OHIO APPELLATE COURT | Key Points

1. About two years ago Ohio’s Second District Court of Appeals reversed a summary judgment of foreclosure entered in favor of U.S. Home Ownership, LLC (“USHO”) and against Collin L. Young (“Young”). U.S. Home Ownership, LLC v. Young, 109 N.E.3d 681, 683 (Ohio Ct. App. 2018). The Second District found there to be factual issues regarding satisfaction of conditions precedent that prevented entry of summary judgment in favor of USHO.

2. The Court found a demand letter sent by a predecessor owner of the note and mortgage did not satisfy the note and mortgage provisions (paragraph 22 of the mortgage and 7(C) of the note) which required the demand notice be sent by the ‘[l]ender,’ or the ‘[n]ote [h]older. The Court also found that “when a mortgagee issues a notice of default, commences a foreclosure action and then dismisses the action [as was the case here], the mortgagee (or its successor in interest) must send a new notice of default if it wishes to commence a second action against the mortgagor.”

3. The Court reversed USHO’s foreclosure judgment and remanded the matter for further proceedings. Despite this apparent departure from established precedent which would usually draw industry-wide attention, only two other cases (both originated in Ohio) have cited to the Second District’s opinion since it was issued in March of 2018. Notably, neither of those cases refer to the seemingly novel requirements regarding the demand letters. Time will tell if this Second District opinion will be applied in other jurisdictions, but as for best practices we recommend lenders carefully review demand letters prior to initiating suit to ensure they comply with the specific requirements of the note and mortgage. Given the risk of substantial fee exposure on this issue and the minimal effort required to ensure compliance with conditions precedent, we also recommend redemanding after a dismissal.

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