1) No way could he have pulled off ten years of adverse possession, IMO. However I don't know for a fact it would have to be ten years, I don't know the law in Oregon. I don't even know what it is here to be honest. First of all, it's such a rare thing to begin with. I'm not sure in 7 years I ever saw an adverse possession case. I've seen frauds go down and the police get involved (also rare), I've seen lots of things, but never that.
2) I don't know enough about Oregon law to say about the lease. I know that during the mortgage meltdown it was an issue that came up. Tenants with valid leases who were stunned to learn their properties had been foreclosed upon because their landlords had not been paying their mortgages. There were enough displaced people in some of the harder hit locales that discussions about strengthening tenants rights protections in the law were discussed, but I was getting out of the business by then, so I really don't know what became of it in different areas. One thing is that it wouldn't mean he would get to stay there forever.
3) The person holding a second mortgage is usually pretty out of luck in a foreclosure. The first and best lien in a foreclosure is- you guessed it - the government. Usually this means any local real estate taxes owed get paid first, but it can also apply to federal or state liens for unpaid taxes, child support liens, etc. Once the government gets theirs then the order is the order the liens were filed. So the first mortgage would get paid first, then the second mortgage. Foreclosures usually auction off for below their appraised value if they sell at all, so after the government gets theirs and the attorneys fees, sheriff's fees, etc. the first mortgage holder doesn't even get all their money and the second mortgage guy has to write it all of as loss.
The whole produce the note thing is a real deal. The two most important things in a loan closing package are the note and the mortgage. The mortgage gets filed at the county so if it is lost the county can always produce a certified copy for legal purposes. The note gets sent directly back to the lender. Except when it doesn't. Or when it does and they lose it. Or they sell it to another bank and the other bank loses it. This happened in the past. A lot. One of the title companies I worked at was less organized then the others and I know every now and then I found an original note lying in a file. Worse, this was months or years down the road and the lender had never even called about it - they didn't even notice they never recieved it until I sent it to them. Yes, if your lender can't produce the note you can fight the foreclosure. However, you'll never really know unless you get to foreclosure, so it's a really, REALLY bad idea to just stop paying your mortgage because maybe you will be the one out of 100 whose note they can't find.
I can't think of a reason why he would have wanted her to stop paying her mortgage unless he wanted her to just have more money around to spend on him, or more money sitting in her bank account. It would be pretty delusional, IMO, to think a strategy cobbled together out of some of these legal elements would actually work in this case.
If he was seriously looking at an adverse possession strategy it's worth noting that if the owner of the land occupies or uses the land, adverse possession cannot be claimed. (According to Wikipedia, lol. Like I said, I haven't had any experience with adverse possession.) Again all of this from a non-lawyer, not giving legal advice, just stating what I believe to be true.
