Ohio Default Litigation Case Law Update

Common litigation issues which a creditor may face are allegations of violations of RESPA, FDCPA as well as the Statute of Limitations.  Each of these imposes separate responsibilities and liabilities on the part of lenders, investors, services, and debt collectors.  However, these are very different, below is an update on recent cases involving these issues.

RESPA

The United States District Court for the Southern District of Ohio state of Ohio has recently issued a decision which diverged from the Ohio Supreme Court’s decision in Holden and instead found violations of RESPA, the FDCPA and that the Statute of Limitations of the note, which is six-years, barred a foreclosure of the mortgage. Baker v. Nationstar Mortgage LLC, 2018 WL 3496383

RESPA, which stands for the Real Estate Settlement Procedures Act of 1974 provides a mechanism for borrowers to request information relating to the servicing of a loan by submitting a Qualified Written Request or (“QWR”).  There are several requirements that a consumer’s correspondence must meet to constitute a QWR.  Once a valid QWR is received, then a servicer can respond in one of three ways.  (1) The servicer can make corrections to the account, (2) following an investigation, the servicer can clarify why the account is already correct, or (3) following an investigation, the servicer can provide the consumer with a written explanation or clarification that includes the requested information or explains why it cannot be provided.

Often at issue before the Court is whether the servicer received a valid QWR and what constitutes “servicing”.  If a servicer were able to demonstrate that a QWR did not relate to “servicing’ then, the servicer was often able to avoid any RESPA liability.  However, the Court in Baker held that the information sought by a consumer “need not relate to servicing to constitute a QWR and a servicer must fulfill its obligations … {under RESPA}… regardless of whether such information relates to the statutory definition of servicing.” Thus, “any request for information made with sufficient detail is enough under RESPA to be a QWR and thus to trigger the servicer’s obligations to respond.”  In addition, the Baker Court found that the servicer violated RESPA for failure to provide a thorough investigation when determining that information sought by a consumer is unavailable.

Statute of Limitations

Previously, the Ohio Supreme Court, in Holden has held that even if a Note is time-barred pursuant to Ohio’s six-year statute of limitations with respect to Notes, that a Mortgage could still be foreclosed as the Court found that there is a distinction between the remedies sought between a Note and Mortgage.  However, recently, in In re Fisher, 584 B.R. 185 (Bankr. N.D. Ohio 2018) that Court found that the six-year statute of limitations which controls the Note controls a cause of action to enforce the mortgage.

The Court in Baker rejects the decision in Holden and rather adopts the decision in Fisher and finds that if enforcement of the Note is time-barred pursuant to the statute of limitations, then enforcement of the mortgage is also time-barred by the same six-year statute of limitations.

FDCPA

Lastly, the Court in Baker found that communications which were sent by the servicer on a debt which is time-barred are violations of the Fair Debt Collection Practices Act, FDCPA. While many Courts have held that the expiration of the statute of limitations does not invalidate a debt, rather it merely renders it unenforceable.  The FDCPA does permit voluntary repayment of a time-barred debt, so long as the debt collector does not initiate or threaten legal action in connection with the debt.  In this case, the Court found that the communications in question threatened legal action and thus violated the FDCPA.

If you have any questions or would like to discuss this or other default related matters in Ohio, Indiana, Kentucky or Michigan.  Please feel free to reach out to me at dacox@woodlamping.com.

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    Daniel A. Cox

    Daniel Cox is a partner and manages the Default Litigation Practice Area which handles accounts in Ohio, Indiana, Michigan, and Kentucky. The majority of his practice focuses on assisting clients to manage their commercial and residential Default Litigation and Default related matters including Foreclosure, Bankruptcy, Forfeiture, Evictions, Appeals, Code Violations, Lender Liability Litigation, Loss Mitigation, Mediations, Best Practices and Risk Management.  He focuses on providing consultation and risk analysis in the effort to reduce costs and minimize risk per account to protect his client’s interests.

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