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.

Q:       What happens if the property I’m renting is in foreclosure?

A:        You probably make monthly rent payments to your landlord, while your landlord makes mortgage payments to a lender. If your landlord stops making payments, the lender may foreclose on your landlord, which will also affect you. In Ohio, the lender must file a foreclosure complaint before legally taking a house or apartment away from the landlord (owner). Your landlord still owns the property until a court grants a foreclosure judgment and approves a sheriff’s sale.

Q:       How will I know if a foreclosure has been filed against my landlord?

A:        Generally, the lender (“plaintiff”) will name you as a tenant in the foreclosure complaint, but may only list you as “Jane or John Doe” or “unknown tenant at [your address].” You are unlikely to get a copy of the foreclosure judgment, but keep any notification you receive so you can find out how the case is progressing or get legal advice, if necessary.

Q:       How can I find out about the status of the foreclosure case?

A:        Check with your local clerk of courts for your county’s Court of Common Pleas. Many clerks have case information online (http://www.occaohio.com/countylist.aspx?qname=All). You may need to provide your landlord’s name to get information about the foreclosure, which is a civil lawsuit.

Q:       Can I stop paying rent if a foreclosure lawsuit is filed against my landlord?

A:        NO. Your landlord still owns the property until there is a judgment and sale, and if you stop paying your rent, your landlord could file an eviction action in court, even during a foreclosure action.

Q:       Can I break my lease if a foreclosure lawsuit is filed against my landlord?

A:        Generally, a foreclosure filing doesn’t allow you to break your lease unless your lease agreement says otherwise. If you do so, your landlord could sue you for money damages. If you decide to move, you may want to negotiate with your landlord to terminate your lease early. If you reach an agreement, make sure it’s in writing and signed by your landlord, yourself and anyone else on the lease.

Q:       Must my landlord maintain the property while it goes through foreclosure?

A:        YES. Until the court approves the sale, your landlord must still fulfill all obligations, such as making repairs, just as you must continue to pay rent.

Q:       Can my landlord still collect rent after the court issues a foreclosure judgment and approves the property sale?

A:        NO. Once a “confirmation of sale” has been filed with the court, it cuts off all the owner/landlord’s rights, including the right to collect rent, but you should continue to set aside rent payment so you can pay the new owner. Whoever purchased the property at the sheriff’s sale will become your new landlord, because the lease survives the foreclosure sale. The new owner should tell you where to make your rental payment, and the amount should not change. Also, the new owner must make any repairs that the lease or Ohio law would have required the old owner to make.

Q:       Can I stay in my apartment once the foreclosure process is completed?

A:        YES, for at least 90 days. Under the federal Protecting Tenants at Foreclosure Act (PTFA), which applies to anyone who bought a property on or after May 20, 2009 as the result of a foreclosure, the new owner generally must keep you as a tenant. Usually, the new owner is the lender (plaintiff), who buys the property back from the landlord at the sheriff’s sale, so the lending company may become your new landlord.

Q:       Can the new owner force me to move out?

A:        Possibly, but you should receive at least 90 days’ notice before the new owner can make you leave. If you are a “bona fide tenant” with a “bona fide lease,” then you have the right to stay in your home until your current lease ends. If, however, the new owner intends to live on the property, you must receive at least 90 days’ advance notice to move out. The new owner can evict you if you do not leave after being properly notified. (Note: You must meet certain criteria to be a “bona fide” tenant with a “bona fide” lease. Consult an attorney if you are unsure about your tenancy status.)

Q:       Can the court evict me through the foreclosure action?

A:        NO. If you are a “bona fide tenant” with a “bona fide lease agreement,” then the new owner must give you a 90-day eviction notice. If you do not move within 90 days, the new owner must: 1) serve you with a three-day Notice to Leave Premises and 2) file an eviction action. Under the PTFA, you may have the right to stay through the end of your lease.

Q:       Where can I get more information or legal help?

A:        Go to http://www.ohiolegalservices.org/programs  or call 1-866-LAW-OHIO (1-866-529-6446) to locate the legal aid program in your area. You must be financially eligible to receive services, including advice, from a legal aid program.

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by attorney Joe Maskovyak of the Ohio Poverty Law Center in Columbus. 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.