Monday, August 20, 2012
New Oregon Law Causes Increase in Judicial Foreclosures
EUGENE, Ore. – Home foreclosures in July fell by 62 percent from the previous month, say officials with Eugene-based Gorilla Capital. In 19 Oregon counties1 where Gorilla operates, there were a total of 428 notices of default recorded during July 2012 – down from 1,138 in June. A notice of default is the official beginning of the foreclosure process.
The company recorded a 38 percent year-over-year decrease in notices of default compared to the 694 notices of default filed in July 2011.2
Following the passage of SB-1552 in April, which requires lenders to meet in mediation sessions with homeowners who are facing foreclosure, notices of default spiked in May and June in advance of the new law. Additionally, Gorilla Capital officials observed that the majority of notices of default recorded in July were posted on or before July 10 – one day prior to SB-1552 taking effect.
“In the last 30 days, foreclosures in Oregon have significantly changed,” said John Helmick, Gorilla Capital CEO. “If you are only looking at the non-judicial foreclosures, you’re only getting half of the story – due to the new Oregon foreclosure law, judicial foreclosures have risen sharply.”
The judicial foreclosure process requires a court to supervise the sale of a mortgaged property. In these instances, lenders initiate the foreclosure by filing a lawsuit against a borrower and ultimately a judicial decision is made. The non-judicial foreclosure process involves the sale of the property by the mortgage holder and doesn’t require court supervision.
In a non-judicial foreclosure, if the home sells for less than what is owed to the lender, the deficiency is forgiven and the former homeowner owes nothing to the bank. With judicial foreclosure, the lender receives a judgment for the full amount of the debt and if the home sells for less than the full amount of the debt – which is what occurs in most cases – the money judgment remains against the homeowner. The judgment can be sold and the owner of the judgment can garnish the wages and accounts and lien property of the former homeowner. Thus, by modifying the foreclosure statutes, the legislature has begun a process that will ultimately cause thousands of Oregonians to be subject to judgment liens rather than to have the underwater portion of their mortgage forgiven.
1Gorilla Capital operates in 19 Oregon counties, including: Benton, Clackamas, Coos, Crook, Curry, Deschutes, Douglas, Jackson, Jefferson, Josephine, Klamath, Lane, Lincoln, Linn, Marion, Polk, Tillamook, Washington and Yamhill.
2Percent excludes filings for Clackamas and Washington counties; Gorilla Capital did not expand into these counties until September 2011 and January 2012, respectively.
*Gorilla Capital expanded into the Tillamook and Yamhill counties in April 2011.
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