Foreclosures fall after SB 1552

Under judicial foreclosures, judgments against homeowners the norm

   Home foreclosures in July fell by 62 percent from the previous month, according to officials with Eugene-based Gorilla Capital.
   In 19 Oregon counties where Gorilla operates, including Jefferson County, there were a total of 428 notices of default recorded during July -- down from 1,138 in June. A notice of default is the official beginning of the foreclosure process.
   From June to July, filings in Jefferson County dropped from 10 to seven. In July 2011, there were only six filings, but so far this year, there has been a 44 percent decrease in filings.
   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.
   Following the passage of Senate Bill 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 nonjudicial 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 nonjudicial foreclosure process involves the sale of the property by the mortgage holder and doesn't require court supervision.
   In a nonjudicial 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, according to Gorilla Capital.
   Gorilla 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.