Pursuing a residential foreclosure is not for the faint of heart. The foreclosure process is fraught with procedural pitfalls – many of which arise even before initiating the formal legal process in court.
This is especially true in the case of a residential mortgage foreclosure, where a borrower (“debtor”) has defaulted upon his or her mortgage payments and the mortgagee (“creditor”) is attempting to collect the entirety of the loan through a judicial sale of the debtor’s residential property.
The creditor must not file immediately upon the debtor’s defaulted payment. Instead, the creditor should understand what pre-suit obligations he or she may have by reviewing (1) the contractual requirements under the note and mortgage, (2) the statutory requirements under R.C. §1349.78, and (3) any regulatory requirements that may be applicable to the loan.
Failing to abide by any of these pre-suit requirements may be fatal to a foreclosure action.
Before initiating a formal foreclosure action, it is paramount that a creditor reviews the note and mortgage for any contractual pre-suit requirements. Although it is not common, some notes and mortgages require written notice of actual acceleration of amounts due in the event of default. Regardless of whether this provision is or is not included, reviewing the note and mortgage should be the first step any creditor takes towards pursuing a residential foreclosure.
After reviewing any contractual pre-suit requirements, a creditor must then review his or her statutory pre-suit requirements. Under §1349.78, a creditor is required to send a cure letter to the debtor if: (1) the debt is secured through a mortgage lien on the debtor’s residential real property, (2) the debt is not in the first mortgage position, and (3) the debt has been accelerated or is in default according to the terms of the promissory note. This letter must be sent at least thirty days before the initiation of a foreclosure action, and must include specific language outlined in R.C. §1349.78.
Depending upon the type of loan, there may also be regulatory pre-suit requirements. These requirements are often applicable when the loan is backed by the federal government.
Once a creditor has completed these pre-suit requirements, they can then begin preparing the complaint and pursuing formal legal action against the debtor.
As demonstrated, foreclosure actions are procedurally complex – even before filing the formal suit against the debtor. Failure to abide by any of the above-mentioned requirements could result in the ultimate dismissal of the subsequent foreclosure action.