Banks Must be Cautious with Conditions Precedent: the Alliterative Way to Defend against Foreclosure
Put simply, foreclosure is a contractual remedy to a breach (i.e. default) on a note that is secured by a home. Thus, in order for the bank to succeed in a foreclosure action, it must prove the elements for a breach of contract. In Ohio, to prevail on a breach of contract claim, the plaintiff must prove:
- The existence of a valid contract;
- That the plaintiff performed their obligations under the contract;
- That the defendant did not perform their obligations; and
- Injury resulting from the defendant’s breach.
Conditions precedent stem from the second prong. Many notes or mortgages will require notice of a default and/or acceleration. If a note or mortgage has such a notice clause, the lender must comply with the notice terms or the complaint may be dismissed. Further, certain federal regulations issued by the Secretary of Housing and Urban Development (HUD) may impose additional requirements on the party seeking a foreclosure.
In BAC Home Loan Servicing, LP. v. Taylor, the Ohio Ninth District Court of Appeals held that the bank’s failure to comply with HUD’s regulations could be successfully used as a defense against a foreclosure action. The Taylors’ note and mortgage were subject to the HUD regulations for default and acceleration, and on appeal, they submitted affidavits that no attempt had been made for the required face-to-face meeting, while conversely BAC offered no contradictory evidence. Thus, the court reversed the trial court and found a genuine issue of material fact as to whether BAC had performed all conditions precedent in order to continue with foreclosure.
This ruling is in line with many other Ohio appellate courts and stands for the notion that the foreclosing party must comply with all of the conditions of the note and mortgage contract, or the homeowner may successfully defend against the foreclosure action.
Jarupan v. Hanna, 173 Ohio App.3d 284, 2007-Ohio-5081.
 Fifth Third Mtge. Co. v. Bell, 2013-Ohio-3678.
 See 24 C.F.R. §203.604, which requires a face-to-face meeting or a reasonable attempt for a face-to-face meeting prior to foreclosure.
 BAC Home Loan Servicing. LP v. Taylor, 2013-Ohio-355.
 Id. at ¶ 21.
 See Wells Fargo v. Phillabaum, 192 Ohio App.3d 712, 2011-Ohio-1311, ¶ 11 (4th Dist.); Wells Fargo Bank, N.A. v. Isaacs, 1st Dist. No.C-100111, 2010-Ohio-5811, ¶ 10; U.S. Bank, N.A. v. Detweiler, 191 Ohio App.3d 464, 2010- Ohio-6408, ¶ 53 (5th Dist.); Washington Mut. Bank v. Mahaffey, 154 Ohio App.3d 44, 2003- Ohio-4422, ¶ 22 (2d Dist.)