For decades most home foreclosures in Oregon were “non-judicial.” Lately they have been mostly “judicial.” What’s a “judicial” foreclosure?
A Little Recent History
Judicial and non-judicial foreclosures involve very different procedures. For many years Oregon home foreclosures were predominantly non-judicial. Those do not involve a lawsuit filed in court but rather follow a detailed process laid out in the state statutes. Because in normal circumstances the non-judicial procedure is faster and cheaper for the foreclosing lenders, that’s what they mostly used.
But the last several years have been anything but normal. 2012 saw years of battles between mortgage lenders and homeowners culminating in two events. These events caused a shift to judicial foreclosures, a procedure that does involve a lawsuit filed in court by the mortgage lender against the homeowner. First, the Oregon Court of Appeals ruled that foreclosing lenders were unlawfully short-cutting the non-judicial procedures (involving the recording of mortgage ownership changes among mortgage creditors). And second, a state law was passed giving homeowners in non-judicial foreclosures a right to mediation with their lenders. Lenders reacted to these two events by largely ditching non-judicial foreclosures and filing judicial ones instead. So if your home is currently being foreclosed in Oregon, there’s a good chance you are in a judicial foreclosure. (There is currently appears to be a shift back to non-judicial foreclosures, but we’ll get to that some other time.)
Judicial Foreclosure
A judicial foreclosure is, as mentioned above, a court proceeding. There are two major steps the mortgage lender must take to complete such a foreclosure. First, it must get a judgment of foreclosure. Second, it must have the sheriff sell the house.
The Lawsuit and Judgment
A judicial foreclosure begins when your mortgage lender sues you by filing a formal Complaint in the local county Circuit Court. The Complaint describes the debt, states that you are in default, specifies the amount owed, and asks the court to allow the lender to foreclose its lien and take possession of the property because of your non-payments.
The lender must then serve this Complaint on you and any other borrowers, and usually also on anyone else on the title that the lender wants to clean off the title. The Complaint is served with a Summons, telling you and any other defendants to appear and respond to the Complaint if they want to object to it.
You can be served the Summons and Complaint in person (by a process server or a sheriff’s deputy), or through a member of your household, or sometimes even through your place of employment. If you can’t be served through these usual means, with permission of the court the lender could serve you by attaching the Complaint and Summons to your front door, by publication in the newspaper, or by sending them to you by certified mail.
Once your lender has served the Complaint on you and whoever else needs to be served, it must then wait 30 days to see if you or any other defendant will file a formal response—an Answer—to the Complaint. If you or any other defendants do not file an Answer within that time, then the lender can ask the court for a “default judgment” against you and the other non-responding defendants. It does this by filing a motion for an order of default, which is a request to have the court order that, since you did not file an Answer, the lender is entitled to a judgment of foreclosure. Immediately after that order is signed, the lender can file a proposed judgment for the total amount owed, including its foreclosure costs—attorney fees, court filing fees, service and other out-of-pocket costs. The judge signs the judgment if it appears to him or her that the lender has gone through the necessary steps appropriately.
Contesting the Foreclosure
When you receive the Complaint, before the time to do so expires you can file an Answer disputing the facts alleged there (such as by asserting that certain payments were in fact made). Or you can offer defenses to the allegations or present counterclaims alleging illegal behavior by the lender. If you can show that there are differences of facts that call into question the lender’s right to foreclose, and the matter can’t be resolved through a settlement, then the court will hold a trial to determine whether the foreclosure should happen.
The reality is that most of the time, the foreclosure lawsuit proceeds without objection by the homeowner because he or she is indeed in default and the facts presented by the lender are accurate, or even if those facts are not precisely accurate they are close enough that foreclosure is legally appropriate. Even if the homeowner does have some legitimate objection either as to the facts or the law, for practical reasons—the cost of litigation and the lack of available funds for just about anybody facing foreclosure—it is extremely difficult to mount a successful defense of a foreclosure.