Oregon Amends Provisions Regarding Payoff Statements and Borrower Obligations under Real Estate Loan Agreements

By Paul McSheffrey, JD
July 8, 2015 The Oregon legislature recently passed House Bill 3244, amending Oregon statute ORS 86.157.  These changes concern payoff statements and the obligations of borrowers under real estate loan agreements.
The definitions found within 86.157(1)(a)-(g) have been amended.  The definitions for “borrower” and “lender” now include an assignee or successor in interest.   Additionally, a new definition for “payoff statement” is included.  A payoff statement is defined as a written statement that sets forth, as of the date the lender prepares the statement, amounts a borrower must pay in order to fully satisfy the borrower’s obligation under a real estate loan agreement.
Under 86.157(2), the term “debt” has been replaced with “obligation”.  This section prohibits a lender from seeking the payment of remaining debt following a short sale.  This restriction applies when the lender reports to the IRS that as a result of a short sale of residential property the lender canceled any part of a borrower’s obligation, and the lender provides the borrower with written evidence of this report.
Section 86.157(3) provides that a borrower or their agent may rely on a payoff statement for the purpose of establishing the amount the borrower must pay to satisfy their obligation under a real estate loan agreement other than for a construction loan.  However, the borrower may not rely upon the payoff statement if the borrower has received an amended payoff statement from the lender before the borrower has disbursed funds for payment.  If the amount that a borrower owes does not appear on a payoff statement, and the borrower satisfies the obligation included in the payoff statement, the lender may only recover the amount owed as an unsecured obligation or by foreclosing upon any other property that secures the obligation.  In order to satisfy the obligation the borrower must:
1. submit the amount shown on the payoff statement,
2. instruct the lender to close any line of credit that is related to the obligation, and;
3. request a certificate of discharge or a reconveyance upon performance  before  any deadline specified in the payoff statement.
If the borrower disburses the amount of funds specified in the payoff statement, the borrower has discharged the mortgage for purpose of requesting a certificate of discharge, and met their obligation for the purpose of requesting a reconveyance.
These changes are effective on the date of the passage of House Bill 3244, June 4th, 2015.