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On November 17, 2015, the Ohio House passed Ohio's proposed foreclosure fast-track legislation (H.B. 134), and the bill now moves to the Ohio Senate for consideration. The primary objective of the bill is to allow a mortgagee to bring an expedited foreclosure action against vacant and abandoned residential property. The bill would also modify some procedures that generally apply to foreclosure sales of Ohio properties.

Ohio, which is a judicial foreclosure state, requires the filing of a complaint, service of a summons on all parties which may have an interest in the property, a judgment for foreclosure, a judicial sale, and a court order confirming the sale, before the title to the property can be transferred.

The Ohio Rules of Civil Procedure, which generally govern the proceedings in a foreclosure until the judgment has been entered, allow for the foreclosure plaintiff to file a motion for default judgment only after 28 days following service of the summons on a non-answering defendant.¹  Most courts either schedule a hearing a few weeks after the motion is filed, or hold the motion for a period of time to allow any party to file an objection.

The bill would permit a mortgagee who files a foreclosure action on a residential property to file a motion with the court to proceed in an expedited manner on the basis that the property is vacant and abandoned. In the motion, the mortgagee must establish: (1) that it is the party entitled to enforce the debt instrument; (2) that there has been a monetary default; and (3) that no defendant has filed an answer setting forth a defense which, if proven, would preclude the entry of a judgment for foreclosure or has filed a written statement that the property is not vacant and abandoned.

If the mortgagee files such a motion, the bill would require the court to decide the motion within 21 days after the motion is filed, or within 21 days after the last answer date of any defendant, whichever is later. The bill does not suggest any remedy if the court fails to decide the motion within the specified time frame.

In order to grant the motion, the court must find by clear and convincing evidence that at least three of the following factors are true:

1. Utility services have been disconnected.
2. Windows or entrances are boarded up or closed off, or multiple window panes are broken.
3. Doors are smashed through, broken off, unhinged, or continually unlocked.
4. Trash or hazardous substances or materials have accumulated on the property.
5. Furnishings, window treatments, or personal items are absent from the structure.
6. The property is the object of vandalism, loitering, or criminal conduct, or there has been physical destruction or deterioration of the property.
7. A mortgagor has made a written statement expressing the intention of all mortgagors to abandon the property.
8. An inspection showed that no owner or tenant appears to be residing in the property.
9. Government employees have provided written statements indicating that the structure is vacant and abandoned.
10. The property is sealed because, immediately prior to being sealed, it was considered by an appropriate official to be open, vacant, or vandalized.
11. Other reasonable indicia of abandonment exist.

The bill would require that if the court decides that the property is vacant and abandoned, and that the mortgagee that filed the motion is entitled to judgment for foreclosure, the court must enter a final judgment and order the property to be sold, and the property must be offered for sale or not later than 75 days after the clerk of courts issues the order of sale. The bill does not impose a time frame for the clerk of courts to issue an order of sale. Some clerks of court are backlogged, so there may still be a delay at this stage. Some sheriffs are also backlogged in scheduling sales, and the bill does not suggest a remedy if a sheriff fails to schedule the sale within the specified time frame.

Some other features of the bill include:

• An express provision imposing criminal liability on an owner who knowingly causes physical harm to the property after having been served with the summons in the residential mortgage loan foreclosure action. (While this is not limited to fast-track foreclosure cases, it is limited to residential properties. There is no apparent explanation for this limitation).
• Establishment of a uniform requirement for a deposit equal to 5% of the appraised value, with a minimum deposit of $5,000 and a maximum of $10,000, to be paid by the successful bidder, including the judgment creditor, on the day of the sale. The failure to make a timely deposit would invalidate the sale.
• All notices and advertisements for the sale of residential property located in a municipal corporation in connection with a mortgage foreclosure case, must include a provisional date for a second sale if there are no bidders at the first sale. The second sale is to be scheduled between seven and thirty days after the first sale, and will have no minimum bid requirement. The successful bidder at the second sale must pay to the sheriff, in addition to the amount of the bid, a deposit in an amount determined by the Sheriff, not less than $5,000 and not more than $10,000. The Sheriff is to use the deposit to pay the costs of the sale. After doing so, the Sheriff must refund any excess to the purchaser. (The bill does not state how the costs of the sale will be paid if the Sheriff underestimated the amount required for the deposit, or if the costs are more than $10,000).
• If there are no bidders at the second sale, additional sales may be scheduled with no minimum bid requirement. If there is a bidder at the second or a subsequent sale, the judgment creditor and the first lienholder each will have the right to redeem the property within 14 days after the sale by paying the purchase price, and thereby become the purchaser.
• In one provision, the bill states that in all foreclosures, the purchaser will be responsible for the payment of real estate taxes, assessments, penalties and interest that attach as of the day following the date of the sale, including taxes and assessments levied for the year in which the sale occurred, apportioned pro rata after the date of the sale.
• In all foreclosures, the officer making the sale must record the deed within 14 days after confirmation of the sale and payment of the balance due. If the officer fails to record the deed within the specified time frame, the purchaser may file a motion to have a certified copy of the order of confirmation of sale filed with the county recorder to effectuate the transfer of title. In this provision, the bill states that the purchaser becomes responsible for real estate taxes beginning on the date of confirmation of the sale. (This seems to be in conflict with the provision referred to in the bullet point above, which states that the purchaser's responsibility for taxes accrues as of the day following the date of the sale, rather than as of the date of confirmation of the sale).
• The clerks of court will be prohibited from restricting, prohibiting, or otherwise modifying the rights of the parties to seek service of the summons as allowed by the Rules of Civil Procedure. (Some clerks of courts, for example, previously imposed requirements preventing simultaneous attempts to perfect service of the summons through alternative methods, or required service by the county sheriff despite a plaintiff's desire to use a private process server).

Weltman, Weinberg & Reis will continue to monitor and keep you advised of further developments regarding this bill.


¹ If the United States is named as a party, federal law allows it to file an answer within 60 days after it has been served with the summons.