Oregon Passes Sweeping Law to Protect Real Property and Residential Secured Borrowers

In response to COVID-19, on June 30, 2020 (effective date), Governor Brown signed into law HB 4204, adopted by the Legislative Assembly in its 2020 Special Session, which imposes significant limits on the default remedies of lenders secured by real property.

All lenders authorized to do business in Oregon must provide notice of the HB 4204 protections by mail to "all of the lender's borrowers" within 60 days following passage of the Act. The law applies retroactively to an "emergency period" commencing March 8, 2020, and ending September 30, 2020, unless timely extended by the Governor's executive order.

The protections apply to all commercial and residential borrowers whose loans are secured by real property or personal property used as a residence. During the emergency period, a lender may not treat as a default a borrower's failure to make payments if at any time during the emergency period the borrower notifies the lender, in form described below, of its inability to make a periodic installment payment or to pay any other amount, and must, absent other mutual agreement:

• Defer collecting the payment;
• Permit the borrower to pay the deferred amount when full performance is due, such as the scheduled maturity date. (A lender may adjust impounds already required in loan documents in accordance with the Real Estate Settlement Procedures Act, taking into account such deferrals.);
• Not impose charges, fees, penalties, default interest rates, attorneys fees, inspection fees, appraisal or broker opinion fees or declare a covenant default;
• Not initiate cash management or impose a lockbox to the extent attributable to non-payments protected by the Act (unless already in place before the effective date); and
• Not foreclose judicially or non-judicially.

Form of borrower's notice: A borrower need only give one notification, and a mere attestation that nonpayment is a result of loss of income related to the pandemic will suffice for a residence with four or fewer dwelling units. For commercial properties or residential properties with more than four dwelling units, the notice must include financial statements or other evidence that demonstrates a loss of income related to the pandemic and must discuss funds received under PPP, or other state or federal relief.

Private right of action: Borrowers are given the right to sue the lender to recover actual damages and attorneys' fees for violation of this statute.

There are limited exceptions for judgments of foreclosure and notices of sale that were given before the emergency period, tax foreclosures, and foreclosure where the borrower has recorded notice of intent to abandon the property.

The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.

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