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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 38 July 2023 F E A T U R E WHEN A SERVICER CAN TAKE POSSESSION OF A PROPERTY Attorney Joseph T. McCormick details a recent Ninth Circuit opinion on when a servicer can take possession of a property under the Oregon Unlawful Trade Practices Act. B y J O S E P H T. M C C O R M I C K , E S Q . O n July 15, 2022, the U.S. Court of Appeals for the Ninth Circuit issued an unpublished opinion in the case Santoro v. Ocwen Loan Servicing, LLC, 2022 U.S. App. LEXIS 19667, 2022 WL 2764751, in which the Court held that a borrower can sustain a claim for damages against a mortgage loan servicer for viola- tion of Oregon's Unlawful Trade Practices Act (UTPA), where the servicer takes possession of occupied property before completing fore- closure while the borrower still occupies the subject property. The Court found that Paragraph 9(a) of the subject Deed of Trust (DOT), which purported to grant a right of entry to the property in the event of a default, conflicted with Oregon Statute (ORS) 86.010, which precludes a mortgagee or its agent from taking possession of mortgaged property without completing a foreclosure sale; accordingly, Paragraph 9(a) was void. Because the entry provision of the DOT was void, it did not protect the servicer against a claim for damages under UTPA when the servicer took action to secure the property after sending a single letter to the property to determine whether it was still occupied. The Court held that a jury could reasonably find that the servicer should have known that additional investigation was needed before the property was abandoned, and based on this, reversed the lower court's grant of summary judgment in favor of the servicer. In reaching this conclusion, the Court found guidance in a Washington case, Jordan v. Nationstar Mortg., LLC, 185 Wash. 2d 876, 374 P.3d 1195 (2016), which concerned a similar factual and statutory context. In Jordan, the Supreme Court of Washington held that provisions of a Deed of Trust that purported to allow a servicer to take possession of vacant property conflicted with Washington Statute RCW 7.28.230(1); therefore, the entry provisions of the Deed of Trust were void. Because ORS 86.010 is substantially similar to RCW 7.28.230, the Court reasoned that an Oregon court would likely reach a similar conclusion to that reached in Jordan. Following the Jordan ruling, the state of Washington enacted RCW 7.100.030, which now provides a mechanism by which a servicer may enter and secure the property if the property is abandoned and in foreclosure if certain requirements are met. Before Washing- ton enacted the new statute, creditors' firms sought, often successfully, to protect the value of their collateral and themselves from liability by seeking injunctive relief from courts. The petitions sought to allow servicers to enter and take possession of real property, supported by inspections showing abandonment and deteriorating property condition, to show a likelihood of irreparable harm. State courts frequently granted these orders when a proper showing was made, which provided servicers with an additional level of protection against civil liability under the CPA. Santoro is an unpublished option; more- over, it is a federal court construing state law, so it would not be mandatory authority in Oregon state court even if it were published. Additionally, the holding is not identical to Jordan; the Ninth Circuit appears to have left open the possibility that the servicer can still take possession to secure the property if it is abandoned; of note, the Court did not consider the abandonment argument under Paragraph 9(c) of the DOT. Following remand, the servicer has moved for summary judgment of dismissal on an agency theory, arguing that the contractor who secured the non-abandoned property was not the servicer's "agent" for purposes of vicari- ous liability and that there was, therefore, no J O S E P H T . M C C O R M I C K , E S Q . is an Associate Attorney at Wright, Finlay & Zak's Washington office. He first began practicing law in Florida in 2010 in the fields of consumer protection and creditors' rights since then. He was admitted to the Florida Bar in 2010 after graduating from Stetson University College of Law, where he was awarded the Blews Pro Bono Service Award. McCormick practiced law for six years in Florida, with a heavy focus on real estate practice before moving and earning admission to the Washington Bar. He joined Wright, Finlay & Zak in June of 2018, focusing mainly on real estate litigation, wrong ful foreclosure defense, consumer litigation, and bankruptcy. He may be reached by email at jmccormick@wrightlegal.net.