Freddie Mac’s Diabolical Solution to Oregon’s Recording Requirement: Locate and Destroy the Assignment

Freddie announced that it had made a change to its foreclosure practices in Oregon “to comply with Oregon Revised Statutes 86.735.” Remember, ORS 86.735(1) requires lenders to publicly record all trust deed assignments. So how did Freddie intend to “comply” with the recording requirement? As Freddie explained in the 2002 letter:

Oregon law requires that any assignment of the deed of trust must be recorded before a trustee may foreclose a deed of trust by advertisement and sale. Therefore, you must locate the executed but unrecorded assignment to Freddie Mac and destroy it no later than 10 days after the date you refer the foreclosure to your trustee. This will ensure that, at the time the trustee beings the foreclosure process in Oregon, the chain of assignments to the deed of trust identifies you as the beneficiary of the deed of trust and there is no assignment in existence from you to Freddie Mac.

So how does Freddie comply with Oregon’s recording requirement? By using the ingenious “locate and destroy” approach. Freddie (by and through its agent) destroys the assignment. Shreds it. Nukes it. Gives it the Jimmy Hoffa treatment. Because, as somebody at Freddie shrewdly realized, if you destroy the assignment, then there will be “no assignment in existence” to record. Diabolical, no? Dr. Evil should hire whoever came up with this idea and fast!

But what if the homeowner catches up on the loan, and the servicer cancels the foreclosure? Then what? Freddie paid for that loan after all. Freddie owns that loan. And Freddie needs to protect its ownership interest in the mortgage like any other owner would. So Freddie further instructed servicers:

If the Borrower reinstates their Mortgage after the Mortgaged Premises have been referred to foreclosure, you must prepare and execute a new assignment of the deed of trust to us. The assignment must not be recorded.

So if you have to foreclose, locate and destroy the assignment so nobody will find out about it. And if you have to call off the foreclosure, create a new assignment immediately…just don’t make it a matter of public record.

Full article here…