22 August 2024
/ Benjamin N. Hoen
Mortgage Servicers in Ohio Should be Very Careful When Relying on a Notice of Default Sent by a Prior Servicer
A recent Ohio court of appeals decision underscores the critical importance of compliance with procedural requirements for issuing proper notices of default in foreclosure proceedings. The court’s decision emphasized that a proper notice of default is a condition precedent to initiating foreclosure actions and that, in certain circumstances, such notices must be issued by the current mortgagee or its servicer, not a predecessor.
In this case, a predecessor in interest commenced and dismissed a foreclosure, then transferred the loan. Following the transfer, the current mortgagee commenced a new foreclosure and relied on the notice of default sent by its predecessor. The borrower contended that the current mortgagee failed to send a proper notice of default.
Although the trial court found that the current mortgagee could benefit from the predecessor’s earlier notice when the loan was transferred to it, the court of appeals reversed this decision. The court of appeals held that a new notice of default must be issued by the current mortgagee or its authorized servicer before initiating foreclosure proceedings. The current mortgagee could not rely on the predecessor’s notice after it had commenced and then dismissed its own foreclosure action prior to the servicing transfer of the loan.
Mortgage servicers should ensure that procedures for issuing notices of default are up-to-date and compliant with these current legal standards. It is also imperative to notify counsel at the time of referral of any prior foreclosure dismissals, which could affect the validity of the notice of default. When a notice of default is a condition precedent to foreclosure, such as when there is a contractual or state law requirement to send such notice, it is strongly recommended that servicers send their own notice of default and not rely on any notice sent by a predecessor. If you choose to rely on such a notice, make sure to confirm that the predecessor has not commenced and dismissed its own foreclosure prior to the servicing transfer of the loan.
Adherence to procedural requirements for issuing notices of default is crucial for the integrity and success of foreclosure actions. This decision serves as a pivotal reminder for mortgage servicers to meticulously follow these legal protocols. By implementing these guidelines, mortgage servicers can mitigate the risk of adverse court rulings and ensure compliance with judicial expectations.
If you have any questions on this topic or would like to learn about Weltman’s real estate default solutions, please contact shareholder Ben Hoen at any time.
This blog is not a solicitation for business, and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
In this case, a predecessor in interest commenced and dismissed a foreclosure, then transferred the loan. Following the transfer, the current mortgagee commenced a new foreclosure and relied on the notice of default sent by its predecessor. The borrower contended that the current mortgagee failed to send a proper notice of default.
Although the trial court found that the current mortgagee could benefit from the predecessor’s earlier notice when the loan was transferred to it, the court of appeals reversed this decision. The court of appeals held that a new notice of default must be issued by the current mortgagee or its authorized servicer before initiating foreclosure proceedings. The current mortgagee could not rely on the predecessor’s notice after it had commenced and then dismissed its own foreclosure action prior to the servicing transfer of the loan.
Mortgage servicers should ensure that procedures for issuing notices of default are up-to-date and compliant with these current legal standards. It is also imperative to notify counsel at the time of referral of any prior foreclosure dismissals, which could affect the validity of the notice of default. When a notice of default is a condition precedent to foreclosure, such as when there is a contractual or state law requirement to send such notice, it is strongly recommended that servicers send their own notice of default and not rely on any notice sent by a predecessor. If you choose to rely on such a notice, make sure to confirm that the predecessor has not commenced and dismissed its own foreclosure prior to the servicing transfer of the loan.
Adherence to procedural requirements for issuing notices of default is crucial for the integrity and success of foreclosure actions. This decision serves as a pivotal reminder for mortgage servicers to meticulously follow these legal protocols. By implementing these guidelines, mortgage servicers can mitigate the risk of adverse court rulings and ensure compliance with judicial expectations.
If you have any questions on this topic or would like to learn about Weltman’s real estate default solutions, please contact shareholder Ben Hoen at any time.
This blog is not a solicitation for business, and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
