07 Sep Ohio Legislative Update
The Ohio legislature recently enacted a new law affecting real property, which creates the D.O.L.L.A.R. deed program, a loss mitigation alternative for borrowers who are in default on a mortgage encumbering real property. The legislation was initially introduced as the “Deed Over Lender Leaseback Agreed Refinance” (“D.O.L.L.A.R.”) program. Ohio foreclosure laws were amended to provide for expedited foreclosures. Both bills are effective September 26, 2016.
Ohio House Bill 303
The following definitions are effective for this law:
- “Borrower” means the person who receives a loan from a lender secured by a mortgage on real property to which the borrower holds legal title and who is an applicant for the D.O.L.L.A.R. deed program; includes the original borrower’s successor in interest.
- “D.O.L.L.A.R. deed in lieu of foreclosure” means a transaction in which a borrower, after default on a loan secured by a mortgage on real property, conveys to the lender by deed that satisfies the minimum requirements of Ohio law, title to the real property pledged as security for the related note of indebtedness.
- “Home affordable modification program” means the program established by the U.S. Department of Treasury and the U.S. Department of Housing and Urban Development, also known as HAMP.
The Ohio housing finance agency must adopt rules that include:
- A model form for an application to participate in the program;
- A model for the deed, which will act as the deed in lieu of foreclosure;
- A model for the lease with option to purchase agreement; and
- Any other rules necessary to implement this new enactment.
An applicant to the D.O.L.L.A.R. deed program must submit both of the following to the loss mitigation department of the lender (includes servicer for lender):
- An application form (model form to be adopted); and
- A request for modification and affidavit form developed under HAMP.
To qualify for the program, all of the following must apply:
- The applicant need not be eligible for another mortgage loss mitigation alternative or program;
- The applicant’s front-end and back-end debt-to-income ratios must fall below the current ratios set for HAMP at the time the application is submitted to the lender; and
- The applicant must occupy the residence.
The lender must respond to the applicant in writing not later than 30 days after the date the lender receives all application documents.
A lender is not required to participate in the program. If a lender approves a borrower applicant to the D.O.L.L.A.R. deed program, the statute sets forth the documents that must be executed by the borrower and lender, as well as describing the contents and any limitations/requirements of each document. The documents, once executed, must be recorded in the real property records of the county recorder’s office of the county in which the subject property is located.
Ohio HOUSE BILL 390
“Residential Mortgage Loan” means a loan or agreement to extend credit, including the renewal, refinancing, or modification of such a loan or agreement, that is made to a person and that is primarily secured by a mortgage, deed of trust, or other lien upon any interest in residential property or any certification of stock or other evidence of ownership in, and a proprietary lease from, a corporation or partnership formed for the purpose of cooperative ownership of residential property.
“Residential Property” means real property located within Ohio consisting of land and a structure on that land containing four or fewer dwelling units, each of which is intended for occupancy by a separate household. Residential Property includes a residential condominium unit, notwithstanding the number of units in the structure, but includes a manufactured or mobile home only if it is taxed as real property.
A lender who files a foreclosure action on a residential property may now file a motion with the court to proceed in an expedited manner on the basis that the property is vacant and abandoned. In order to proceed in an expedited manner, the lender must be a person entitled to enforce the instrument or obligation secured by the mortgage.
If a motion to proceed in an expedited manner is filed before the last answer period has expired, the court must decide the motion not later than twenty-one days, or within the time consistent with the local rules, after the last answer period has expired. If a motion to proceed in an expedited manner is filed after the last answer period has expired, the court must decide the motion not later than twenty-one days, or within the time consistent with local rules, after the motion is filed.
In deciding the motion to proceed in an expedited manner, the court will deem the property to be vacant and abandoned if all of the following apply:
- The court finds by a preponderance of the evidence that the residential mortgage loan is in monetary default;
- The court finds by a preponderance of the evidence that the lender is a person entitled to enforce the instrument secured by the mortgage or a person with the right to enforce the obligation secured by the mortgage pursuant to law;
- The court finds by clear and convincing evidence that at least three of the following factors are true:
- Gas, electric, sewer, or water utility services to the property have been disconnected.
- Windows or entrances to the property are boarded up or closed off, or multiple window panes are broken and unrepaired.
- Doors on the property are smashed through, broken off, unhinged, or continuously unlocked.
- Junk, litter, trash, debris, or hazardous, noxious, or unhealthy substances or materials have accumulated on the property.
- Furnishings, window treatments, or personal items are absent from the structure on the land.
- The property is the object of vandalism, loitering, or criminal conduct, or there has been physical destruction or deterioration of the property.
- A borrower has made a written statement expressing the intention of all borrowers to abandon the property.
- Neither an owner nor a tenant appears to be residing in the property at the time of an inspection of the property by the appropriate official of a county, municipal corporation, or township in which the property is located or by the mortgagee.
- The appropriate official of a county, municipal corporation, or township in which the property is located provides a written statement or statements indicating that the structure on the land is vacant and abandoned.
- The property is sealed because, immediately prior to being sealed, it was considered by the appropriate official of a county, municipal corporation, or township in which the property is located to be open, vacant, or vandalized.
- Other reasonable indicia of abandonment exist.
- No borrower or other defendant has filed an answer or objection setting forth a defense or objection that, if proven, would preclude the entry of a final judgment and decree of foreclosure; and
- No borrower or other defendant has filed a written statement with the court indicating that the property is not vacant and abandoned.
If a government official has not verified the real property is vacant and abandoned but the court makes a preliminary finding that the residential real property is vacant and abandoned, then within seven days of the preliminary finding, the court must order the appropriate official of a county, municipal corporation, or township in which the property is located to verify the property is vacant and abandoned. Any court costs assessed in connection with the inspection shall not be more than fifty dollars.
If the court decides after an oral hearing that the property is vacant and abandoned and that the lender who filed the motion to proceed in an expedited manner is entitled to judgment, the court must enter a final judgment and decree of foreclosure and order the property to be sold in accordance with the law. If the court does not decide that the property is vacant and abandoned, the seventy-five-day deadline will not apply to the sale of the property.
If the court decides that the property is vacant and abandoned and enters a final judgment and decree of foreclosure, the property must be offered for sale not later than seventy-five days after the issuance of the order of sale. The sale of the property must be conducted in accordance with the law, including possible postponement of the sale.
None of these provisions will supersede or limit other procedures adopted by the court to resolve the residential mortgage loan foreclosure action, including foreclosure mediation.
Except as otherwise provided, if a residential property is found to be vacant and abandoned, a lender may enter that property to secure and protect it from damage. A lender that has not filed a residential mortgage loan foreclosure action on a property for which the lender holds a mortgage may enter and secure that property only if the mortgage contract or other documents provide for such an entry. The equitable and statutory rights to redemption of a mortgage on a property found to be vacant and abandoned expire upon the confirmation of sale of the property.
A person is guilty of criminal mischief if all of the following apply:
- The person knowingly and with purpose to diminish the value or enjoyment of the residential real property moves, defaces, damages, destroys, or otherwise improperly tampers with the person’s own residential real property;
- The residential real property is subject to a mortgage; and
- The person has been served with a summons and complaint in a pending residential mortgage loan foreclosure action relating to that residential real property. “Pending” includes the time between the filing of the foreclosure action and confirmation of sale.
If a decree of foreclosure has been entered with respect to residential real property but the property has not been sold or a sale of the property is not underway, then, beginning twelve months after the entry of the decree of foreclosure, either of the following may occur:
- The local political subdivision may request, by motion or resolution, or by other means, that the county prosecuting attorney file a motion with the court for the sale of the property.
- Upon receiving such a request, or upon the prosecuting attorney’s own motion, the prosecuting attorney of the county in which the action was filed may file a motion with the court for authorization to sell the property in the same manner as if the prosecuting attorney were the attorney for the party in whose favor the decree of foreclosure and order of sale was entered.
The prosecuting attorney must serve a copy of the motion on all parties who entered an appearance in the foreclosure action. The court must decide the motion not sooner than thirty days after the date of the filing of the motion. Unless the court finds good cause as to why the property should not be sold, the court must grant the motion and order the prosecuting attorney to issue an order of sale and sell the property at the next available public auction with no set minimum bid and in accordance with the terms of the order of sale and applicable provisions of Ohio law. The judgment creditor in the foreclosure action has the right to redeem the property within fourteen days after the sale by paying the purchase price. The judgment creditor must pay the purchase price to the clerk of the court in which the judgment was rendered or the order of sale was made. Upon timely payment, the court must proceed as required by law with the judgment creditor considered the successful purchaser at sale.
Specific procedures have been set forth for the sale of real estate after foreclosure including sale at public auction and online sale.