Ohio Revised Code 1349.72 was enacted in 2019. The statute requires servicers of second mortgages and junior liens on residential real property to mail a written notice to a borrower’s address before collecting or attempting to collect the debt. As originally enacted, the statute was vague and left lenders, servicers, and attorneys with more questions than answers: Did a letter have to be sent before sending an acceleration letter? Did the letter have to be sent prior to returning a phone call from a delinquent borrower? No one wants to make a mistake and be subject to a violation.
The original statute required the following:
(A) Before a person collecting a debt secured by residential real property collects or attempts to collect any part of the debt, the person shall first send a written notice as described in division (B) of this section via United States mail to the residential address of the debtor, if both of the following apply:
1. The debt is a second mortgage or junior lien on the debtor’s residential real property.
2. The debt is in default.
(B) The written notice shall be printed in at least twelve-point type and state the following:
1. The name and contact information of the person collecting the debt;
2. The amount of the debt;
3. A statement that the debtor has a right to an attorney;
4. A statement that the debtor may qualify for debt relief under Chapter 7 or 13 of the United States Bankruptcy Code, 11 U.S.C. Chapter 7 or 13, as amended;
5. A statement that a debtor that qualifies under Chapter 13 of the United States Bankruptcy Code may be able to protect their residential real property from foreclosure.
The General Assembly heard the industry’s concerns and recently enacted Substitute H.B. 133 in an attempt to clear up some common questions. Now, amended R.C. 1349.72 only applies if both of the following apply:
1. The debt is secured by a mortgage lien on the debtor’s residential real property that is not in the first mortgage position.
2. The debt has either been accelerated or is in default in accordance with the terms set forth in the promissory note.
The amendment clarifies 1349.72 only applies to junior mortgages. Thus, a creditor holding a junior judgment lien is not required to send the notice letter. Further, the 1349.72 letter does not have to be sent prior to acceleration. Additionally, the amendment does not require the creditor to send a notice unless the creditor is filing a foreclosure action.
The notice must be sent not less than 30 days before filing a foreclosure action to collect on a debt. The notice may be included with any other communication like an acceleration or demand letter. Further, it must be in at least twelve-point type and still include the following:
- The name and contact information of the person collecting the debt
- A statement of the amount of the debt
- A statement that the debtor has a right to engage an attorney
- A statement that the debtor may qualify for debt relief under Chapter 7 or 13 of the United States Bankruptcy Code. 11 U.S.C. Chapter 7 or 13, as amended
- A statement that a debtor that qualifies under Chapter 13 of the United States Bankruptcy Code may be able to protect their residential real property from foreclosure
The amended statute becomes effective September 1, 2021. If you have any questions regarding this change and how it affects your business, please contact Kim Hammond at [email protected] or KWA at [email protected]