March 6, 2009
Gerald Baldwin

 

With the number of mortgage foreclosures setting a new record (85,733 in 2008 according to the records of the Ohio Supreme Court), the Ohio Legislature will have several new bills to consider in an effort to protect both homeowners and tenants.

First, in the Senate, Eric Kearney has introduced a bill (S.B. No. 46) that would prohibit any order that a residential tenant be required to vacate earlier than 90 days following confirmation of the sale. During that time, the tenant would continue to pay rent at the rate in the pre-existing rental agreement, but payments would be made to the new owner.

Also in the Senate, a bill (S.B. No. 13) has been presented by Senator Miller which would require the Director of Commerce to prepare a publication which outlines the rights of a tenant or owner in a foreclosure. That publication would be required to be served on the owner when a summons is served. The clerk would also be required to mail the publication to residents at the property. The landlord/owner of a property being foreclosed upon would be required to provide written notice of the foreclosure to tenants with 30 days after receiving the summons and give tenants 21 days notice prior to any scheduled sale of the real estate. Any rental agreement would automatically convert to month-to-month as of a sale date. House Bill 9, proposed by Representatives Foley and Celeste, is very similar to S.B. 13.

Yet to be drafted and presented is a bill which will be much more sweeping. Our February 10, Representatives Foley & Driehaus issued a Memorandum asking for co-sponsors for a bill (probably to be H.B. No. 3) which would dramatically change the foreclosure process for residential property. The legislation has the avowed purpose of “slowing down the foreclosure bleed” because “good faith efforts promised by Ohio mortgage services have proved ineffective.” Some significant aspects of the legislation are:

- Ban on all “home” foreclosures for 6 months; 
- The power of the state courts to modify the terms of mortgages as needed as an “equitable remedy;” 
- Increase of the filing fee to $1,500 to be charged against the lender and not recoverable from the borrower; 
- 60 days advance notice to the homeowner prior to the initial pleading; 
- Requirement for submission of “foreclosure information” to a statewide database prior to a foreclosure filing; 
- A prerequisite to filing a complaint will be that ownership of the note and mortgage must be “clear and unambiguous.” 
- If a loan has been securitized, the specific mortgage backed security holding the loan, and the MBS trustee, must be identified; 
- A current appraisal must be filed with the complaint; 
- Affidavit of counsel for plaintiff that he or she has the authority to negotiate with the borrower. 
- The homeowner’s right to occupy the property until “the lender finds a buyer” (presumably someone other than the lender in a credit bidding purchase)
Vacant properties would be exempt (even from the increased filing fee?).

Expect that the progress of the so far undrafted legislation will be bumpy. Passage of any legislation in the Senate, where Republicans control, is open to serious question.