In a non-recourse state, you will not be liable for more than what your home is worth, when it is sold through a short sale or auction. A recourse state does allow a lender to pursue you for the deficiency amount, if the proceeds from the sale of your property are less than what you owe. Although identified as a non-recourse state, Oregon does allow recourse after a foreclosure in certain cases.
Typically, if a state is a non-recourse state like Oregon, a lender cannot pursue you for the difference between the balance on your mortgage loan and the proceeds from the sale of your property. Recourse states allow a lender to come after you for the difference (deficiency judgment). However, even in non-recourse states, particular types of loans -- refinanced purchase loans, second mortgages, home equity lines of credit and home equity loans -- are often recourse loans. Your loan contract should indicate whether the loan is a recourse or non-recourse loan.
Oregon Foreclosure Laws
The primary method of foreclosure used in Oregon is the non-judicial foreclosure, in which there is no court involvement. Judicial foreclosures, which proceed through the court system, are also allowed and are typically used in the absence of a power of sale clause in the deed of trust. In Oregon, the deed of trust is the document securing title to a property, and the deed remains with a trustee until the underlying mortgage loan is paid in full. A non-judicial foreclosure in Oregon requires the lender to provide notice of the proceedings, known as foreclosure by advertisement. Generally, it takes about six months to complete an uncontested foreclosure in Oregon, longer if you decide to fight it in court.
Power of Sale Clause
Usually when you buy a home in Oregon, and you sign the deed of trust or mortgage contract, you are giving your permission for the lender to sell your property in the event that you default on your loan, through a special provision called the power of sale clause. Whether Oregon will allow recourse after a foreclosure depends largely on the language set down in your contract.
Two factors primarily affect whether you will be liable for a deficiency judgment after foreclosure: whether you owe more on your property than it is worth or have substantial equity, and the language used to outline the terms found in your mortgage contract. If you owe more on your home than it is worth, the time and expense to obtain a deficiency judgment is usually not cost-effective, unless you have other substantial assets. Oregon does not allow recourse after a foreclosure for non-judicial foreclosures. Deficiency judgments (recourse) are not allowed for any residential deed of trust, regardless if it was a non-judicial or judicial foreclosure. In all other cases, an Oregon lender has the right to pursue a deficiency judgment if the sale of your property will not fully satisfy the mortgage debt.