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Ohio Legislature Enacts New Requirements for Mortgage Servicers

Posted By USFN, Monday, May 20, 2019

by Rick D. DeBlasis and Charles E. Rust

Lerner, Sampson & Rothfuss

USFN Member (KY, OH)


On March 20, 2019, two provisions of Ohio law took effect, which impose new requirements on mortgage servicing.

Section 1322.07(A) - Certificate of Registration Requirements
First, an amendment to Revised Code Section 1322.07(A) requires mortgage servicers to obtain a certificate of registration from the Superintendent of Financial Institutions for the “principal office and every branch office” from which they conduct mortgage servicing in Ohio. Under the statute, unregistered persons are prohibited from conducting mortgage servicing in Ohio.

Additionally, “[a] registrant shall maintain an office location for the transaction of business as a mortgage lender, mortgage servicer, or mortgage broker in this state.” This language allows for two interpretations: 1) servicers are required to maintain a brick and mortar location in Ohio; or 2) servicers are required to maintain a brick and mortar location somewhere for the transaction of business in Ohio.

According to advisory guidance from Ohio’s Division of Financial Institutions,2017 amendments to the statute eliminated the brick and mortar requirement1. Because the most current amendment simply adds “mortgage servicer” to the existing statute, absent a contrary advisory opinion, the statute does not appear to impose Ohio brick and mortar requirements on servicers. Because the most current amendment simply adds “mortgage servicer” to the existing statute, absent a contrary advisory opinion, the statute does not appear to impose Ohio brick and mortar requirements on servicers.

Section 1349.72 - New Requirements for Junior Lien Collections
The second major change affects persons collecting debt that is in default and secured by “a second mortgage or junior lien” on residential real property. Though the new law raises many unanswered questions, Revised Code Section 1349.72 requires creditors and collectors of junior liens to provide defaulting debtors with an entirely new notice before attempting to collect the debt.

The new notice must:

  • Print in at least 12-point type
  • Provide contact information for the person collecting the debt
  • Include the amount of the debt• Include a statement that the debtor has a right to an attorney
  • Include certain specific notices about bankruptcy options

Section 1349.72 also requires the “owner” of a debt to provide a copy of the note and loan history to the debtor upon written request. For noncompliance, the statute authorizes a private right of action for aggrieved debtors but allows the collector a defense if the collector:


1) demonstrates that noncompliance was due to “bona fide error;” 2)sends a notice of error to the debtor within 60 days of discovery and prior to initiating action stating how it will make restitution; and 3) makes reasonable restitution to the debtor. “Bona fide error” is limited to “an unintentional clerical, calculation, computer malfunction or programming, or printing error.” Strict compliance with the new notice requirements should be a priority.

Given the potential for financial penalties and litigation, lenders and servicers, and their agents, operating in the State of Ohio are strongly encouraged to work with their attorneys to address the intricacies of these new requirements and develop strategies for compliance.

1 See Ohio Department of Commerce, Division of Financial Institutions, Ohio Residential Mortgage Lending Act H.B. 199 Implementation Guidance.

(Editor’s note: For information on Ohio House Bills 480 and 489, and Senate Bill 263, please see the article by Ellen L. Fornash here).

 


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