Judicial foreclosure requires a lawsuit in circuit court brought under the provisions of ORS 88.010 et. seq. The mortgagee or lien holder sues to have the mortgage or lien foreclosed. If the suit is successful, the court will issue a decree and order the property sold by the local sheriff at a public auction.

In order to sue for judicial foreclosure, the owner of the property must be in “default.” “Default” means they have failed to meet the terms of a mortgage or otherwise failed to pay a debt when due which is secured by the property. Like any lawsuit, a foreclosure suit requires service of the filed complaint. Service will serve as notice to the property owner that the legal foreclosure process has begun.

Once the suit is filed, the owner can avoid the foreclosure only by satisfying the debt. This right to satisfy the debt ends when the property is sold. How long it will take for the court to order foreclosure is hard to predict because it depends on whether the default is contested as well as how full the court’s docket is with other cases. Typically, a judicial foreclosure will take six months or longer.

Foreclosure sales are conducted according to the public sale provisions of ORS 18.924. The provisions require notice and publication, including posting notice on the property (usually taped to the door) and serial publication in newspapers. Once sold, the former owner has a six-month statutory right of redemption. That means they can get the property back for up to half a year after the sale by paying the purchaser the purchase price, taxes, interest and other costs.

Oregon is a “non-recourse” state when it comes to most residential property. “Non-recourse” means the mortgage holder cannot collect a default judgment if the sale does not produce enough proceeds to pay off the entire secured debt. The mortgagee takes the loss if the property is not worth the loan value As a general rule in the judicial foreclosure of residential property in Oregon, the mortgagee will have no recourse because under ORS 88.070 most residential mortgages are what are called “purchase money mortgages.”

A purchase money mortgage is one in which money is borrowed to purchase the property to which the mortgage is attached. There is, however, no general non-recourse rule for all liens and mortgages on real property. Mortgages on residential property taken for reasons other than for purchase may be subject to default judgments. Real estate licensees should, therefore, never advise clients about default judgments and should instead always refer clients to a lawyer, accountant or other financial professional.
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