Oregon lawmakers edged closer toward reinstating the statewide moratorium on residential foreclosures Tuesday as House Democrats pushed through a bill that would protect homeowners until at least June 30.
Two Republicans joined Democrats in voting to pass the bill, which still needs to gain approval from the Senate.
“Oregonians need this sort of protection,” said Rep. Paul Holvey, D-Eugene, the chief sponsor of the bill. “Without it, I fear we face even more economic distress. More Oregonians will become homeless if this bill does not pass.”
Oregon lawmakers allowed the state’s ban on foreclosures to expire at the end of December, leaving many struggling homeowners in a state of uncertainty.
House Speaker Tina Kotek, D-Portland, said in February that legislation to extend the foreclosure moratorium was left off the docket for the December special session due to opposition from the banking industry and a push from senators to keep it off the list. Lawmakers did extend the state’s eviction ban for renters until the end of June during that December special session.
The bill the House members approved Tuesday would reinstate the foreclosure moratorium, potentially banning lenders from foreclosing on homeowners who attest to experiencing a loss of income due to the coronavirus pandemic until the end of 2021.
Under House Bill 2009, the moratorium would be retroactive Dec. 31 and would run through at least June 30. The moratorium would be extended in 90-day intervals to the end of September, or even the end of the year, if Gov. Kate Brown extends the statewide emergency period.
The bill would also require any lender that initiated more than 30 foreclosures last year to participate in a foreclosure avoidance meeting with borrowers during any foreclosure process. Under current state law, only lenders who initiated more than 175 foreclosures during a year must participate in mediation.
Unlike a bill passed by lawmakers last June, the new legislation would not protect commercial property owners. Those that own more than five properties, or properties with more than four housing units, would not be covered, either.
Homeowners with federally backed mortgages are already protected by a federal moratorium on foreclosures, which runs until the end of June. Those homeowners also have the right to request forbearance by the end of June to delay their mortgage payments for up to a year.
But 30% of single-family mortgages, or roughly 14.5 million loans nationwide, are not backed or owned by a federal agency and are not covered by the federal moratorium, according to a report from the National Housing Law Project. Oregon’s legislation would give protections to those homeowners.
While the pandemic recession is continuing, the number of Oregon homeowners struggling to pay their mortgages appears to be on the decline.
Analytics firm Black Knight estimated that Oregon had a mortgage delinquency rate of just over 4% in February, fifth lowest in the country.
Meanwhile, in the U.S. Census Bureau’s most recent Household Pulse Survey, 6% of more than one million Oregon homeowners surveyed who were still paying off their mortgages said they were behind on their payments.
That marks an improvement from January when 10% of Oregonians surveyed said they were behind on their mortgage payments.
At that time, nearly 27,000 Oregonians said their mortgage payments were being deferred. Just 13,000 said they were having payments deferred in the most recent survey in March.
A proposal defeated by the House on Tuesday would have prevented the moratorium from automatically continuing beyond June if the governor extends the emergency period. Republicans said an open-ended moratorium was unnecessary since it appears fewer homeowners are falling behind on their mortgages.
Other Republicans raised questions about the constitutionality of the bill, pointing to language in the Oregon Constitution that prohibits laws “impairing the obligation of contracts.”
“As it’s stated right now, I believe this bill is unconstitutional,” Rep. Jack Zika, R-Redmond, said.
Rep. Julie Fahey, D-Eugene, said it is imperative for Oregon to reinstate the moratorium to avoid the policy mistakes that led to a foreclosure crisis during the Great Recession and to ensure that homeowners have time to access financial relief that the state is on the verge of receiving.
The Oregon Homeownership Stabilization Initiative has already been providing financial relief to help homeowners affected by COVID-19 catch up with mortgage payments. Fahey said Oregon stands to receive between $50 and $100 million from the federal government’s most recent relief bill to provide additional help.
“We lost a lot of ground in the Great Recession in terms of homeownership, particularly for families of color,” Fahey said. “We cannot let that happen again.”