As you undoubtedly know, our nation is experiencing a mortgage crisis, which is resulting in a significant increase in the number of foreclosures. Fortunately, Oregon and Washington are experiencing foreclosures at a lower rate than other areas of the country, particularly Arizona, Nevada and Florida.
In response to the nationwide increase in foreclosures, the Oregon legislature, along with the federal government and other state legislatures, has passed reform legislation that may ease the impact the mortgage crisis is having on our communities. In February 2008, the Oregon House and Senate unanimously passed House Bill 3630, and in March 2008, the governor signed the Bill into law.
House Bill 3630 contains many protections for real property owners who may be threatened with foreclosure or may need assistance in straightening out their financial affairs. This article will address some of the more salient changes instituted by passage of House Bill 3630, but will certainly not be all inclusive, as the Bill is both lengthy and very detailed.
House Bill 3630 deals primarily with “foreclosure consultants” – those who offer to assist homeowners who are at risk of losing their homes. In times of financial hardship, we hear more about individuals who claim to have answers to financial problems, and provide assistance to those in financial trouble in exchange for compensation. For instance, with an increase in the number of short sales taking place in the real estate market, we have seen many short sale “experts” advertising their services in assisting homeowners in negotiating with lenders. Although there is nothing illegal or improper about these consultants or “experts,” the Oregon legislature perceived that some individuals were potentially taking advantage of many consumers, who were undoubtedly mired in financial trouble and desperate to find a solution. Accordingly, House Bill 3630 outlines a number of requirements governing those who fall under the definition of “foreclosure consultants” contained in the Bill.
House Bill 3630 defines a “foreclosure consultant” as an individual who provides services to homeowners to accomplish one of the following:
(a) Prevent, postpone or stop a foreclosure sale.
(b) Obtain a forbearance from a beneficiary or mortgagee.
(c) Assist the homeowner in exercising a right of redemption.
(d) Obtain an extension of the period within which the homeowner may reinstate the homeowner’s obligation.
(e) Obtain the waiver of an acceleration clause that is:
a. Contained in a promissory note or contract; and
b. Secured by or contained in a deed of trust for, or mortgage on, a residence in foreclosure or in default.
(f) Assist the homeowner in obtaining a loan or advance of funds.
(g) Avoid or ameliorate an impairment of the homeowner’s credit resulting from a recorded notice of foreclosure or default.
It is important to note that real estate licensees, mortgage brokers, escrow officers, attorneys, and tax-exempt organizations that provide counseling or advice to homeowners are exempted from the requirements under House Bill 3630. However, despite being exempt from the requirements, it is important for real estate licensees and others to be familiar with the requirements, and to ensure they avoid recommending that their clients work with consultants who fail to comply with the newly established requirements. Real estate licensees may risk violating duties and obligations to their clients by referring them to, or formally associating with, consultants who fail to comply.
Any individual qualifying as a “foreclosure consultant” under House Bill 3630 must comply with a number of stringent requirements that ensure homeowners are given ample disclosures and are not taken advantage of. One such requirement is that a “foreclosure consultant” must provide a written foreclosure consulting contract to a homeowner, at least 24 hours before the homeowner signs the contract, written in a language spoken by the homeowner that was used to communicate with the consultant. In addition, the language contained in the contract must be in 12 point type, and must fully disclose the services to be provided and the terms and total amount of compensation to the consultant. Furthermore, House Bill 3630 provides homeowners with a right to cancel a foreclosure consulting contract at any time without penalty by providing written notice via mail, facsimile or email to the consultant.
Overall, provisions of House Bill 3630 relating to “foreclosure consultants” attempt to define their relationships with potentially vulnerable homeowners by restricting the method by which consultants are compensated and interest rates they may charge. In addition, the Bill requires consultants to fully disclose all relevant information to homeowners.
Notices of Default
Another significant change to current foreclosure laws contained in House Bill 3630 relates to the form of notice of default that must be served on a property owner as part of the foreclosure process. Previously, the notice was required to contain information on the amount(s) owed by the property owner, the date, time and location of the foreclosure sale, and the method by which property owners could cure the default or satisfy the indebtedness. However, the notice was not necessarily written in plain English, and was not required to contain helpful contact information for the lender. In addition, Oregon law did not previously require lenders serving a notice of default to provide property owners with information on governmental agencies, nonprofit organizations, or other groups that may provide assistance to the property owner.
As a result of the passage of House Bill 3630, lenders will now be required to send notices of default that are written in at least 14 point type, and contain information on the background of the default, the amount required to bring the loan current, the daytime phone number of the lender, and the date, time and place of the foreclosure sale. Most significantly, the notice of default is now required to contain information on what the property owner can do to stop the sale, including correct the default, refinance or pay off the loan, call the lender to attempt to negotiate more time or a change in loan terms, or sell the property. The notice of default must also contain information on organizations and governmental agencies the property owner can contact for assistance, and a warning to the property owner about people who may offer to assist him or her in keeping the property. The required form of notice of default undoubtedly protects consumers, and more clearly spells out the options available to the property owner.
House Bill 3630 was intended to assist vulnerable consumers who may be facing foreclosure of their homes, and hopefully will do just that. Although real estate licensees are exempted from being regulated as “foreclosure consultants,” and are not sending notices of default to homeowners who are in foreclosure, it is important for real estate licensees to familiarize themselves with the basics of House Bill 3630 so as to provide a higher level of service to their clients. In addition, licensees are advised to familiarize themselves with the Bill so that they avoid greater exposure to liability in situations in which they may involve themselves with consultants.
This column contains general information only and must not be construed as legal advice.
Questions may be submitted directly to Maylie & Grayson by fax at (503) 775-1765,
by email at or by mail at 7959 SE Foster Road, Portland, Oregon 97206.