Foreclosure cases are rapidly filling the dockets in the Deschutes County Circuit Court, adding hundreds of new cases and increasing the workload on a court in its fourth year of budget cuts and staff reductions.
The court received 537 case filings for initial foreclosure hearings against Deschutes County homeowners last year — compared with the 158 filed in 2011 and 50 in 2010.
And if January's filing numbers hold steady throughout this year, the court would end 2013 with more than 1,200 cases.
For years, foreclosures in Oregon were handled almost entirely outside the court system, through a nonjudicial process created in 1959. But in the second half of last year, lenders shifted to the courts, prompted by a new foreclosure mediation program that started in July and an Oregon Court of Appeals ruling issued the same month.
The Deschutes County Circuit Court has felt the strain from the increased caseload, said Presiding Judge Alta Brady, one of the court's two judges who hear civil cases. “Just in terms of processing the pretrial conferences (for foreclosure cases), it's having a time impact” on the court, Brady said. “It's just that many more cases we are responding to.”
Many civil cases, like divorce and child custody hearings, personal injury claims and contract disputes, can take a year to 15 months from start to finish, Brady said.
But foreclosure cases can drag on two years or longer, said David Ambrose, a foreclosure attorney who works in the Bend and Portland areas.
“And that's really a best-case scenario, from the time of a complaint being filed to the time someone buys a property at a foreclosure sale,” Ambrose said. “A judicial foreclosure can take a considerably longer period of time than a nonjudicial foreclosure, and it's a much more complex process.”
The judge sees the complexity taking its toll on homeowners.
She estimated that three-quarters of the homeowners who show up for a trial on her docket don't have attorneys. The U.S. Constitution grants citizens the right to an attorney in criminal cases, but not civil ones.
“Some of them are in a position where they can't afford to hire an attorney,” Brady said. “I can explain to them what the (case) procedure is; I just can't tell them what is a defense or not a defense to a foreclosure action.”
Oregon is one of 28 states that uses the nonjudicial method as the primary track for foreclosures. It lets lenders repossess homes from delinquent borrowers administrativelyand takes, at minimum, 120 to 180 days.
But the new mediation law, which only applies to nonjudicial foreclosures, prompted lenders to switch to the judicial process. And those cases are landing on the desk of Jeff Hall, trial court administrator for the Deschutes County Circuit Court.
The foreclosure case files are often more than an inch thick, stuffed with documents about the history of the mortgage, the lender and homeowner.
Reviewing them all “takes time,” Hall said. “It's not like it's two pieces of paper.”
Well before the foreclosure shift, the court had to institute worker furloughs and other cuts, a result of declining state judiciary funds. Between 2-5 p.m., court staff does not answer phones and the public cannot view files. Staffing at the court is down about 14 percent from 2009.
Attorneys and mortgage officials have been keeping close tabs on the foreclosure shift since the summer, when state lawmakers and the Oregon Department of Justice unveiled the foreclosure mediation program.
The goal of the program was simple: Give homeowners at risk of losing their homes a chance to sit down with their lenders and a mediator, in hopes of coming up with an alternative payment plan, or maybe a short sale.
The Oregon Department of Justice expected to receive about 1,000 requests for mediation each month, said DOJ spokesman Jeff Manning.
To date, about 400 have been filed in total, with 34 individual homeowners getting a hearing. A total of four have reached an agreement with their lenders through the program.
The volume of cases “is not anywhere close to what we thought,” Manning said.
An added twist came just a week after the mediation program began. On July 18, the Oregon Court of Appeals overturned a foreclosure case against a homeowner from Rhododendron, the town on U.S. Highway 26 west of Mount Hood. The court ruled that Mortgage Electronic Registration Systems, a company established by lenders to track the sale of mortgages, could not prove that it properly recorded transfers of those mortgages, as required by state law. The case has been appealed to the Oregon Supreme Court.
The mediation program and ruling against MERS have effectively frozen hundreds of foreclosures across the state, notes Ambrose.
Without a fix, he said, at-risk homeowners are left in a sort of mortgage limbo, staying in their homes without paying down their loans — but waiting for an eviction notice at any time.
“The whole (foreclosure) system is broken right now,” Ambrose said. Without a solution from the state Legislature, “It's going to be a significant problem for a long time.”
Legal notices and the law
Editor's note: This report is part of an occasional series about the legality of profits being made from the publication of foreclosure notices, as well as the roles of banks, trustees and the courts in this state-mandated process. Follow along at www.bendbulletin.com/foreclosures.