The Ohio State Bar Association (OSBA) recently supported amendments to legislation in the Ohio General Assembly that propose substantial changes to Ohio’s foreclosure process. The legislation has four components: increasing the statute of limitations for suit on a promissory note, expanding the right to enforce a promissory note, creating new criminal code for homeowners between the date of foreclosure filing and judgment and the creation of private selling officers to handle sheriffs’ sales. These provisions could disarm homeowners by prolonging the act of foreclosure.
While the legislation has a worthy goal of speeding up foreclosures of vacant properties there is much in the proposed bill that would make it harder for homeowners to defend foreclosures.
In the state of Ohio, the current statute of limitations (SOL) to bring suit on a promissory note is six years. This is consistent with 20 other states in the nation. The proposed legislation would raise the SOL to 21 years, which is more than twice as long as the highest SOL in the nation. The longest SOL is currently 10 years, which is in place in only seven states. In addition to creating the distinction of having the longest SOL in the nation, this provision could also confuse the land title process and lead to more abandoned homes on the market.
Expanding the Right to Enforce on Promissory Note
A second aspect of the legislation creates a felony offense relating solely to the homeowners in the period between filing foreclosure and a foreclosure judgment. This section penalizes a homeowner for damage done to a home during this period. Though everyone in the process has an interest in maintaining the integrity of the home, the legislation as it stands does not account for lenders’ agents accessing a home to secure or winterize the property. Further, there are no guidelines for periodic quality inspections to ensure that any damage to the home accurately reflects the time period at issue. One worry is that the new felony provision will create a subjective standard, which is typically dangerous for a criminal statute.
The legislation also proposes to create private selling officers in lieu of the traditional sheriff ’s sale. They will sell vacant and foreclosed homes pursuant to tax liens post-foreclosure. That work is currently the responsibility of county sheriffs, who work in concert with the County Courts of Common Pleas. Such selling officers create a risk of abuse and fraud. The current system for allowing county sheriffs to conduct the sale should remain in place.
Past collusion of agents involved in different aspects of the home buying and foreclosure processes was an underlying reason for the need for federal reform with the Secure and Fair Enforcement Act (SAFE). As recent abuses in the housing sector established the need for federal reform to prevent this type of wrongdoing, it seems that new state law, which undermines the integrity of the Housing and Economic Recovery Act is not designed to protect the average Ohio homeowner.
Proposed provisions intend to accelerate the process for some properties as well. In Ohio, however, the Supreme Court of Ohio ruled that a borrower who does not file an answer to a foreclosure lawsuit within 28 days waives the right to challenge irregularities in process or substance. If the Ohio General Assembly chooses to enact the accelerated foreclosure provision, perhaps consideration should be given to allow a homeowner or borrower seeking to vacate a judgment freedom from violating Supreme Court precedent.
Though the Ohio State Bar Association must be commended for addressing the issue of foreclosure procedures, the current proposal falls short of providing proper equal protection and due process of law for the state’s homeowners. It may create undue hardships on families who are facing the possibility of losing their homes. Members of the Ohio legislature should work to improve this bill before considering its enactment. Marc Dann