Ohio recently passed legislation that will enact a fast-track process for foreclosures. The purpose of the legislation is to prevent zombie homes from depressing the surrounding neighborhood.
In Ohio, 1 in every 977 housing units received foreclosure filings. Ohio is one of the ten worst states for foreclosures in the United States. Ohio’s existing foreclosure laws slow down the foreclosure process. The current foreclosure standards often mean vacant homes sit with no activity for at least two years, becoming “zombie homes”.
What are Zombie Homes?
If a person has fallen behind on his or her mortgage payments, often times this means the homeowner also doesn’t have the disposable income to make necessary repairs to his or her home. As a result, major problems with the property, such as a faulty roof, cracked foundation, or outdated electrical may not be addressed for years.
Many foreclosed homes become abandoned or vacant once the foreclosure process begins. These properties are known as zombie properties. They depreciate the values of neighboring homes because most homes in foreclosure desperately need repairs and no one is around to make such repairs.
How Does Foreclosure Work? In order to foreclose on a mortgage, the lender must first prove that the borrower is in default. After the lender contacts the borrower and attempts to resolve the default with the homeowner, the lender files a lawsuit with the court against the borrower. The purpose of filing a lawsuit is to obtain court approval to initiate foreclosure. Because the lender must go through court in order to initiate foreclosure proceedings, the process is known as judicial foreclosure.
Non-judicial foreclosures occur when the borrower signs a deed of trust which contains the power of sale clause. The clause enables the trustee to initiate a foreclosure sale without having to go to court. The trustee starts the non-judicial foreclosure process by recording a notice of default and election to sell. After a three-month waiting period, the trustee may publicize, post, and record a notice of sale. If the sale is not postponed and the borrower does not exercise his right of reinstatement or redemption, the property is sold at action to the highest bidder.
Ohio is one of twenty states that require judicial foreclosures. Judicial foreclosures have many requirements and therefore take much longer to process than non-judicial foreclosures.
How Will Ohio’s Legislation Impact Foreclosures?
Ohio’s legislation will go into effect within the next 90 days. It aims to accelerate the foreclosure process so it could take as little as six months’ time as opposed to two years. It will also allow the mortgage lenders to take possession of the property before it deteriorates. In this regard, politicians hope the legislation will increase the likelihood that a residential property which falls into foreclosure can be rehabilitated and sold without detrimentally impacting the community.
The legislation will require proof that the loan is in default and that the property is abandoned by “clear and convincing evidence.” This new requirement will ensure no one is kicked out of their home. The proof may include disconnection of utilities, boarded up windows or entrances, vandalism, and the like. New York is also considering enacting similar legislation.
Authored by Erin Chan-Adams, Legal Match Legal Writer and Attorney at Law