Ohio’s Foreclosure Process Is Changing, Part I
On May 25, 2016, the Ohio Legislature passed HB 390, which is pending the Governor’s signature. It is expected the Governor will sign the legislation in the coming weeks. The bill makes a number of changes to Ohio law, including sweeping changes to Ohio’s foreclosure process. The foreclosure modernization was originally proposed in HB 463, but late last month was amended into HB 390 and ultimately passed. This is the first of a series of articles about current law, changes to the foreclosure process, the public foreclosure sale procedures and Ohio’s commercial paper law.
Ohio is one of 23 states that is classified as a “judicial foreclosure” state. This means that a Court must oversee the lender’s attempt to foreclosure an owner’s mortgage and obtain title to the property. A lender’s foreclosure is initiated by filing a lawsuit in Court in the county in which the property is located. The owner, or defendant, is given the opportunity to answer the lawsuit and raise any defenses to the lender’s allegations (i.e. the lender does not have the right to foreclose the note/mortgage). After the lawsuit is filed and defendant has been given the opportunity to answer, the lender must either convince the court through a summary proceeding, either default judgment or summary judgment, to rule in the lender’s favor.
If the Court does not grant judgment in a summary proceeding, then the case will go to trial. If the lender obtains judgment, the lender must then file a writ of execution directing the county sheriff to sell the property at public auction. Once the property is sold, the Court has 30 days to confirm the sale. The time between the sale and the Court’s confirmation is known as the redemption period. The owner has a right to buy back the property during the redemption period, essentially nullifying the sheriff sale. After the Court’s confirmation, the high bidder at sheriff sale, usually the lender, can obtain title to the property.
The bill creates an exemption to the foreclosure process outlined above for property that is vacant and abandoned. If a property is vacant and abandoned, the lender may avail itself of an expedited foreclosure process by filing a motion with the Court. Upon the filing of the motion, the Court has 21 days after the expiration of the owner’s answer period, or the lenders filing of the motion, whichever is later, to enter a final judgment and decree of foreclosure in favor of the lender. The officer conducting the foreclosure sale then has 75 days to offer the property for sale.
Columbus Attorney Tony Fiore, a partner with the law firm of Kegler, Brown, Hill & Ritter, testified in April before the House Financial Institutions, Housing and Urban Development Committee as one of the experts involved in drafting the legislation. He explained that the reforms contained in the legislation will reduce the number of vacant and abandoned properties in Ohio, while continuing existing protections for borrowers behind on their mortgage payments.
I agree with Mr. Fiore that reforms have been long overdue and an unintended consequence of existing foreclosure processes is the blight on our communities from vacant and abandoned properties. In the next article we will review what constitutes a vacant and abandoned property and the conditions that must be met for a Court to approve an expedited foreclosure sale.