Chapter 20 Oregon Laws 2001
AN ACT
SB 240
Relating to credit instruments; amending ORS 86.095 and 86.155.
Be It Enacted by the People of the State of Oregon:
SECTION 1.
ORS 86.095 is amended to read:
86.095. (1) Actions that do not affect the priority granted
to the lien of a [mortgage] credit instrument at the time it is
first received for recordation shall include but shall not be limited to:
(a) Renegotiation or adjustment of the initial interest
rate provided in the note or [mortgage] the credit instrument, upward or
downward, which may increase or decrease the amount of periodic payments or may
extend or shorten the term of the [mortgage]
credit instrument, or both;
(b) An increase in the underlying obligation secured by the
[mortgage] credit instrument during any part of the term of the [mortgage] credit instrument as a result of deferment of all or a portion of
the interest payments and the addition of such payments to the outstanding
balance of the obligation;
(c) Execution of new notes at designated intervals during
the term of the [mortgage which] credit instrument that reflect changes
made pursuant to paragraph (a) or (b) of this subsection;
(d) Extension of the term of the [mortgage] credit instrument;
(e) Substitution of a note if there is no increase in the
principal amount [or interest rate]
to be paid under the note; [or]
(f) Modification of periodic payments required under the
note if there is no increase in the principal amount due [or the interest rate to be paid] under the note; or
(g) Advances made under
ORS 86.155.
(2) As used in this section, the addition of accrued
interest to the principal amount of the underlying obligation is not an
increase in the principal amount.
(3) As used in this section, [“mortgage”] “credit instrument”
includes a mortgage, a line of credit
instrument, a deed of trust and a
contract for sale of real property.
SECTION 2.
ORS 86.155 is amended to read:
86.155. (1) As used in this section:
(a) “Credit agreement” means any promissory note, loan
agreement or other agreement which provides for advances subsequent to the date
of recording of the line of credit instrument which secures such note or
agreement.
(b) “Line of credit instrument” means a mortgage or trust
deed which secures a consumer or commercial credit agreement and creates a lien
on specified real property up to a stated amount, provided that the front page
of the mortgage or trust deed, or a memorandum thereof:
(A) Contains the legend “line of credit mortgage,” “line of
credit trust deed” or “line of credit instrument” either in capital letters or
underscored above the body of the mortgage or trust deed;
(B) States the maximum principal amount to be advanced
pursuant to the credit agreement; and
(C) States the term or maturity date, if any, of the credit
agreement exclusive of any option to renew or extend such term of maturity
date.
(c) “Residential line of credit instrument” means any line
of credit instrument creating a lien on real property upon which are situated
or will be constructed four or fewer residential units, one of which, at the
time the credit agreement is entered into, is the borrower's residence or is
intended, following construction, to be a residence of the borrower.
(2) A line of credit instrument shall have priority,
regardless of the knowledge of the lienholder of any intervening lien, as of
its date of recording as to the following advances whether such advances are
optional or obligatory advances:
(a) Principal advances made any time pursuant to the credit
agreement, to the extent the total outstanding advances do not exceed the
maximum principal amount stated in the line of credit instrument under
subsection (1)(b)(B) of this section;
(b) Interest, lawful charges and advances made any time
pursuant to the credit agreement for the reasonable protection of the real
property including, but not limited to, advances to pay real property taxes,
hazard insurance premiums, maintenance charges imposed under a declaration or
restrictive covenant and reasonable attorney fees, whether or not such
interest, lawful charges or advances shall exceed the maximum principal amount
stated in the line of credit instrument under subsection (1)(b)(B) of this
section; and
(c) Advances made any time after the date of recording and
pursuant to a credit agreement that is not secured by a residential line of
credit instrument to complete construction of previously agreed-upon
improvements on the real property, whether or not such advances exceed the
maximum principal amount stated in the line of credit instrument under
subsection (1)(b)(B) of this section provided, however, that the front page of
the instrument states that the maximum principal amount to be advanced pursuant
to the credit agreement may be exceeded by advances to complete construction
pursuant to this subsection.
(3) Actions that do not affect the priority granted to the
advances set forth in subsection (2) of this section shall include, but not be
limited to, those actions set forth in ORS 86.095 (1). [ORS 86.095 (3) does not apply to a line of credit instrument.] If
any modification to a credit agreement increases the maximum principal amount
to be advanced pursuant to the credit agreement, then principal advances that
are made that exceed the original maximum principal amount stated in the line
of credit instrument shall have priority as of the date of recording an
amendment to the line of credit instrument that states the increased maximum
principal amount.
(4) In the case of a residential line of credit instrument,
the debtor may limit the indebtedness secured by that line of credit instrument
to the amount of the credit outstanding by delivering a notice by personal
service upon the lienholder or trust deed beneficiary or by mailing a notice by
certified mail, return receipt requested, to the lienholder or trust deed
beneficiary at the address given for payment or, if none, to the address of the
lienholder or trust deed beneficiary indicated in the line of credit instrument
or deed of trust. To be sufficient to limit indebtedness under this subsection,
the notice must:
(a) State that it is made under this section;
(b) Contain the legal description in the line of credit
instrument or the street address of the real property;
(c) Provide the information necessary to locate the line of
credit instrument in the public record;
(d) State the debtor's intention to limit the amount of
credit secured by the line of credit instrument to the amount owed at the time
the notice is received;
(e) State the date sent; and
(f) Be signed and acknowledged by all debtors obligated
under the line of credit instrument.
(5) Not later than the 20th day after receipt of the notice
described in subsection (4) of this section, the lienholder or trust deed
beneficiary shall:
(a) Indorse on the notice, or on an addendum to the notice,
the principal amount of the indebtedness secured by the line of credit
instrument on the date the lienholder or trust deed beneficiary received
notice;
(b) Sign and acknowledge the notice or the addendum, if
applicable; and
(c) Record the notice and addendum in the public record
where the line of credit instrument was originally recorded.
(6) If the lienholder or trust deed beneficiary fails to
record the notice and addendum, if applicable, within the time period specified
in subsection (5) of this section, the debtor may record the notice in the
public record where the line of credit instrument was originally recorded,
together with proof of receipt by, or personal delivery to, the lienholder or
trust deed beneficiary.
(7) Notwithstanding subsection (4) of this section, the
line of credit instrument shall continue to have priority as of its date of
recording as to:
(a) Principal advances, including any advance the creditor
is required to honor, that were made before a notice under subsection (4) of
this section is received;
(b) Interest, lawful charges and advances described in
subsection (2)(b) and (c) of this section; and
(c) All advances made after a notice under subsection (4)
of this section is received which are within the amount owed at the time the
notice under subsection (4) of this section is given.
Approved by the Governor
April 4, 2001
Filed in the office of
Secretary of State April 4, 2001
Effective date January 1,
2002
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