in the county or counties
where your house is located. At this point the information about the loan
in default and the foreclosure process becomes public information.
The notification of sale should include the following:
- Your name(s) and address, the names of the trustee and financial institution.
- The legal description of the property and often the commonly known address
- Information about the records within the county where the notification
of sale has been recorded
- The reason why your house is in foreclosure
- The total amount(s) owed
- The decision made to sell the property to satisfy the debt
- The date, time and place of the sale
- Your rights under state law to stop the foreclosure process if you bring
your loan current, including paying expenses incurred by the financial institution
to cover the foreclosure process.
You have the right to reinstate your loan by bringing your loan current,
in addition to paying the expenses mentioned above, but you should do this
no later than 5 days before the sale (auction date) of the house.
At least 20 days prior to the sale of the property, the trustee should publicize
for the last time the sale/auction in a local newspaper in the county or counties
where the property is located. The publication will also include the date,
time and place where the sale of the property will take place.
The buyers of the property will be entitled to take possession of the property
ten (10) days after the auction date. Anyone interested, including yourself,
may present a bid to buy the house.
Effective June 9, 2008, a new state law – the Mortgage Rescue Protection
Act – requires trustees to provide homeowners a “notice of home
loss danger.” The trustees are required to provide this notification
to the homeowner at the same time or before the required notification that
the house is in foreclosure.
The purpose of the notice is to promptly and clearly notify homeowners who
occupy the property as their primary residence, about the risk of losing their
homes and, if possible, what homeowners could do to try to save their homes.
The notification also should include a toll-free number where homeowners can
call to get information about approved non-profit organizations that provide
foreclosure prevention counseling programs in different areas of the state.
Also, the law and the notice provide homeowners with the opportunity to seek
legal assistance if they meet the definition of low income under federal guidelines.
For more information on foreclosure prevention counseling and legal assistance,
please see the resources section of this publication or call the telephone
numbers provided in the required notifications. If you receive such notification,
we strongly recommend calling the toll-free number provided and seek help
from an approved counselor or legal assistance in your area. Also, you can
find the contact information in the resources section.
Also, if you do not pay your annual property taxes to the county or counties
where your house is located, after three years of unpaid property taxes, the
county will start the foreclosure process.
Proper procedures of notification must be followed. You will receive in your
annual property tax statements the notification about when your house is subject
to foreclosure.
What if my house sells for less than I owe?
If your house is sold at auction or is transferred to the lender and the
amount for which it was sold or transferred is not enough to cover the balance
of your loan, the financial institution, with certain exceptions, may have
to cancel or forgive the balance between the fair market value of the house
and the amount you owe. This balance or deficit is also known as "cancellation
of debt." The institution will file the applicable IRS forms with the
amount(s) owed and other relevant information. You will receive a copy of
the applicable 1099 form(s) in reference to the amount "forgiven."
With certain exceptions, you may have to include this amount as part of your
income when you file your income taxes. Talk to a tax adviser about the potential
impact on your tax filings.
A recent law, the "Mortgage Forgiveness Debt Relief Act" amending
the Internal Revenue Code, provides with additional exclusions for some homeowners
who lost their homes, if occupied as their primary residence, to foreclosure
and the lender canceled or "forgave" a debt secured by the house.
This new law can be applied for residential discharged debts of up to $2 million
($1 million if married filing separately) made on or after January 1, 2007,
but before January 1, 2010.
For additional information please see our resources section for the IRS web
site or contact your tax advisor.
How can I save my house?
A new option for home owners facing the risk of foreclosure because of conventional
(non-FHA) loans with adjustable rates, have sufficient income to make the
mortgage payment, and a history of timely mortgage payments made before the
interest rates changed, may be the "FHASecure" refinance loan program
under the Federal Housing Administration. To learn more about this refinancing
option, please visit the web site link available in our resources section
under FHASecure.
For homeowners 62 or older another option maybe a loan program called reverse
mortgage. There are various types of reverse mortgages, the most common being
the Home Equity Conversion Mortgage (HECM) administered by the Federal Housing
Administration (FHA,) and the HomeKeeper, which is a Fannie Mae loan product.
These type of loans, unlike a regular mortgage, does not to have to paid back
unless the house is no longer occupied as primary residence or is sold. It
is very important that you seek counseling prior to obtain this type of loan,
because it may not be the type of loan you are interested in. Please see in
the resource section of this brochure about how to find an HUD approved non-profit
organization near you offering counseling on a reverse mortgage.
What are foreclosure scams?
Homeowners facing foreclosure should beware of foreclosure scams. Scammers
can cause you to lose both your home and the equity you have built. Many scammers
contact homeowners offering to "save" their houses. Information
about your property is a matter of public record and fairly accessible by
anyone interested in obtaining it. In addition to the information recorded
with the county when you bought your house, notifications of default filed
by the lender or a lien holder or if the house is subject to an auction or
to be foreclosed are all public record.
Unfortunately, unscrupulous individuals can use this information to take
advantage of homeowners in distress. Other times, homeowners facing foreclosure
may respond to ads offering to pay cash immediately for houses. Although this
sounds like a quick solution, it may not be the right option if your ultimate
goal is to keep your home. And you need to be very careful, because many of
these offers may also be scams. Scammers are particularly interested in properties
where homeowners have been living for a long time or there is an indication
the homeowner has built a significant amount of equity. The schemes vary depending
on what the scammer is trying to obtain.
For example: Scammers advertise their services to negotiate with the lender
on behalf of the homeowner to save the house. They often collect fees up-front,
usually one month's mortgage payment. The scammers prohibit the homeowner
to contact the lender so the process will not be "disrupted." In
many cases, the scammers do very little or nothing to help consumers. In other
cases, scammers will convince the homeowner to convey or give up the title
of the house with the promise to return the house after it has been taken
out of the foreclosure process. Scammers commonly pay the homeowner an amount
significantly less than the real value of the home, sometimes as little as
$1. In some cases, the deal includes a rental agreement where the homeowner
pays rent, which can be more than the original mortgage payment. The homeowner
is still responsible for the payment of taxes, insurance, and other obligations
as if nothing has changed except for the ownership of the house. Since the
homeowner no longer has the title, the scammer can evict the homeowner if
he or she does not pay the rent.
The Mortgage Rescue Protection Act also provides additional protection for
homeowners facing foreclosure when approached by companies or individuals
offering to assist in negotiating with the lender or financial institution
to save a home or offer to pay off a loan on the homeowner’s behalf.
The law identifies these individuals or companies as "foreclosure consultants"
and "equity purchasers."
The law requires that contracts offered by either foreclosure consultants
or equity purchasers must be clearly disclosed and provided to homeowners
at least 24 hours before they are personally signed and dated. The law also
gives homeowners the opportunity to cancel the contracts within the time frame
the law allows, as long as the contracts include the required contact information.
If you make the decision to use the services to help you save your house
or any type of assistance when your house is at risk, you should take the
time to read the entire contract before you sign it! While the law has some
protections and restrictions to prevent fraud, signing a contract means you
agree with the terms and conditions included in it. It is strongly recommended
you seek legal assistance to make you are protected by the provisions of this
new law. The Statutes section provides additional
foreclosure information.
Resources
The Division of Finance & Corporate Securities has a free publication
for consumers "Foreclosure, you can avoid it." For a free copy,
please contact:
(503) 378-4140 Toll-free (866) 814-9710, or write to:
DFCS
Consumer Information Program
350 Winter Street NE, Room 410
Salem, Oregon 97301
You also can download the brochure at:
www.dfcs.oregon.gov/pdf/3496e.pdf
For property tax information in Oregon counties:
bluebook.state.or.us/local/counties/counties.htm
Department of Revenue:
(503) 378-4988
www.oregon.gov/DOR
For information on construction or "mechanic's liens:"
Construction Contractors Board:
(503) 378-4621
www.oregon.gov/ccb
For information about your mortgage payments rights:
Department of Housing and Urban Development (HUD)
National Servicing Center:
(888) 297-8685
www.hud.gov
To learn more about your rights regarding your mortgage payments:
Federal Trade Commission
Mortgage servicing publication
www.ftc.gov/bcp/edu/pubs/consumer/homes/rea10.shtm
For information about the "FHASecure" loan program
1-800-CALL-FHA
http://portal.hud.gov/portal/page?_pageid=33,717441&_dad=portal&_schema=PORTAL
For information on Fannie Mae's "HomeSaver Advance" loan program
www.efanniemae.com/sf/servicing/homesaveradvance.jsp
For a list of foreclosure counseling agencies in your area:
800-SAFENET or 800-723-3638
www.dfcs.oregon.gov/ml/foreclosure/counselors.html
Foreclosure Hotline:
(888) 995-HOPE,
(888) 995-4673
Housing Connections
www.housingconnections.org
Dial 2-1-1
www.211info.org
To report foreclosure scams:
State Attorney General Office:
(877) 877-9392
www.doj.state.or.us
Freddie Mac - Avoid Fraud
a video explaining how foreclosure scams work
www.youtube.com/AvoidFraud
To learn more about cancellations of debt (COD) income:
www.irs.gov/newsroom/article/0,,id=174034,00.html
and
www.irs.gov/faqs/faq4-4.html
Reverse Mortgages
Information about the Home Equity Conversion Mortgage (HECM)
www.fha.gov/reverse/index.cfm
Information about Fannie Mae's HomeKeeper
www.fanniemae.com/homebuyers/pdf/findamortgage/mortgages/Homekeeper_Fact_Sheet.pdf
To obtain more information about the "FHASecure" refinancing loan
program
www.fha.gov/about/fhascusqa.cfm
Verify an Oregon mortgage lender licenses/registration
Oregon Division of Finance and Corporate Securities (DFCS)
www4.cbs.state.or.us/ex/dfcs/dfcslic/mortgage_lender/
File a complaint against a lender
Banks
www.cbs.state.or.us/dfcs/complaint.html#banks
Credit Unions
www.cbs.state.or.us/dfcs/complaint.html#cu
Mortgage companies
www.cbs.state.or.us/dfcs/complaint.html#ml
Statutes
Foreclosure- related Oregon Revised Statutes
Chapter 86
www.leg.state.or.us/ors/086.html
Chapter 87
www.leg.state.or.us/ors/087.html
Chapter 88
www.leg.state.or.us/ors/088.html
Collection of property taxes and delinquent taxes
Chapter 311
www.leg.state.or.us/ors/311.html
