Oregon judges have delivered a series of setbacks to servicers and securitization trusts. A recent decision, Hooker v. Northwest Trustee Services, ruled that assignments of the beneficial interest (as in, transfers of the note) needed to be recorded. That makes any foreclosure in the name of the mortgage registry MERS a non-starter, since MERS was never and could never be the holder of the beneficial interest. This will have little impact going forward, since MERS has instructed servicers to stop foreclosing in its name, but there are plenty of foreclosures in the pipeline that were initiated in the name of MERS.
The latest move is that Judge Grand reversed a foreclosure sale due to the failure of the parties representing the lender to satisfy the requirements of Oregon’s recording statute. To put it mildly, foreclosure actions are seldom reversed. The decision is terse but it has wideranging ramifications. The Oregonian provided a good write-up of the case. Key extracts:
A Columbia County judge has blocked U.S. Bank from evicting a Vernonia woman whose home it purchased in foreclosure, concluding in a case with far-reaching implications that her lenders had not properly recorded mortgage documents.
Last week’s action appears to be the first in which an Oregon judge has halted an eviction and declared a foreclosure sale void after the fact. The ruling, if it stands, raises questions about the validity of other recent foreclosures in the state and could create serious problems for lenders and title companies, as well as for buyers of such properties…
A U.S. Bank spokeswoman said the bank would cease further eviction action and assess its “appropriate next steps.”
Nearly all foreclosures in the state occur without a judge’s involvement under so-called nonjudicial proceedings. But this ruling, legal observers say, could potentially divert more foreclosure actions into courtrooms, a more time-consuming and costly proposition that could exacerbate the state’s housing slump.
“This will certainly be problematic for lenders,” said David Ambrose, a Portland real-estate attorney.
It also casts doubt on the validity of already completed foreclosure sales in which lenders resold mortgages without recording the sales in county recorder offices. Many of those questionable transactions, including Flynn’s, involve the Mortgage Electronic Recording System….
The path will remain muddled for the mortgage industry until a definitive case reaches the Oregon Supreme Court or lenders decide to take a different strategy and negotiate settlements with distressed homeowners, real estate attorneys say.
The article has the background of the case and makes clear that this is a qualified win for the borrower, since it is unclear who has title to her condo. She bought it 20 years ago (and therefore has equity in the property) but fell behind on payments after she quit her job and her new business proceeds plus other sources of income weren’t enough for her to stay current.