On December 19, 2018, Governor John Kasich signed Ohio House Bill 489 which will become effective in March of 2019. Credit Unions, Mortgage Servicers (as defined by the legislation) Financial Institutions, Mortgage Lenders and Mortgage Brokers are all impacted by this legislation which amends Ohio’s Residential Mortgage Lending Act.
Specifically, Mortgage Servicer means, an entity that for itself or on behalf of the holder of a mortgage loan, holds the servicing rights, records mortgage payments on its books or performs other functions to carry out the mortgage holder’s obligations or rights under the mortgage agreement including, when applicable, the receipt of funds from the mortgagor to be held in escrow for payment of real estate taxes and insurance premiums and the distribution of such funds to the taxing authority and insurance company. Mortgage Servicers must maintain at least one office within the State of Ohio and also obtain a certificate of registration from the Superintendent of Financial Institutions for the principal office and every branch office to be maintained in the state of Ohio.
In addition, the Legislation limits civil liability as well as limits sanctions by the Superintendent of Financial Institutions for certain sections of the Ohio Consumer Sales Practices Act, if certain compliance requirements are met. Failure to meet these conditions will result in a private right of action for the consumer including class action. Those conditions are as follows:
- The entity must show that the compliance failure was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error,
- Within 60 days of discovering the error and prior to an action by the Superintendent of Financial Institutions or written notice by the consumer, the entity notifies the Superintendent of Financial Institutions and the consumer of the error and the manner in which the entity intends to make full restitution,
- The entity makes reasonable restitution to the consumer.
The Legislation further provides a new Notice requirement for all actions to collect a debt secured by residential real property if the mortgage is a second/junior lien. However, please note, the Legislation does not limit the priority to the priority established at the time of the mortgage. Since there are often instances of tax lien certificates or other liens which may become senior to the mortgage, it is likely that this notice will be required in instances where the creditor was believed to be in the first position.