Toxic Title Alert | Ohio Agents: Be Aware of Recent Ohio Case Law in Fed. Home Mtg Corp. v. Schwartzwald
Ohio Agents: Be Aware of Recent Ohio Case Law
The Fed. Home Mtg Corp. v. Schwartzwald case recently decided by the Ohio Supreme Court has turned foreclosure standing requirements around. This was the case in which the Ohio Supreme Court held that a lender must have standing to foreclose on the date the complaint is filed in order to proceed to final judgment. If they do not “hold” the mortgage and note, via assignment or otherwise, on the date the complaint is filed they are not the real party in interest for purposes of foreclosure and they are not entitled to a judgment through the jurisdiction of the court. As a result of this case, we required all Ohio title agents to use the following requirement on all future title insurance commitments with the admonishment that further guidance would be forthcoming: “Per the Ohio Supreme Court’s holding in Fed. Home Loan Mtge. Corp. v. Schwartzwald, 2012-Ohio-5017, the Insurer requires filing and proper service of a new Complaint in Foreclosure naming the assignee under Instrument dated DATE, and filed for record on DATE, in the YYYY County, Ohio Recorder’s Office, as the plaintiff and real party-in-interest in said action.” Since lack of jurisdiction cannot be cured by the passage of time, defeated with a laches or bona fide purchaser defense and impervious to prospective application, we must now take the steps to except the result of the Schwartzwald case entirely. Therefore, all Ohio title agents should replace the requirement above with the following language, including those transactions insuring the successful bidders at Sheriff’s Sale, or said purchaser’s lender and insuring parties to an REO transaction. What is the new guidance for Ohio title agents? In the event you find a foreclosure where at the time of the filing of the complaint the lender was not the holder of the note and mortgage, please use the following guidance for Ohio purchase transactions, including those involving Sheriff’s Sales and REO transactions: “The Policy does not insure, and the Company will not be liable for attorney’s fees and defense costs, against loss or damage by reason of an attempt to void and set aside the foreclosure judgment and subsequent sale, or a decree voiding and setting aside the foreclosure judgment and subsequent sale, in case captioned ____________v. ____________, Case No. ___________, [name of county] Court of Common Pleas, Ohio.” The above-referenced exception must appear in both the title commitment and the title insurance policy. In Ohio, all purchase transactions must be backed by the appropriate residential minimum 42-year search period, or greater. For all Ohio refinance transactions and the issuance of an Ohio preliminary judicial report, please use the following exception language: “The Policy does not insure, and the Company will not be liable for attorney’s fees and defense costs, against loss or damage by reason of an attempt to void and set aside the foreclosure judgment and subsequent sale, or a decree voiding and setting aside the foreclosure judgment and subsequent sale occurring prior to the Date of Policy by reason of lack of standing and jurisdiction.” Again, the above-referenced exception must appear in both the title commitment and the title insurance policy. In Ohio, all residential refinance transactions must be backed by the appropriate minimum two-owner AND 10 year search period, or greater. The Company abides by the National Association of Independent Land Title Agents (NAILTA) minimum title search standards and does not permit the issuance of title insurance on residential or commercial transactions based upon current- or present-owner searches. Make sure your searchers and examiners are advised that Schwartzwald requires them to review the foreclosure complaints going back a minimum of 10 years and compare them to the assignments of mortgage and to note any deficiencies.