The Oregon Supreme Court ruled earlier this month in two cases that will have a major impact on how foreclosures are handled in Oregon.
For decades most foreclosures in Oregon have been handled out of court. That is, until a couple borrowers questioned whether or not the Mortgage Electronic Registry System (MERS) could legally file foreclosure on behalf of lenders. In July 2012 the Oregon Appeals Court ruled that only the beneficiary of a loan, which MERS is not, could file foreclosure. That ruling all but eliminated nonjudicial foreclosures in Oregon for the last 11 months.
This month’s Oregon Supreme Court ruling appears to pave the way for a return to out-of-court foreclosures. While the court found that MERS still cannot foreclose on mortgages itself because it is not the beneficiary of a trust deed, it can act as an agent for lenders and initiate foreclosures in the name of the lender. After the Appeals Court ruling last year MERS changed its own rules and stopped initiating foreclosures under its own name.
From the justices’ decision: “insofar as MERS does not have the right to receive repayment of the notes that the trust deeds in these cases secures, it cannot hold legal title to those trust deeds under the OTDA, or transfer legal title to another entity; but (b) if it can be shown that the original lenders and their successors conferred sufficient authority on MERS to act on their behalves in the necessary respects, MERS may have authority, as the true beneficiary’s agent, to hold and transfer interests in the trust deed.”
A second important ruling from the court answered the question of recording ownership of mortgage loans. The court ruled that lenders can file for nonjudicial foreclosure even if all transfers in ownership of a loan had not been recorded in county records. Written assignments of ownership must be recorded while unwritten assignments, automatic transfers of ownership that follow the promissory note, are not required to be recorded.
It is expected that the ruling from the Oregon Supreme Court will not affect foreclosures that have already been completed. It could, however, bring “shadow inventory” to market. Experts believe that the number of foreclosed homes waiting to be sold has been growing since the Oregon Court of Appeals decision last year.Sources: Housing Wire: Major Oregon Supreme Court Ruling… OregonLive: MERS Ruling From Oregon Supreme Court Bend Bulleting: Rulings Mean Foreclosure Change