Failure to Record a Satisfaction of Mortgage Can Become Costly in the State of Ohio

An Act has been introduced by the Ohio legislature, known as H.B. 201, which will make it very costly for a mortgagee, or any successor or assignee of the original mortgagee, who receives a payoff from the homeowner, and fails to timely record a satisfaction of mortgage. The Act has passed both the House and Senate and now awaits the signature of Ohio Governor John Kasich.

Under Ohio law, a mortgagee is required to record a satisfaction of mortgage within 90 days of receiving a payoff from the homeowner. A delay in processing the satisfaction by the county recorder does not cause the mortgagee to be in violation of the law.  By contract, a mortgagee may recover from the mortgagor the cost of filing the satisfaction with the county recorder. 

The new statute now defines specific penalties for failing to comply with this requirement.

First, if a satisfaction of mortgage is not recorded within 90 days, the current owner of the property may recover damages of $250 from the mortgagee or any successor or assignee of the original mortgagee. Additionally, after 90 days, the current owner may send a written notice to the mortgagee or any successor or assignee of the original mortgagee, demanding that the satisfaction be filed within 15 days of receiving the notice. If the mortgagee or any successor or assignee of the original mortgagee fails to record the satisfaction after receiving the notice, the current homeowner may file a civil action and be entitled to recover reasonable attorney's fees and costs plus statutory damages of $100 for each day of non-compliance, not to exceed $5000 in total damages. Finally, the new Bill does not limit the home owner's recovery to these statutory damages.  The current owner will not be precluded from recovering any other legal remedies or damages that may be available. 

The new statute pertains to both residential and commercial mortgages, including mortgages which have been paid in full prior to the passage of the Act. Go here to review Section 5301.26 of H.B. 201. Though, with respect to an unreleased commercial mortgage which has been satisfied more than 90 days prior to the passage of the Act, the mortgagee is exempt from the $250 penalty. However, the mortgagee may still be subject to the additional statutory damages in a civil action as described above. 

Originally, H.B. 201 was introduced in the Ohio House of Representatives with a subsection codifying the Doctrine of Equitable Subrogation. (Go here to see the discussion on Equitable Subrogation in the Dec. 2, 2013 advisory). However, the Ohio Senate dropped this item from its version of the Bill, and it does not appear in the final draft of the Act as adopted by the House and Senate. As a result, the remedy of Equitable Subrogation in Ohio will remain at the discretion of the courts. 

It is imperative for mortgagees to review their satisfaction of mortgage processes and to become compliant with this new statute. Because the statute permits the recovery of attorney's fees in addition to the statutory damages, you can be sure that aggressive consumer advocates are gathering information now to proceed with actions against mortgagees for failing to comply with the requirements of the statute.