The Five Things a Bank Must Prove in Ohio Foreclosure Cases
Ohio is a judicial foreclosure state. This means bank must initiate a lawsuit against the borrowers before it can foreclose and have the property sold. In that lawsuit, the bank must establish the following five things.
Promissory NoteWhen you took out your mortgage loan, you gave the bank two legal documents: a promissory note (or line-of-credit agreement) and a mortgage, sometimes called a mortgage deed. The promissory note is the promise to repay money. It is usually 3-5 pages long. You owe the money only if you signed the promissory note. Often the bank that is suing is not the bank or mortgage company you signed the promissory note for.
To foreclose, the loan servicer must obtain rights under the promissory note from the original bank. Usually this is simply done by the original bank writing "pay to the order of" on the last page of the promissory note, signing underneath, and then giving the promissory note to the foreclosing bank. This process is called indorsement. Without having possession of an indorsed promissory note, the current loan servicer (if not the original bank) cannot foreclose.
MortgageThe other document you signed when you took out the mortgage loan was the mortgage itself. The mortgage is the paper which turns your house into collateral for repayment of the promissory note. The mortgage is usually 15-25 pages long. Just because you signed the mortgage does not mean that the mortgage loan is your debt. Sometimes the spouse of the borrower is asked to sign the mortgage either because he or she is a co-owner of the property, or to release dower (spousal) property interests the spouse automatically has under Ohio law.
To foreclose, the current bank must be the owner of the mortgage. The original bank can assign the mortgage to a subsequent bank or mortgage company. Assignments are in writing, and are separate from the mortgage itself. Assignments are almost always filed in the office of the county recorder. If there has been more than one assignment, then the assignments taken together (the "chain") must show that ownership of the mortgage has passed from the original bank to the foreclosing bank
DefaultThis may sound obvious, but the foreclosing bank must show that a default has occurred under the promissory note and mortgage. The default is almost always a failure to pay the monthly installments. Default is defined in the terms of the promissory note and mortgage. In most places in Ohio, the mortgage company must show default in a two-step process. First, an employee of the mortgage company or bank must sign a sworn statement, or affidavit, stating that the loan is in default, and the date of default. Second, the employee must attach mortgage loan records which show the default. This second step is usually required so that the judge can check the records to verify the employee's statement.
Amount of Principal and Interest DueA bank forecloses to get the property sold to pay the amount owed on the mortgage loan. So it makes sense that the bank must establish the amount of money owed under the promissory note and mortgage. Like with default, the mortgage company must submit a sworn statement accompanied by mortgage loan records showing the amount owed on the date of default. Then, using the same, two-step process, the bank must show the rate of interest at which the amount owed in growing. The rate of interest must be known so the amount ultimately due to the bank can be calculated when the foreclosure sale is completed.
Satisfaction of Conditions PrecedentOK, sorry about the legalese here. "Conditions precedent" are simply things which the loan servicer must do before it files a foreclosure lawsuit. The conditions precedent are specified in the terms of the promissory note and mortgage. Usually the only thing the loan servicer must do is send the borrower a letter and give him or her a month or so to send in the late payments and late fees to catch up. But all mortgage loans are different: some loans require nothing, while others require the mortgage company to visit the house and send certified mail. Generally the bank proves it satisfied the conditions precedent by filing with the court copies of the letters sent to the borrower.