OAR 441-035-0021: Disclosure Requirements for Real Estate Paper Transactions Exempt Under ORS 59.035(7)

(1) All transactions exempt under ORS 59.035(7), involving a mortgage banker or mortgage broker must comply with the provisions of OAR 441-870-0050. (2) All transactions exempt under ORS 59.035(7), involving a broker-dealer or person described in 59.015(1)(b) must comply with the provisions of this rule. Compliance does not relieve any person of any other duties and liabilities under the Oregon Securities Law, Oregon Administrative Rules, or any other provision of law. (3) For transactions to be exempt under ORS 59.035(7), a broker-dealer or person described in 59.015(1)(b) must provide to the purchaser, prior to the time of sale, a written disclosure document containing the following information: (a) The legal description of the real property underlying the real estate paper being sold; (b) The priority of the lien created by the real estate paper and the total face amount of any senior liens including outstanding taxes; or a current title report on the real property prepared by a title insurance company; (c) The terms of any senior lien and of any assignments thereof, or a copy of the instrument creating the senior lien and any assignments thereof; (d) A statement whether any future advances may have a priority senior to that of the lien created by the real estate paper being sold; (e) In the case of a sale of junior real estate paper, a statement of the risk of loss on foreclosure of a senior lien; (f) A prominent statement of any balloon payments, including the dates payable and the amounts due; (g) A statement of the balance of all taxes owing on the real property underlying the real estate paper, as provided by the county assessor directly or indirectly through a title insurance company; (h) A statement of the value of the real property underlying the real estate paper, based upon the tax assessed value of the property underlying the real estate paper, as provided by the county assessor directly or indirectly through a title insurance company, and: (A) If available, a statement of value based upon an appraisal or an opinion of value prepared by an independent licensed appraiser may also be provided; however (B) Under no circumstances may the statement of value be based upon any source other than the county assessor or an independent licensed appraiser. (i) If the transaction involves existing real estate paper: (A) The debtor’s payment record for the lesser of two years immediately preceding the sale or for the period of existence of the real estate paper, covering the existing real estate paper being sold; and (B) If the payment record is less than two years, or the real estate paper being sold is a junior lien, a credit report on the debtor prepared by a credit reporting agency and current within 90 days of the transaction. (j) If the transaction involves real estate paper to be created: (A) The debtor’s payment record, if any, for the lesser of two years immediately preceding the sale or for the period of existence of the real estate paper, covering: (i) Any lien senior to the real estate paper being created; and (ii) Any lien being retired with the proceeds from the subject sale. (B) A credit report on the debtor prepared by a credit reporting agency and current within 90 days of the transaction; and (C) A financial statement of the debtor current within 90 days of the transaction. (k) If the seller of the real estate paper, the seller’s agent, or any affiliate is the debtor, a statement disclosing that fact and the amount of cash paid to the debtor in consideration for the issuance of the real estate paper; (l) A statement of any commissions, collection fees, and other costs chargeable to the purchaser of the real estate paper; and (m) A statement of whether the purchaser of the real estate paper will be insured against casualty loss. (4) The information contained in the written disclosure document described in section (3) of this rule may be provided in summary form except that copies of the tax statement and the appraisal, where applicable, must be true and complete copies of the originals. (5) Although not a condition of the availability of the exemption granted pursuant to ORS 59.035(7), all broker-dealers relying on the exemption and this rule shall, pursuant to 59.195, maintain and make available to the Director, or any purchaser involved in the subject transaction, a separate file for each transaction. Each file shall be retained for a period of six years following the date of the transaction, and shall include: (a) A copy of the disclosure document described in section (3) of this rule; (b) A written statement, signed and dated by the purchaser, acknowledging receipt of the written disclosure document and an opportunity to review the supporting documentation; (c) The supporting documentation evidencing the summarized information contained in the disclosure document; and (d) Copies of the documents described in section (6) of this rule. (6) The broker-dealer or person described in ORS 59.015(1)(b) must: (a) Deliver to the purchaser or licensed escrow agent or title company the written evidence of the obligation properly endorsed, together with the instrument creating the purchaser’s lien or assessment of the lien; (b) Record, or cause to have recorded, the instrument creating the purchaser’s lien or assignment of the lien in a timely manner in the county or counties where the property is located and retain a copy of the recorded instrument in the purchaser’s transaction file; and (c) If a title report prepared by a title insurance company is relied upon for the disclosure required under subsection (3)(b) of this rule, deliver to the purchaser a fully paid title insurance policy running to the benefit of the purchaser. (7) If a security transaction is exempt under ORS 59.035(7), the following are also exempt: (a) Guarantees or surety agreements created as an integral part of the real estate paper and sold with the real estate paper if the guarantor or surety is not a mortgage banker, mortgage broker, broker-dealer, or person described in ORS 59.015(1)(b); and (b) “With-recourse” agreements or guarantees created by a seller and sold with the real estate paper, if the seller is not a mortgage banker, mortgage broker, broker-dealer, or person described in ORS 59.015(1)(b).