Q:       My mortgage lender foreclosed on my house. How would I know if the lender had the right to file the foreclosure?
A:        Every mortgage loan has two important documents: the note and the mortgage. The note is your agreement to pay the lender. The mortgage is the document that gives the lender the right to foreclose if you don't make the payments due under the note. Your lender can gain the right to bring a lawsuit against you in one of two ways. First, your mortgage might have been assigned to the lender before your foreclosure case was filed.  If so, a document called “assignment of mortgage” would be attached to the foreclosure complaint, and the name on that assignment would be the name of the plaintiff (that is, the person or entity bringing the foreclosure suit, such as your lender or an entity your lender has designated). Second, the plaintiff might hold your note, although this may be difficult to establish.  Sometimes the note will include a stamp that says “endorsed to [plaintiff],” indicating that the plaintiff probably held the note. In other cases, the note will say “endorsed to (blank).” In such a case, the plaintiff is not specifically named and can bring the case only by having physical possession of the note when filing the foreclosure case.

Q:       My house is in foreclosure and will be taken soon.  Is there anything I can do to make sure my rights are protected?

A:        Your foreclosure complaint will have a note and mortgage attached to it. An assignment of mortgage also may be attached.  If the mortgage is either in the plaintiff’s name or is assigned to the plaintiff, then the foreclosure is probably valid. If not, look at the note. If the note is made payable to the plaintiff, then the foreclosure is probably valid. If the note is endorsed in blank, the plaintiff should have alleged in the complaint that it holds the note, and later will submit an affidavit stating that it holds the note. If the plaintiff did not take any of these steps, there could be a defect, and this may entitle you to have the case dismissed.

Q:       My property was sold at a foreclosure sale a couple of years ago.  Now I understand that a Supreme Court of Ohio decision may affect the validity of that sale.  Is that true?

A:        Possibly. On October 31, 2012, the Supreme Court of Ohio issued its decision in Fed. Home Loan Mtge. Corp. v. Schwartzwald. In that case, the court found that the lender’s right to bring a foreclosure case is determined on the date that a complaint is filed.  To have the “standing” necessary to bring a foreclosure case, the plaintiff must either hold the note or have been assigned the mortgage. If your foreclosure was filed and the plaintiff either did not hold the note or was not assigned the mortgage at the time of filing, the foreclosure may not be valid.

Q:       What will happen to future foreclosures in Ohio in light of this Supreme Court of Ohio decision?

A:        In the post-Schwartzwald world, lenders will be very cautious to make sure that they have the right to bring the foreclosure in the first place. As the law currently stands, the plaintiff can bring the foreclosure if the plaintiff either holds the note or was assigned the mortgage. However, a case is now being appealed to the Supreme Court of Ohio to determine whether the plaintiff must hold both the note and the mortgage of record in order to bring the foreclosure case. 

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by J. Michael Debbeler, a partner in the Cincinnati firm of Graydon Head. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.