In Oregon, Deficiency Judgments Following Foreclosure

In Oregon, deficiency judgments are not permitted after nonjudicial foreclosures.

If the foreclosure selling price is less than the amount owed on the mortgage loan, the foreclosing bank cannot pursue you for the difference, known as a “deficiency,” after a nonjudicial foreclosure. However, shortfall judgments are permitted in certain court foreclosures.

What Is a Deficiency Following Foreclosure?

In a foreclosure, the total amount owed to the bank by the borrower occasionally surpasses the foreclosure selling price. A “deficiency” is the gap between the selling price and the total debt.

Example. Assume the entire debt is $600,000, but the house sells at the foreclosure auction for $550,000. The shortfall is $50,000.

In certain areas, the bank may pursue a personal judgment against the debtor, known as a “shortfall judgment,” to collect the deficiency. In general, after a deficiency judgment is obtained, the bank may collect the amount—in our case, $50,000—from the borrowers through standard collection techniques, such as garnishing the borrowers’ paychecks or levying the borrowers’ bank account.

Deficiency Judgments in Oregon

Most foreclosures in Oregon have been nonjudicial throughout the years. However, banks shifted to judicial foreclosures in 2012 for a variety of reasons that are no longer relevant. Banks have subsequently returned to relying mostly on the nonjudicial method.

Deficiency judgments are not permitted after nonjudicial foreclosures. Following a nonjudicial foreclosure, a deficiency judgment cannot be obtained against the borrower in Oregon.

Deficiency judgments in judicial foreclosures are limited. Deficiency judgments are permitted in judicial foreclosures but not in residential trust deed foreclosures. 86.797 (Or. Rev. Stat. A “residential trust deed” is a trust deed on residential property that consists of four or fewer residential units and the borrower, borrower’s spouse, or borrower’s minor or dependent child occupies the property as a principal residence at the time the trust deed is recorded or, in the case of a purchase money loan, the property is intended to be the borrower’s, borrower’s spouse, or borrower’s minor or dependent child’s principal residence after 86.705 (Or. Rev. Stat.

Oregon Foreclosure Regulations

Go to Chapter 86 of the Oregon Revised Statutes to learn the laws that regulate Oregon foreclosures. Statutes change, so double-checking is usually a good idea. The way courts and other organizations interpret and implement the law might also shift. Some restrictions may even differ across states. These are just a few of the reasons why you should visit an attorney if you are facing foreclosure.

Consult a Lawyer

Consider speaking with a local lawyer if you are behind on your mortgage payments and want to learn about viable defenses or strategies to prevent foreclosure. It’s also a good idea to make an appointment to speak with a HUD-approved housing counselor.