In Oregon, real estate brokers and principal brokers are required to adhere to record-keeping rules established by the Oregon Real Estate Agency (OREA). While text messages are not explicitly mentioned in Oregon statutes, any communication material to a real estate transaction may need to be retained, including text messages. Here’s an overview of the laws and their implications for archiving text messages:

1. Record Retention Requirements

• Oregon Administrative Rule (OAR) 863-015-0250 mandates that brokers and principal brokers maintain complete and accurate transaction records for six years from the date of the transaction’s closure or termination.

• Required records include contracts, agreements, disclosures, correspondence, and any communication related to the transaction.

2. Inclusion of Text Messages

• The requirement to retain "communications" material to a transaction applies to text messages if they document:

  • Offers and counteroffers

  • Negotiation details

  • Client instructions or approvals

  • Amendments or changes to agreements

  • Other material aspects of the transaction

• Any text messages that are relevant to the transaction should be considered part of the official record.

3. Electronic Communication

• OREA considers electronic communications (e.g., emails) as part of the transaction record. By extension, text messages used for transaction-related purposes should also be archived.

• If text messages include material information, brokers must ensure they are properly stored and accessible during the six-year retention period.

4. Method of Archiving

• Oregon law does not prescribe specific methods for retaining electronic records, but brokers must ensure that all records are secure, complete, and retrievable.

• Text messages can be archived using methods such as:

  • Printing messages and filing them with transaction records

  • Exporting text conversations to digital formats for electronic storage

  • Utilizing software solutions designed for capturing and securely storing text messages

5. Consequences of Non-Compliance

• Failure to retain required records, including relevant text messages, may result in disciplinary actions by the OREA, such as:

  • Fines

  • Suspension or revocation of the broker's license

• Non-compliance could also increase liability risks in legal disputes, as incomplete records may hinder the broker's ability to defend their actions.

6. Best Practices for Compliance

• Brokers and principal brokers should establish clear policies for documenting and retaining communications, including text messages.

• Use communication platforms or apps that allow for easy archiving and retrieval of text messages.

• Regularly review transaction files to ensure all relevant communications are included and properly stored.

Summary

In Oregon, real estate brokers must retain all communications, including text messages, that are material to a transaction for six years. Properly archiving text messages helps ensure compliance with OREA regulations and protects brokers from potential legal or regulatory issues. Adopting robust record-keeping systems is essential for meeting these requirements effectively.

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E&O Risk

The risk to a brokerage concerning errors and omissions (E&O) insurance in relation to record retention of text messages and electronic communications is significant. E&O insurance generally provides protection against claims of negligence, misrepresentation, and failure to perform duties as expected. If a brokerage fails to archive important communications—including text messages—that document critical aspects of a real estate transaction, it can expose the brokerage to increased liability, and E&O insurance may not fully cover the consequences in certain situations. Here are key risks and considerations:

1. Potential for Gaps in Transaction Records:

   • If a brokerage does not properly archive text messages that contain vital transaction information (such as offers, counteroffers, client instructions, or contract amendments), it may create gaps in the documentation of a transaction. In a dispute, the absence of these records can weaken the brokerage's ability to defend itself and may lead to claims that cannot be fully supported or disproven.

   • If critical communications are missing, clients may allege that the brokerage acted negligently or misrepresented information, and E&O insurance may not cover claims if the brokerage did not follow industry standards for record-keeping.

2. Violation of Regulatory Requirements:

   • Most states have regulations that require brokers to retain all material records for specific periods. Failing to comply with these record-keeping regulations can lead to regulatory penalties and disciplinary actions by the state real estate commission.

   • E&O insurance often does not cover regulatory fines or penalties, meaning that the brokerage could be solely responsible for any costs incurred as a result of non-compliance.

3. Increased Likelihood of Claims Due to Incomplete Communication Records:

   • In the absence of complete and accessible records, brokerages may face higher risks of claims alleging failure to disclose, miscommunication, or misunderstanding of terms. This is particularly relevant in real estate transactions where documentation of all communications is critical to resolving any disputes that arise.

   • Without comprehensive records (including relevant text messages), brokerages may struggle to prove they acted appropriately, which can lead to larger settlements or judgments that may impact their E&O policy premiums or insurability.

4. Possible E&O Policy Exclusions:

   • Many E&O policies have exclusions related to "known wrongful acts" or "acts of intentional non-compliance." If a brokerage knowingly neglects to retain necessary records, or if record-keeping negligence is proven, E&O coverage may be limited or denied for claims resulting from this oversight.

   • Insurers may consider a failure to retain legally required records as an act outside the scope of covered professional services, thus potentially excluding coverage for claims related to missing documentation.

5. Impact on Policy Renewals and Premiums:

   • Repeated or severe claims arising from record-keeping issues can impact the brokerage's insurance premiums, making it more expensive to maintain E&O coverage.

   • If a pattern of poor documentation or non-compliance with record retention is identified, an E&O insurer may choose not to renew a brokerage's policy, forcing the brokerage to seek other (potentially more costly) insurance options.

6. Defensibility in Claims Situations:

   • Retaining text messages and other communications can be crucial in defending against claims. For instance, if a client claims that a certain promise or representation was made, well-kept records can help demonstrate what was actually communicated.

   • Without archived text messages, a brokerage may have to rely solely on testimony, which may not be as persuasive as contemporaneous written records in legal proceedings.

Risk Mitigation Strategies for Brokerages

To mitigate these risks, brokerages should:

• Establish a clear policy for retaining all relevant electronic communications, including text messages, emails, and digital correspondence, and ensure all agents are trained to comply.

• Invest in archiving technology that captures and stores electronic communications in a secure, accessible, and compliant manner.

• Regularly audit compliance with record-keeping policies to ensure agents are properly retaining required communications and that records are easily retrievable.

• Work closely with E&O providers to understand the requirements and best practices for documentation to ensure comprehensive coverage.

By maintaining thorough, organized records of all communications, including text messages, a brokerage can better protect itself against claims, demonstrate regulatory compliance, and strengthen its defensibility if claims arise, thereby optimizing its E&O insurance coverage and reducing the risk of adverse financial consequences.

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Memo2File is specifically designed for real estate agents and brokers to properly archive and retain text messages related to a transaction.  

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Sample: Text Archive for Real Estate

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Mortgage Loan Originators

In Oregon, mortgage loan originators (MLOs) and mortgage brokers must comply with federal and state record-keeping laws that govern the retention of communications, including text messages, as part of their professional duties. These requirements are primarily overseen by the Oregon Division of Financial Regulation (DFR) and are informed by federal regulations such as those issued by the Consumer Financial Protection Bureau (CFPB).

1. Federal Regulations Applicable to Text Message Retention

• Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA):

  • Require MLOs to retain records that demonstrate compliance with disclosures, loan terms, and other regulatory requirements.

  • Communications (including text messages) that discuss terms, fees, disclosures, or other transaction-related matters must be retained.

• CFPB Compliance:

  • CFPB regulations under Regulation Z (TILA) and Regulation X (RESPA) require mortgage lenders and originators to retain records of consumer communications for up to five years.

  • Text messages may be considered part of the loan file if they include material information.

2. Oregon-Specific Requirements

• Oregon Administrative Rules (OAR) Chapter 441:

  • MLOs and brokers must retain "all records related to loan transactions" for at least three years under OAR 441-865-0040.

  • This includes "all written and electronic communications" related to a mortgage loan transaction.

  • Records must be retrievable and available for inspection by the Oregon DFR.

• Definition of Records:

  • Oregon law considers emails, text messages, and other electronic communications as part of the official transaction record if they pertain to:

    • Loan terms or conditions

    • Consumer disclosures

    • Negotiations, agreements, or amendments

3. Archiving Text Messages

• What Must Be Retained:

  • Any text messages that:

    • Provide disclosures or explanations to the borrower

    • Confirm terms, interest rates, fees, or conditions

    • Include instructions or agreements between the borrower and MLO

  • Must be archived as part of the loan transaction file.

• Acceptable Methods for Archiving:

  • Text messages can be archived by:

    • Printing and storing with transaction records.

    • Exporting to digital formats for secure electronic storage.

    • Using compliance software designed to capture and retain text messages.

• Access and Security:

  • Retained records, including text messages, must be secure and retrievable for inspection during the required retention period.

4. Consequences of Non-Compliance

• Regulatory Penalties:

  • Failure to maintain proper records, including text messages, can result in:

    • Fines

    • Suspension or revocation of the MLO license

    • Regulatory sanctions from the Oregon DFR or CFPB

• Legal Risks:

  • Missing communications may lead to claims of non-disclosure, fraud, or misrepresentation, potentially increasing liability exposure in consumer disputes.

5. Best Practices for Compliance

1. Adopt a Communication Policy:

   • Implement policies requiring that all material communications, including text messages, be retained.

2. Use Archiving Technology:

   • Use platforms that integrate with mobile devices to automatically capture and archive text messages.

3. Regular Training:

   • Train staff on what types of communications must be retained and how to properly document and store them.

4. Perform Audits:

   • Periodically review loan files to ensure all required communications, including text messages, are archived.

Summary

In Oregon, mortgage loan originators must retain all material communications, including text messages, for at least three years under state law and up to five years under federal law. Ensuring compliance with these requirements is critical to meeting regulatory standards and reducing legal and financial risks. Implementing robust archiving solutions and maintaining clear policies are key to managing text message retention effectively.