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Real estate professionals and legal analysts agree that foreclosure filings will increase in Oregon over the next several months, despite hurdles in front of a backlog of cases waiting to move through the state’s court system.

Since an Oregon Court of Appeals decision in 2012 pushed cases to the courts, and the state Legislature last year passed a law solidifying mediation as a requirement, the foreclosure process has been sluggish.

It isn’t fast enough for John Helmick, CEO of Eugene-based real estate company Gorilla Capital. He would like to see a fast-track process for foreclosing on abandoned homes, which he says are blighting neighborhoods.

“We have gone from being one of the most efficient states processing foreclosures to one of the slowest,” he said. “People say that’s really good, but half the homes in foreclosure are vacant, abandoned or what we call ‘zombie homes.’ ”

A key factor is mediation, which must take place before a property auction and the mandatory six-month redemption period that allows the borrower to pay for the house after sale. Legislators had expected the face-to-face meeting process to take 45 to 60 days to complete, but Helmick said it is dragging out six months or longer.

Delays have been caused by a variety of factors – costs, borrower absenteeism, increased paperwork and launch of a new system – according to legal and real estate officials.

Meanwhile, Helmick estimated that approximately 22,000 foreclosure cases are waiting to go through mediation.

“While the mediation process does not appear to be reducing the number of foreclosures, it has created a void of foreclosure actions filed with the courts over the last five months,” he said.

The judicial process also suffers from higher fees and shortage of county resources to effectively process cases, said Peter McCord, a Lake Oswego-based attorney with Scarborough McNeese O’Brien & Kilkenny PC specializing in foreclosure work in the tri-county area.

Foreclosures cost more than $500 per case to process, and that amount is passed on to the borrower, McCord said. Paperwork, weighed down by state and federal requirements, has increased from two pages to 10, he said.

“It seems to me that the Legislature’s efforts to benefit the homeowners are in fact causing much higher costs associated with the foreclosure endeavor, which seems to be counter to the idea of helping out the homeowner,” he said.

Craig Peterson, managing attorney in the foreclosure department with Seattle-based Robinson Tait PS, agreed that the process is taking longer and becoming costlier for borrowers.

“Lenders are entitled to pass costs,” he said. “If a borrower wants to reinstate their loan, that raises their costs. It also impacts people at the end if they redeem their loan at the end of the process.”

According to Peterson, most mediation notices sent out don’t elicit responses from borrowers. That means the lender pays a fee and gets a letter from the state approving a waiver for the mediation process.

“The process is fairly new,” he said. “We can all question the efficacy of the mediation process, but it seems to be running smoother.”

Foreclosure filings in 20 Oregon counties – including Multnomah, Washington and Clackamas – in fact increased from 277 in December 2013 to 371 in January.

Daren Blomquist, vice president of Irvine, Calif.-based RealtyTrac, which collects and analyzes real estate data throughout the nation, said filings in Oregon could continue to trend upward.

“Oregon is one that definitely stands out,” he said. “The numbers have been volatile because of changes in the law.”

Blomquist compared Oregon’s situation to Maryland’s. It passed a similar mediation law in August 2010, and the numbers of foreclosure filings subsequently dropped through July 2012. However, Maryland has since had 19 consecutive months of year-over-year increases in filings, he said.

In Oregon, however, foreclosure filings aren’t likely to reach the 2010 peak of 3,700 monthly, Blomquist said.

“Before the legislation took effect in Oregon, the numbers were already heading down,” he said. “We had passed the worst of the housing crisis. What the Legislature created was an additional hurdle that slowed down the activity even further. I would say it artificially slowed it down.”

Recent milestones for the foreclosure process in Oregon

April 2012 – Gov. John Kitzhaber signs into law Senate Bill 1552, which requires mediation between lenders and borrowers before issuance of a certificate of compliance; foreclosure filings drop.

July 2012 – The Oregon Court of Appeals rules in Rebecca Niday v. GMAC Mortgage LLC
that use of the automated service to process mortgages in bulk – Mortgage Electronic Registration Systems Inc. (MERS) – violates state law.

June 2013 – Kitzhaber signs into law Senate Bill 558, which closes a loophole allowing lenders to foreclose judiciously without mediation.

July-August 2013 – Foreclosures filings in 20 Oregon counties spike, ahead of new law, from 1,542 in June to 2,111 in July and 2,060 in August.

September 2013 – Foreclosure filings in 20 Oregon counties plummet to 326.

January 2014 – Foreclosure filings in 20 Oregon counties jump to 371, up from 277 in December 2013.