Oregon Passes Law Restricting Lender Remedies

Governor Kate Brown recently signed into law House Bill No. 4204, which sets forth certain prohibited activities that apply to a lender of a financing agreement relating to property located in Oregon.  The Bill became effective on June 30, 2020, and applies to an “emergency period,” which runs from March 8, 2020, through September 30, 2020, unless extended by the Governor.

During the emergency period, the Bill restricts lenders from treating a borrower’s failure to make payments under the financing agreement as a default, provided that the borrower notifies the lender of their inability to pay resulting from the COVID-19 pandemic.  Although the Bill allows a lender and borrower to modify, defer, or otherwise mitigate the loan at issue, in the absence of such an agreement, the lender is required to defer the payments and allow the borrower to make the payment when full performance of the obligation is due.  Other lender prohibitions include, for example, restricting lenders from charging late fees or penalties, imposing a default rate of interest, and treating such failure to make payment as ineligibility for a foreclosure avoidance measure.

Further, lenders are required to provide written notice by mail to borrowers to inform borrowers of their rights for accommodation under the Bill.  This notice must be provided by August 29, 2020—i.e., 60 days after the Bill’s effective date.  The Oregon Division of Financial Regulation has provided a sample notice.  Note, however, the Bill does not grant express authority to the Division to issue regulations implementing the requirements under the Bill.  Nevertheless, in addition to the sample notice, the Division provided guidance regarding its expectations for compliance with the requirements under the Bill.