Oregon Passes Law Restricting Lender Remedies in Response to COVID-19 Pandemic

Oregon Governor Kate Brown recently signed into law House Bill 2009, which, among other things, provides relief to borrowers that were financially impacted as a result of the COVID-19 pandemic by setting forth certain prohibited activities that apply to lenders of financing agreements during the emergency period.  The bill became effective on June 1, 2021, and the bill’s COVID-19 provisions will be repealed 90 days after the expiration of the emergency period.

The bill generally defines “emergency period” to mean a period that runs from December 31, 2020, to June 30, 2021, except that by executive order the Governor may: (i) not later than June 14, 2021, extend the emergency period to September 30, 2021; and (ii) not later than August 16, 2021, extend the emergency period to December 31, 2021. Note prior to the June 14, 2021, deadline, the Governor extended the emergency period to September 30, 2021.

During the emergency period, if certain conditions are met, the bill generally restricts lenders from treating as a default a borrower’s failure to make a periodic installment payment or failure to pay any other amount that is due to the lender on or in connection with an obligation that is subject to a “financing agreement”—i.e., a contract under which a borrower must make payments to a lender to satisfy an obligation that is secured by a mortgage, a trust deed or a land sale contract for real property upon which is situated four or fewer dwelling units used primarily and designed solely for residential use. 

Although the bill allows a lender and borrower to modify, defer, or otherwise mitigate (e.g., agree to a foreclosure avoidance measure) the loan at issue subject to certain conditions, in the absence of such an agreement, the lender must, in lieu of treating a borrower’s failure to pay as a default, defer from collecting the payment during the emergency period and permit the borrower to pay the amount owed at the later of the expiration of the emergency period or the scheduled or anticipated date on which full performance of the obligation is due. 

Lenders are also prohibited during the emergency period from: (i) imposing or collecting charges, fees, penalties, attorney fees or other amounts for the borrower’s failure to make a payment, (ii) imposing a default rate of interest for the borrower’s failure to make a payment, (iii) treating in any manner the borrower’s failure during the emergency period to make a payment as an ineligibility for a foreclosure avoidance measure, or (iv) requiring or charging for an inspection, appraisal or broker opinion of value.  Further, with respect to the borrower’s property, subject to certain exceptions, a lender or trustee may not at any time during the emergency period foreclose a trust deed by advertisement and sale, bring an action or suit to foreclose a mortgage or trust deed, or enforce a forfeiture remedy.

Note the foregoing prohibitions are conditioned on the borrower, during the emergency period, notifying the lender, in writing or orally, that the borrower cannot make the payment because of a loss of income that is related to the COVID-19 pandemic.  The required notice by the borrower does not need to be made more than once, provided that the notice is made on or after the bill’s effective date.

The bill also requires lenders to notify its borrowers who cannot make a payment because of a loss of income related to the COVID-19 pandemic that they may be entitled to relief, provided that the borrowers notify the lender of their hardship.  Note a lender can comply with the bill’s notice requirements by mailing the specified notice to: (i) all of its borrowers within 60 days after the bill’s effective date, or (ii) every borrower that fails to make a payment within 30 days after the borrower fails to make a payment.

Finally, the bill also amends provisions relating to the foreclosure of trust deeds to allow for a resolution conference to occur via remote audio or video communication.