Ohio’s Foreclosure Process Is Changing, Part II

This is the second in a series of articles reviewing provisions of HB 390, which will modernize Ohio’s foreclosure process.  In the last article we generally reviewed Ohio’s current foreclosure process and the new expedited foreclosure process for vacant and abandoned properties.

In order for a lender to proceed in an expedited manner, the Court must be satisfied, without objection from any defendant, that (1) the lender is a person entitled to enforce the note secured by the mortgage, (2) that the defendant is in monetary default, and (3) that the property is vacant and abandoned.

Clarification of who is entitled to enforce the note secured by the mortgage is also contained in the legislation, in what is a significant change to Ohio’s Commercial Paper law.  When I use the word “instrument” I mean the promissory note or mortgage that a borrower signed when they purchased the property.  Currently, lenders are able to enforce a lost instrument if the lender is able to prove it was entitled to enforce the instrument at the time it was lost.  The legislation provides that a lender may enforce a lost instrument if it directly or indirectly acquired ownership from an entity that was entitled to enforce the instrument at the time it was lost.  For example, if Bank A was entitled to enforce an instrument at the time it was lost, and subsequently sold the instrument to Bank B, then Bank B would be permitted to enforce the lost instrument, even though they did not have a right to enforce the instrument at the time it was lost.

Once the Court is satisfied that the lender may enforce the note and mortgage, the Court must determine whether the property is vacant and abandoned.  In determining vacancy and abandonment, the legislation provides that the Court must find by clear and convincing evidence at least 3 of the following factors are true:

(a) Gas, electric, sewer, or water utility services to the property have been disconnected.

(b) Windows or entrances to the property are boarded up or closed off, or multiple window panes are broken and unrepaired.

(c) Doors on the property are smashed through, broken off, unhinged, or continuously unlocked.

(d) Junk, litter, trash, debris, or hazardous, noxious, or unhealthy substances or materials have accumulated on the property.

(e) Furnishings, window treatments, or personal items are absent from the structure on the land.

(f) The property is the object of vandalism, loitering, or criminal conduct, or there has been physical destruction or deterioration of the property.

(g) A mortgagor has made a written statement expressing the intention of all mortgagors to abandon the property.

(h) 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.

(i) 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.

(j) 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.

(k) Other reasonable indicia of abandonment exist.

Upon the Court’s determination, that the property is vacant and abandoned, the Court must enter a final judgment and decree of foreclosure.  The officer conducting the foreclosure sale has 75 days to conduct the sale.  Additionally the legislation allows the lender or its designee to enter the property and secure it to prevent damage.  Last the legislation even makes it a crime for an owner to damages real property that is the subject of a foreclosure action.

I believe Marianne Collins’ testimony before the Financial Institutions, Housing and Urban Development Committee, sums up the need for an expedited foreclosure process.  Ms. Collins is  the Ohio Mortgage Bankers Association Executive Director.  She testified in part:

It is clear that vacant and abandoned properties are impeding a full economic recovery and neighborhood revitalization efforts. To address this, state legislators across the country are considering expedited foreclosure legislation for vacant and abandoned properties as a promising solution.

The first step to expedite the foreclosure process is establishing, by reliable statutory amendments, a clear and objective method to identify vacant and abandoned properties. An unambiguous and easily understood definition greatly mitigates the risk that properties used less frequently or seasonally might inadvertently be classified as vacant and abandoned, and provides necessary protection from possible challenges for those seeking to utilize an expedited foreclosure process.  House Bill 463 establishes that definition.

The next article will discuss the modifications to judicial sale procedures that are contained in this same legislation.