Before the foreclosure crisis, federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited and tended to favor foreclosing lenders. However, many federal and state laws now give protections to borrowers. Servicers generally must provide borrowers with loss mitigation opportunities, account for each foreclosure step, and carefully comply with foreclosure laws.
Also, most people who take out a loan to buy a residential property in Ohio sign a promissory note and mortgage. These documents usually give homeowners certain contractual rights after a mortgage loan default.
So, don't get caught off guard if you're a homeowner behind in mortgage payments. Learn about Ohio foreclosure laws and how the foreclosure process works, from missing your first payment to a foreclosure sale.
In an Ohio foreclosure, you'll most likely get the right to:
Once you understand the Ohio foreclosure process and your rights, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible.
The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. (Sometimes, people refer to the period before a foreclosure sale happens as "preforeclosure," too.)
During the preforeclosure period, the servicer can charge you various fees. Also, in most cases, federal law requires the servicer to let you know how to avoid foreclosure, and most mortgage contracts require the servicer to send you a breach letter (a preforeclosure notice).
Under federal law, the servicer usually can't officially begin a foreclosure until you're more than 120 days past due on payments, subject to a few exceptions. (12 C.F.R. § 1024.41). This 120-day period provides most homeowners ample opportunity to submit a loss mitigation application to the servicer.
If you default on your mortgage payments for your home in Ohio, the foreclosure will be judicial.
A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale.
Summons and complaint. The lender gives notice of the suit by serving you a summons and complaint. The summons will have instructions as to when and where to file an answer, along with other important foreclosure case information. If the court has a mediation program, the summons will likely include information on how to participate in mediation, including a form to request it.
Filing an answer. Review the complaint carefully and examine the attached exhibits, which will probably include a copy of the promissory note and mortgage you signed when taking out the loan. If you disagree with the allegations or see that the lender failed to include appropriate documentation, you can raise these issues in your answer.
You get 28 days to answer the complaint and serve (or mail) your answer or other response to the foreclosing lender's lawyer. You must also file your answer or other response within three days of serving your answer. (Ohio Civil Rule 12(A), 5(D)). If you need more time to answer, you can file a motion with the court asking for an extension. If you don't file an answer or raise a particular defense in your answer, you'll be barred from raising it later, subject to a few exceptions.
Judgment. If you don't respond to the suit, the lender will ask the court for, and probably receive, a default judgment, allowing it to hold a foreclosure sale. But if you choose to defend the foreclosure lawsuit, the case will go through the litigation process. Your case might be assigned to a special foreclosure magistrate, like in Cuyahoga County. The magistrate makes findings and recommendations about the foreclosure. If you don't object to these findings, or if the court overrules your objection, then the court may adopt the magistrate's decision in full or in part.
The lender might ask for summary judgment. A summary judgment motion asks that the court grant judgment in favor of the lender because there's no dispute about the critical aspects of the case. If the court grants summary judgment for the lender—or you lose at trial—the judge will enter a judgment and order your home sold at auction.
Sale. The property is then appraised because, in Ohio, the home can't be sold for less than two-thirds of its appraised value at the foreclosure sale. (Ohio Rev. Code §§ 2329.17, 2329.20). Notice of the date, time, and place of sale is published for three consecutive weeks in a newspaper. (Ohio Rev. Code § 2329.27).
At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less. In some states, including Ohio, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower.
If the lender is the highest bidder, the property becomes "Real Estate Owned" (REO). But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds—that is, money over and above what's needed to pay off all the liens on your property—you're entitled to that surplus money.
Your legal rights in the property terminate when the court confirms the sale and a writ of possession is issued to the buyer.
A few potential ways to stop a foreclosure and keep your home include reinstating the loan, redeeming the property before the sale or for a short period after the sale, or filing for bankruptcy. Working out a loss mitigation option, like a loan modification, will also stop a foreclosure.
Or you might be able to work out a short sale or deed in lieu of foreclosure and avoid foreclosure. (But you'll have to give up your home with a short sale or deed in lieu of foreclosure transaction.)
Ohio law doesn't give the borrower the right to reinstate the loan. But your loan paperwork might allow for reinstatement. Check your mortgage to see if you get the right to complete a reinstatement. If not, the lender might agree to let you reinstate your loan.
One way to stop a foreclosure is by "redeeming" the property. To redeem, you have to pay off the full amount of the loan before the foreclosure sale.
Some states also provide foreclosed borrowers a redemption period after the foreclosure sale, during which they can buy back the home. In Ohio, you have a right to redeem up until the court confirms the sale. (Ohio Rev. Code § 2329.33). You can file a motion with the court asking to delay the confirmation if you need more time to redeem.
If you're facing a foreclosure, filing for bankruptcy might help. In fact, if a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy. Once you file for bankruptcy, something called an "automatic stay" happens. The stay functions as an injunction that prohibits the lender from foreclosing on your home or otherwise trying to collect its debt, at least temporarily.
In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy might be the answer. To find out the options available, speak with a local bankruptcy attorney.
In a foreclosure, the borrower's total mortgage debt sometimes exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a "deficiency." For example, say the total debt owed is $400,000, but the home sells for $350,000 at the foreclosure sale. The deficiency is $50,000.
In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount—in our example, $50,000—from the borrower.
Deficiency judgments are generally allowed in Ohio, subject to some limitations.
In Ohio, the lender can get a deficiency judgment against you for the remaining balance as part of the foreclosure lawsuit. But at the foreclosure sale, the home can't sell for less than two-thirds of its appraised value. (Ohio Rev. Code § 2329.20, § 2329.17).
In most cases, the lender has two years following sale confirmation to collect the judgment. (Ohio Rev. Code § 2329.08).
For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.
Get tips on what to do—and what not to do—if you're facing a foreclosure.
Find out if foreclosures are on the rise.
If you have questions about Ohio's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney. It's also a good idea to talk to a HUD-approved housing counselor about different loss mitigation options.