Banking & Finance Law Report

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The Ohio Legislature Creates an Alternative to the Judicial Foreclosure Process for Certain Owners of Residential Property

The D.O.L.L.A.R. Deed Program for Ohio (the “Program”) was created following the passage of Substitute House Bill 303, and went into effect on September 28, 2016 in order to provide an additional loss mitigation option for homeowners in default of their residential mortgage obligations. The acronym “D.O.L.L.A.R.” stands for Deed Over, Lender Leaseback, Agreed Finance.  Substitute House Bill 303 was unanimously passed by the Ohio legislature as a cost effective and efficient way for borrowers to avoid incurring the expense of defending a foreclosure action while trying to refinance their property and stay in their homes.  As an alternative to the judicial foreclosure process, the law is meant to combat neighborhood blight and preserve home ownership by keeping borrowers in their homes while they try to refinance their defaulted mortgage obligations.  If the refinance is unsuccessful, the property can be transferred to the lender.  This affords Borrower with the opportunity to maintain and reclaim rights and possession of their real property while they try to address their outstanding mortgage obligations.

In order to qualify for the Program, a borrower does not have to be eligible for alternative mortgage loss mitigation, but his or her front-end and back-end debt-to-income ratios must …

Ohio Revised Code §1301.401 – A Powerful Tool for Lenders with a Defective Mortgage

For years, it was generally accepted that mortgage creditors and bankruptcy trustees could assert the status of a bona fide purchaser and treat a defectively notarized mortgage as if that mortgage did not exist.  On February 16, 2016, our Supreme Court provided clarity regarding the legal effects of R.C. §1301.401 and provided protection to lenders regardless of whether their mortgages were defective.

In Re Messer, 2016-Ohio-510 was a referral to the Ohio Supreme Court from the Bankruptcy Court for the Southern District of Ohio.  Mr. and Mrs. Messer (the “Messers”) owned real property in Ohio.  In order to finance the purchase of the property, the Messers executed and delivered a mortgage to Mortgage Electronic Registration Systems (“MERS”) as nominee for M/I Financial Corp.  The mortgage was later assigned to JP Morgan Chase Bank, N.A. (“Chase”).  Although the mortgage was correctly signed by the Messers, the notary failed to certify the mortgage acknowledgment, although the notary did notarize other documents at the time of the closing.  The Franklin County Recorder accepted and recorded the mortgage on December 4, 2007.

On September 19, 2013, about six years after the defective mortgage was recorded, the Messers filed a Chapter 13 bankruptcy petition. The …

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