Mortgages

ORS 86.797
Effect of sale

  • actions for deficiency
  • restrictions


(1)

If, under ORS 86.705 (Definitions for ORS 86.705 to 86.815) to 86.815 (Time within which foreclosure must be commenced), a trustee sells property covered by a trust deed, the trustee’s sale forecloses and terminates the interest in the property that belongs to a person to which notice of the sale was given under ORS 86.764 (Notice of sale for certain persons) and 86.774 (Service and publication of notice) or to a person that claims an interest by, through or under the person to which notice was given. A person whose interest the trustee’s sale foreclosed and terminated may not redeem the property from the purchaser at the trustee’s sale. A failure to give notice to a person entitled to notice does not affect the validity of the sale as to persons that were notified.

(2)

Except in accordance with subsection (4) of this section, an action for a deficiency may not be brought after a trustee’s sale under ORS 86.705 (Definitions for ORS 86.705 to 86.815) to 86.815 (Time within which foreclosure must be commenced) or after a judicial foreclosure of a residential trust deed, and a judgment to foreclose a residential trust deed under ORS 88.010 (Foreclosure of lien by suit) may not include a money award for the amount of the debt against the grantor, the grantor’s successor in interest or another person obligated on:

(a)

The note, bond or other obligation secured by the trust deed for the property that was subject to the trustee’s sale or the judicial foreclosure; or

(b)

Any other note, bond or other obligation secured by a residential trust deed for, or mortgage on, the property that was subject to the trustee’s sale or the judicial foreclosure when the debt, of which the note, bond or other obligation is evidence:

(A)

Was created on the same day as, and used as part of the same purchase or repurchase transaction as, the note, bond or other obligation secured by the foreclosed residential trust deed; and

(B)

Is owed to or was originated by the beneficiary or an affiliate of the beneficiary in the residential trust deed that was subject to the trustee’s sale or the foreclosure.

(3)

Notwithstanding ORS 88.103 (Sale of real property after mortgage foreclosure), if a judicial foreclosure of a trust deed that is not a residential trust deed results in a judgment that includes a money award, the judgment must provide that execution may issue for the amount by which the unpaid balance of the money award exceeds the net sale proceeds that are payable to the judgment creditor from the sale of the property that is subject to the foreclosure if:

(a)

The net sale proceeds are insufficient to satisfy the money award; and

(b)

The plaintiff requests the provision in the complaint.

(4)

This section does not preclude:

(a)

An action that forecloses, judicially or nonjudicially:

(A)

Other property covered by the trust deed that is the subject of the foreclosure; or

(B)

Another trust deed, mortgage, security agreement, consensual or nonconsensual security interest or lien that covers other real or personal property that is also used as security for the note, bond or other obligation that is secured by the trust deed for the property that was sold.

(b)

An action against a guarantor for a deficiency that remains after a judicial foreclosure.

(5)

A guarantor of an obligation secured by a residential trust deed may not recover a deficiency from the grantor or a successor in interest of the grantor. [Formerly 86.770; 2015 c.291 §3]

(formerly 86.770)

Notes of Decisions

Prohibition against further action to collect deficiency following foreclosure sale does not prevent plaintiff from seeking other relief in same action seeking foreclosure. Siuslaw Valley Bank v. Canfield Assoc. Ore. Ltd., 64 Or App 198, 667 P2d 1035 (1983)

Portion of judgment for attorney fees, costs and disbursements that was not satisfied from proceeds of judicial foreclosure and sheriff's sale is "deficiency judgment" and forbidden by this section. Cottage Grove Apartment Investors v. Brandenfels, 69 Or App 192, 684 P2d 1235 (1984)

Trust deed foreclosed was commercial despite apartment on premises because residence was incidental to storage business and residence exemption was intended to apply to individuals only. Oregon Bank v. Hawkins, 71 Or App 791, 693 P2d 1321 (1984)

Beneficiary under "commercial" trust deed can get deficiency judgment after foreclosing trust deed by judicial proceeding, regardless of whether it is purchase money trust deed. FDIC v. Burdell, 92 Or App 389, 759 P2d 282 (1988), aff'd 307 Or 285, 766 P2d 1032 (1988)

Election of remedy of non-judicial foreclosure occurs only upon sale and because plaintiff abandoned its non-judicial foreclosure proceeding before sale, no election of remedies occurred. Barclaysamerican/Financial Inc. v. Boone, 95 Or App 347, 768 P2d 439 (1989), on reconsideration 96 Or App 635, 773 P2d 1338 (1989)

Trust deed anti-deficiency provision in this section does not initially preclude action being brought on note secured by trust deed. Beckhuson v. Frank, 97 Or App 347, 775 P2d 923 (1989), Sup Ct review denied

When two trust deeds describe same property as security, trust deed beneficiary may foreclose non-judicially on one deed to obtain title to property and then bring action on other note. Urbach v. Monchamp Corp. 110 Or App 275, 821 P2d 1116 (1991), Sup Ct review denied

State anti-deficiency law is not preempted by federal Department of Veterans Affairs regulations so long as state law provides method for secretary of Department to exercise right of indemnity and receive full measure of protection without displacing state law. Connelly v. Derwinski, 961 F2d 129 (1992)

Plaintiffs, who signed deed of trust with defendant creditor and who defaulted on mortgage, could not challenge properly noticed trustee's sale of home 19 months after date of sale because plaintiff's interest in home was foreclosed and terminated at sale. Mikityuk v. Northwest Trustee Services, Inc., 952 F. Supp. 2d 958 (D. Or. 2013); Roisland v. Flagstar Bank, FSB, 989 F. Supp. 2d 1095 (D. Or. 2013)

Where real property used as security for loan obligation was sold at trustee's sale but sale was not conducted by trustee, this section does not bar property owner from post-sale challenge because this section applies only to validly conducted trustee sales. Wolf v. GMAC Mortgage, LLC, 276 Or App 541, 370 P3d 1254 (2016); Fed. Home Loan Mortg. Corp. v. Smith, 287 Or App 42, 400 P3d 1009 (2017). But see DiGregorio v. Bayview Loan Servicing, LLC, 281 Or App 484, 381 P3d 961 (2016)

Where grantor of trust deed had notice that property was being sold at trustee's sale under Oregon Trust Deed Act, this section precludes post-sale challenge on sole ground that trustee's notice of sale did not correctly identify beneficiary of trust deed. DiGregorio v. Bayview Loan Servicing, LLC, 281 Or App 484, 381 P3d 961 (2016), Sup Ct review denied

This section does not mandate strict compliance with every provision of Oregon Trust Deed Act for trustee's sale to be valid and before person's property interests may be terminated by trustee's sale; thus, purported failure to identify beneficiary of trust deed in notice of sale did not render this section inapplicable and trustee's sale invalid. DiGregorio v. Bayview Loan Servicing, LLC, 281 Or App 484, 381 P3d 961 (2016), Sup Ct review denied

This section does not allow post-sale challenges based on violation of each and every technical provision of Oregon Trust Deed Act; thus, where only defect in foreclosure process was that notice of non-judicial foreclosure sale failed to identify proper beneficiary, this section barred borrower's claim that trustee's sale was void. Woods v. United States Bank N.A., 831 F3d 1159 (9th Cir. 2016)

Law Review Citations

69 OLR 880 (1990)


Source

Last accessed
Jun. 26, 2021