71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
Enrolled
Senate Bill 240
Sponsored by Senator HANNON (at the request of Oregon Bankers
Association)
CHAPTER ................
AN ACT
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.
Enrolled Senate Bill 240 (SB 240-INTRO) Page 1
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
Enrolled Senate Bill 240 (SB 240-INTRO) Page 2
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.
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Enrolled Senate Bill 240 (SB 240-INTRO) Page 3
Passed by Senate February 1, 2001
...........................................................
Secretary of Senate
...........................................................
President of Senate
Passed by House February 23, 2001
...........................................................
Speaker of House
Enrolled Senate Bill 240 (SB 240-INTRO) Page 4
Received by Governor:
......M.,............., 2001
Approved:
......M.,............., 2001
...........................................................
Governor
Filed in Office of Secretary of State:
......M.,............., 2001
...........................................................
Secretary of State
Enrolled Senate Bill 240 (SB 240-INTRO) Page 5