There are several ways to stop a sheriff’s sale in Ohio. This post discusses several ways to stop a sheriff’s sale with plenty of good information to help you understand your options.
A Mortgage Servicer Must Show Compliance with Housing and Urban Development Regulations Prior to Initiating Foreclosure Action
In Wells Fargo, N.A., vs. Awadallah, 41 N.E.3d 481 (2015), the Ninth District held that where a note and mortgage requires compliance with HUD regulations, such compliance is a condition precedent to bringing a foreclosure action. A condition precedent is something that must occur before something else will or can occur. Ms. Awadallah’s promissory note and mortgage were prepared on Federal Housing Administration forms and required that the bank, as a condition of receiving federal money, meet all HUD requirements prior to filing a foreclosure action. Under HUD, Wells Fargo was required to have a face-to-face interview with Ms. Awadallah, or make a reasonable effort to arrange such. At minimum, Wells Fargo was required to send a certified letter to Ms. Awadallah and make at least one trip to see her at the mortgaged property. It failed to do so.
Wells Fargo failed to present evidence to the Ninth District regarding their reasonable effort to make a visit to Ms. Awadallah’s home, which is expressly required under her note and mortgage and federal regulation. Wells Fargo argued that they didn’t need to meet that requirement because after the foreclosure action was filed, the parties attempted to settle the case in mediation. Wells Fargo argued that the purpose of the in-person meeting, as required under HUD, is to consider loss mitigation and that court-sponsored mediation serves the same purpose. The Ninth District disagreed, stating that mediation after the foreclosure action has been initiated does not show compliance with the federal regulation. Wells Fargo failed to strictly comply with standard regulations set forth to protect consumers. Thus, Wells Fargo did not satisfy the conditions precedent to filing a foreclosure action against Ms. Awadallah. Therefore, Wells Fargo was not entitled to succeed on its motion for summary judgment. The Ninth District reversed the judgment and sent the case back for further proceedings.
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.)
Why Assumable Loans Are Great
If you are refinancing or modifying your loan, then I recommend doing what you can to ensure that it is assumable. An assumable loan means someone else can acquire your mortgage (and make payments on it) when you sell the home.
Assumable loan clauses are standard in VA and FHA mortgages, so if you are considering making a change, take a very close look at those programs.
Why look for an assumable loan? Because interest rates are not going to get any lower. In this author’s mind, inflation is just a few short years away, bringing with it higher interest rates. Higher interest rates mean loans are more expensive, and people are not able to buy the size of home they could if rates were lower. You know that your payments are less if your rate is 4% versus 8%. Someone looking to buy your home will be looking at it a lot differently if they have to pay 4% or 8% interest. The difference on a $100,000, 30-Year loan is $403.66 per month. That’s a lot of money.
Getting an assumable loan now at market rates means you can lock in that savings for someone looking to buy your home later, when rates are higher. Because someone assuming your 4% loan will save $403.66 more to spend each month than he would getting a market rate, he should be willing to pay a premium for your home. After all, he’s saving $4,843 per year by taking over your mortgage, or $48,439 over ten years. That means your home is worth more than the next guy who did not think to secure an assumable loan while rates were low.