If a lender has filed a foreclosure case against you in Ohio, you may have a defense against the action. The types of defenses you can raise in an Ohio foreclosure will depend on the particular facts and legal issues in your case. This article will explain some of the foreclosure defenses that may be legally available to you in Ohio.
(For more articles on foreclosure in Ohio, including programs that assist struggling Ohio homeowners, visit Nolo's Ohio Foreclosure Law Center.)
In Ohio, you may have the right to receive certain notices before and after the mortgage company has filed a foreclosure against you. In addition, the foreclosure case must proceed in steps, with time periods in between to allow you time to respond to certain actions. You have the right to challenge the foreclosure if the creditor does not follow these procedures.
(For details on the required steps in an Ohio foreclosure, see Ohio Foreclosure Procedures.)
Ohio does not have a specific statute that requires lenders to give you notice before it files foreclosure. However, the forms that banks use in Ohio for mortgage loans often contain a provision that requires the creditor to give you a written notice of the default before it can call the entire loan due (called “acceleration”) and file foreclosure. You should check your mortgage loan paperwork to see if it contains this language.
Failure to Give Notice of Default
If the bank failed to give you written notice of a default required by your loan agreement, then you can raise this as a defense in the foreclosure. If the court agrees with you, it may dismiss the case. This is a temporary measure, however. If you do not bring the loan current, then the bank can simply send you the written notice and file foreclosure again.
Failure to Provide the Right to Cure the Default
If your mortgage loan agreement requires the lender to give you written notice of the default, then it also allows you a period of time to bring the loan current by paying all the past due payments and charges. This is called “curing” the default. Usually, you have at least 30 days to cure the default before the bank may file foreclosure. If you have cured the default (or tendered payment in the proper amount, but the lender refused to accept it) but the bank has filed foreclosure anyway, then you can raise this as a defense to the foreclosure. You may even be able to request that the court dismiss the case.
Pre-Foreclosure Servicing Requirements
If you have a HUD-secured FHA loan, the mortgage lender and its servicer are required to work with you on a solution prior to filing foreclosure. This is called loss mitigation. This means that the lender must make a reasonable effort to meet with you and offer counseling on foreclosure alternatives such as:
forbearance or partial forbearance, or
deed-in-lieu of foreclosure.
If the lender fails to meet these requirements before filing foreclosure, then you can raise this as an issue with the court, usually in the form of a motion to dismiss.
Procedures After the Foreclosure is Filed
Once the creditor has filed foreclosure, you are entitled to certain notices and opportunities to raise different issues before the case may proceed to the next level. You have the right to participate even up to after the time the house is sold at sheriff's sale. If the foreclosure process is not followed (for example, you did not get notice of a default hearing that you wished to attend), you can raise this with the court.
Common Ohio Substantive Defenses
The types of legal and factual issues that you can raise during the foreclosure case will depend on your particular circumstances. What follows is a general list of some of the more common foreclosure defenses, which may or may not be applicable to you.
Insufficient Mortgage Paperwork
The foreclosing creditor must prove that it has standing at the time if filed foreclosure. This means that the lender cannot proceed unless it proves that it is both the legal payee on the note and holds the mortgage on your house. If the creditor lacks standing, then Ohio law requires that the case be dismissed. You can ask that the court dismiss the foreclosure, or raise affirmative defenses in your answer, if you find the following defects:
the creditor has not attached a copy of the promissory note to the complaint or, if it is not attached, provided a written explanation for the absence of the note
the note does not give the creditor a mortgage interest in your home
the lender's request for a deficiency judgment is not supported by the loan papers (for example, you have a non-recourse mortgage loan, or you are not named as an obligor on the note) (learn more about non-recourse loans and deficiency judgments, or
the creditor suing you is not the same creditor that is on mortgage and/or note, and it has not produced an assignment or other legal document that establishes its ownership of that mortgage loan.
Payment Disputes or Mistakes
The foreclosing creditor must allege and prove that you are in default and that the balance due on the mortgage loan is correct. It is not uncommon for a mortgage lender to miscalculate the balance due, overcharge interest and other fees, assess attorneys' fees and other charges that are not supported by the note, misapply principal and interest payments, or fail to properly account for all payments it has received from a borrower. These mistakes may prevent a lender from legally foreclosing.
Some of the more common payment issues that you may be able to raise as affirmative defenses in your foreclosure case include:
inaccurate interest rate and balance due
incorrect payment history (for example, you missed only one payment, not five)
miscalculation of your escrow payments and shortages by overcharging you for property taxes or insurance
miscalculation of the delinquency amount
the lender miscalculated the amount to cure or reinstate your mortgage loan
you paid the mortgage in full (such as refinancing)
you have reinstated the mortgage
- you have entered into a loan modification, forbearance agreement or other resolution with the mortgage lender, and
- the lender has waived its right to foreclose (for example, by accepting payments from you after the foreclosure has commenced).
Federal Unfair Lending or Debt Collection Practices
The mortgage lender may have violated your rights under the federal Real Estate Settlement Practices Act (RESPA), Truth in Lending Act (TILA), or the Home Ownership and Equity Protection Act (HOEPA) if it failed to make required disclosures when you took out the home loan or charged you improper interest rates and other fees. Or it may have engaged in unlawful debt collection or credit reporting practices with regard to your loan. If so, you may be able to rescind the mortgage loan in the foreclosure, and may even be entitled to recover damages in the form of recoupment. For more information, see Should You Fight Your Foreclosure in Court?
Ohio Consumer Violations: CSPA
If you obtained your mortgage loan on or after January 1, 2007, you may have additional defenses if your loan was obtained from a non-bank mortgage lender. The Ohio Consumer Sales and Practices Act (CSPA) extends to some mortgage loan transactions by protecting you against unfair or deceptive lending practices. Examples of improper lending practices under CSPA include:
fraudulent loan disclosures
advising you to default on your existing mortgage loan and other debts
using or encouraging an overinflated property appraisal, and
extending you a loan that it knows you cannot repay.
You may also be able to counterclaim for damages and rescission of the problem mortgage loan.
Right of Redemption
Even if you do not dispute the foreclosure and file an answer, you have a right to redeem your house in foreclosure at any time, until the sale of the house is confirmed by the court. Redemption means that you pay off the mortgage loan in full, including all applicable fees (except attorney fees) and costs. For more information, see Right of Redemption Before Foreclosure.
If you wish to redeem the property, you should request an itemized written payoff from the lender's attorney, which is usually good for at least 30 days.
Right to Reinstate
If you do not have the funds or financing to fully redeem the mortgage, you may still have the right reinstate the loan. That means that you can stop the foreclosure and cure the default by bringing the loan current.
Ohio law does not recognize a right of reinstatement. However, your loan papers may provide for reinstatement. Many do.
To bring the loan current, you will need to pay, by the deadline set forth in the loan agreement:
all past due principal and interest payments
escrow shortages (if applicable)
late charges, and
attorneys' fees and costs related to the foreclosure (unlike reinstatement).
Special Reinstatement Assistance
If your loan allows for reinstatement, but you are still short on funds, you may qualify for additional assistance. As part of the U.S. Treasury Department's Hardest Hit Fun, Ohio has a reinstatement program called “Restoring Stability.” You may qualify for up to $25,000 in reinstatement assistance. For more information, see Save the Dream Ohio.