August 2, 2016
by Peter L. Mehler
Reimer, Arnovitz, Chernek & Jeffrey Co., L.P.A – USFN Member (Ohio)
Ohio recently passed into law HB 303 or what is being called the D.O.L.L.A.R. deed program. The acronym is short for Deed Over Lender Leaseback Agreed Refinance and provides a loss mitigation alternative for delinquent borrowers. The program will be run by the Ohio Housing Finance Agency, the non-profit that was responsible for distributing over $500,000,000 through the Hardest Hit Funds Program.
The idea is quite simple. A borrower who has defaulted on his mortgage can apply for consideration in the program. In order to qualify, the borrower’s front-end and back-end debt-to-income ratios must fall below the current ratios set by the HAMP program and the borrower must occupy the property. Participation by lenders is optional but those participating must reply to the borrower’s request within 30 days of the submission of the application.
If approved, the borrower and the lender execute a deed-in-lieu of foreclosure. As consideration for the deed, the lender then executes a lease with the borrower that contains an option to purchase. The deed and the lease are then recorded with the county recorder. The term of the lease is for the shorter of the period of time necessary for the borrower to be approved for financing by the FHA or two years from the date of the lease with option-to-purchase agreement. The rental terms shall be one-twelfth per month of the annualized amount due for taxes, insurance, and any condominium or homeowners association dues, if applicable. The lease must also contain an option to purchase by the borrower during the term of the lease.
The lender does not risk having its mortgage extinguished by executing the agreement with the borrower; and, if the borrower defaults under the terms of the lease, he loses his rights under the agreement (including the option to purchase) and is subject to Ohio normal laws of forcible entry and detainer.
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