Banks sue over Oregon foreclosure moratorium



United States: Banks sues over moratorium on foreclosure

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Two recent lawsuits filed in the US District Court for the District of Oregon show that Oregon banks are not overly happy HB 4204… This law, passed by the Oregon Legislature in June 2020, bans Oregon residential and commercial foreclosures from March 8, 2020 to December 31, The law originally expired in September 2020 but was extended by executive order. In response to this legislation, the Oregon Bankers Association (OBA) and several other banks sued Oregon in August, stating that the lawsuit “challenges Oregon’s attempt to prevent banks and other financial institutions from granting and administering real estate loans to consumers and businesses in Oregon as agreed by the parties.”

IN his complaintThe OBA first claims federal law is supplanting HB 4204, stating that Congress has decided to grant COVID-related housing benefits by passing Care law and that HB 4204 conflicts with federal-backed home protection for mortgages under the CARES Act. Second, OBA relies on Contract clause The US Constitution, which prohibits states from passing “any law that violates contractual obligations.” According to the OBA, HB 4204 makes it impossible for banks to exercise their contractual rights in the event of default. The OBA was particularly concerned about section 3 of HB 4204, as that section prohibits banks from taking action in the event of default, regardless of the rights they may have under the contract. Finally, the OBA argues that HB 4204 constitutes a state exemption and that retroactive effect is an unconstitutional deprivation of due process, as the bill was signed on June 30, 2020 but went into effect on March 8.

The third argument of the OBA is that HB 4204 deprives the participating banks of their contractual rights. This argument raises interesting questions about the choice of rule of law. If, hypothetically, the contract stipulates that New York or Delaware law controls, can the lender then impose the contractual remedies they have agreed on since Oregon laws do not apply? Also, if foreclosure and evictions are not taken, do creditors have additional remedies independent of HB 4204? Lawyers will closely monitor developments in this area of ​​law in real time.

The government responded by saying that the claims should be dismissed as a matter of sovereign immunity. The state also argued that the lawsuit was controversial because lenders doing business in Oregon had to comply with the HB 4204 notification requirement by August 30, 2020, and that deadline had expired. Finally, the state argued that the OBA and its fellow plaintiffs were not eligible to sue because “the OBA’s only allegations of harm are that its unidentified members were harmed. which he personally carried that could be traced back to the Defendants or that a favorable decision could remedy the situation. “

October 2, 2020 Axos Bank filed a similar claim against the state of Oregon, which does not seem receptive to the persistent arguments against the OBA. Axos Bank is a federal savings and loan association headquartered in San Diego, California. HB 4204, according to the complaint, prevents the bank from defaulting on loans it made to two different hotels in Oregon, and prevents the bank from collecting installments, accelerating loan disbursements and assessing the interest rate, among other concerns. Axos Bank argues that federal law overrides HB 4204, that the contract clause of the US Constitution makes HB 4204 unconstitutional, and that HB 4204 is a retroactive due process violation.

While it’s unclear what lies ahead, there is no doubt that landlords, tenants and lenders will keep a close eye on how the courts will rule on these initial claims. Some also speculate that various government actions to prevent foreclosures and evictions have resulted in a relative lack of bankruptcy and competitive activity in Oregon since COVID-19 began disrupting the economy. If any of these lawsuits succeed, or if the government succumbs to pressure and stops expanding these preventive measures, it could be the spark that ignites the powder keg. Both debtors and creditors should go beyond evictions and foreclosures and develop strategies for the entire journey, not just the first step.


one. This law differs slightly from Executive Order HB 4213 and Gov. Keith Brown restricting evictions from residential and commercial premises. How detailed herecommercial tenants are no longer protected from eviction for non-payment of rent accumulated after October 1, while tenants of residential premises cannot be evicted for non-payment of rent until at least the end of 2020.

The content of this article is intended to provide general guidance on the subject. You should seek professional advice regarding your specific circumstances.

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