Last week, Oregon’s governor signed into law an amendment to the state’s nonjudicial trust deed foreclosure statute. The bill, SB 301, dilutes Oregon’s strict mandate requiring a trustee to effect personal service of the foreclosure notice upon an occupant of the property. Instead, the amendment will allow the trustee to post notice to the property up to three times in lieu of personally serving the occupant.

In the past, the personal service requirement has been problematic, causing significant delays in Oregon’s nonjudicial foreclosure process. Often, occupants intentionally evade service, hoping to stall an impending foreclosure. Many other occupants, such as long haul truck drivers, are simply not home because they have jobs that take them on the road for extended periods. In the case of recreational homes, “occupants” may only be in residence a week or two during the year, making personal service nearly impossible. Even determining whether a home is truly occupied or abandoned sometimes proves impossible.

In situations such as these, occupants may be served only after extensive, expensive and time-wasting stakeouts. Sometimes, service can never be effected. In cases where service starts taking too long or eventually proves impossible, the lender’s only alternative is to terminate efforts at nonjudicial foreclosure and elect the lengthier, more expensive judicial foreclosure remedy instead.

Judicial foreclosures, which involve a 180-day redemption period in Oregon, allow a foreclosing lender to obtain a court order to serve the summons and complaint by means other than personal service. On the other hand, the current Oregon statute offers no alternative to personally serving the nonjudicial foreclosure notice upon an occupant of the property. Adoption of SB 301 means that a lender will never again experience foreclosure delays due to service challenges and will never again need to convert to a judicial foreclosure simply because service has proven difficult or impossible.

SB 301, which amends ORS 86.750(1) and (3), works essentially as follows:

• Service of the foreclosure notice upon “an occupant” must be attempted. If service is unsuccessful, a copy of the notice must be posted on the property on the same day as the first service attempt and a second attempt at service must be made “at least two days after the first attempt”. If service is successful, no further attempts to serve or post are required.
• If a second attempt at service is required and is unsuccessful, a copy of the notice must be posted on the property on the same day as the second service attempt and a third attempt at service must be made “at least two days after the second attempt”. If service is successful, no further attempts to serve or post are required.
• If a third attempt at service is required and is unsuccessful, a copy of the notice must be posted on the property on the same day as the third service attempt and no further attempts at service and no further postings are required.
• An affidavit detailing the posting and/or service of the notices must be recorded prior to the date the trustee conducts the sale.
• The statute’s 120-day notice period before which a sale cannot be conducted commences upon the later of (i) recording the notice of default; (ii) mailing the foreclosure notices to all parties entitled to receive mailed notice; and (iii) the first attempt at service.

Because the date service is first attempted becomes the operative date for counting down the 120 days to sale, no time will be lost in making the second and third attempts to serve or post. Equally important, the amendment does not place a deadline past which service or posting must be completed. Theoretically, errors in service or posting on the second or third attempt can be remedied any time before the sale without losing a sale date.

Routh Crabtree Olsen, Inc. and Northwest Trustee Services, Inc. took the lead in getting this amendment to the legislature. David Fennell, a member of the Oregon State Bar Association Debtor-Creditor Section’s legislative committee, suggested that the committee promote amending the nonjudicial foreclosure statute to provide an alternative to personal service of the foreclosure notice upon “an occupant.”

After the committee rejected David’s suggestion to drop personal service altogether and rely solely on posting, he suggested instead that the committee adopt a serve or post process similar to the one adopted in Idaho. The committee agreed and, through the Oregon State Bar Association’s legislative liaison, found a sponsor for the bill in Oregon’s senate. David prepared the testimony and descriptions for the bill and testified twice in the senate and once in the house on the bill’s behalf.

At Routh Crabtree Olsen, we are proud to have been the impetus that fostered this significant improvement in Oregon’s nonjudicial foreclosure process. It is important to the firm and Northwest Trustee Services, Inc. to maintain a proactive stance in advocating for the development and maintenance of best practices in the mortgage banking industry.

SB 301, amending ORS 86.750(1) and (3), will be effective January 1, 2008..

If you have any questions concerning the effect of this new law, please call David Fennell at 425-586-1929 or contact him by e-mail at dfennell@rcflegal.com.

For previous Oregon articles, click here.