Information on Ohio H.B. 489
Pre-Foreclosure Notice on Junior Liens
Ohio H.B. 489 implements a new requirement , effective March 20, 2019, which requires a person collecting a debt that is secured by a second mortgage or junior lien on a debtor’s residential real property, to send a written notice via U.S. mail to the debtor’s residential address, before collecting or attempting to collect any part of the debt.
This written notice must be in at least 12-point type, and state the following:
- The name and contact information of the person collecting the debt;
- The amount of the debt;
- A statement that the debtor has a right to an attorney;
- A statement that the debtor may qualify for debt relief under Chapter 7 or 13 of the United States Bankruptcy Code; and
- A statement that a debtor that qualifies under Chapter 13 of the Bankruptcy Code may be able to protect the residential real property from foreclosure.
Based upon a plain reading of H.B. 489, it is unclear whether this notice requirement applies to persons or entities collecting their own debts or only to third-party debt collectors. However, based upon the statute’s repeated references to the “owner of the debt,” the safe route appears to be for both the servicer and the law firm to send this new notice for the time being (this question should eventually be clarified by the Appellate Courts).
Accordingly, ALAW strongly encourages all clients to have their counsel review the applicable statutes to determine whether the new notice should be sent by the bank/servicer prior to referral.
Providing a copy of the Note and Loan History
H.B. 489 also includes a provision requiring the “owner of the debt” to provide a copy of the note and/or a copy of the loan history upon receipt of a written request from the debtor. Although the statutory language references the “owner of the debt,” the legislative intent was likely meant to also include holders/servicers who do not own the debt.
“Mortgage Servicer” Registration Requirement with the State of Ohio
Lastly, H.B. 489 revises the Ohio Residential Mortgage Lending Act (RMLA) by adding, “mortgage servicer” to the list of entities required to obtain a certificate of registration from Ohio’s Superintendent of Financial Institutions . This amendment brings mortgage servicers under the regulatory umbrella of the RMLA and subjects “mortgage servicers” to the same registration requirements as “mortgage lenders” and “mortgage brokers” under the RMLA.
The RMLA now defines “mortgage servicer” as 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. The functions include 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. 
The amended statute also contains some concerning language requiring every registered mortgage servicer to “maintain an office location for the transaction of business as a mortgage lender, mortgage servicer, or mortgage broker in this state. ” This language has caused some concern as to whether it requires mortgage servicers to maintain a brick and mortar office within the State of Ohio. However, based upon the legislative history of the RMLA, it appears that registration in Ohio and maintaining an office in any state, should suffice.
Exemptions from the “Mortgage Servicer” Registration Requirement
Thankfully, the RMLA contains broad exclusions from the mortgage servicer registration requirement, including but not limited to:
- Any entity chartered under the authority of any federal or state law as a bank, savings bank, trust company, savings and loan association, or credit union, or a subsidiary of any such entity that is regulated by a federal banking agency and is owned and controlled by a depository institution;
- Any entity created solely for securitizing loans secured by an interest in real estate, provided it does not service the loans;
- A credit union service organization, if it utilizes services provided by registered mortgage loan originators or holds a valid letter of exemption issued by the Superintendent in accordance with the RMLA;
- A depository institution not otherwise required to be licensed under the RMLA that voluntarily makes a filing on the Nationwide Multistate Licensing System & Registry (NMLS&R) as an exempt entity for the purpose of licensing loan originators exclusively associated with it, and holds a valid letter of exemption issued by the Superintendent in accordance with the RMLA. 
This new registration requirement is effective March 20, 2019. ALAW strongly encourages all clients to have their counsel review the applicable statutes to determine whether or not they are required to register as a “mortgage servicer” with Ohio’s Superintendent of Financial Institutions.
For Further Information, please contact:
Antonio J. Scarlato, Esq. | Partner
Albertelli Law Partners Ohio, LLC
1001 Lakeside Ave. E, Suite 1300, Cleveland, OH 44114
O: (216) 588-1500 Ext 255 | E: [email protected]
This Client Advisory should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult us or other counsel concerning your specific situation and any specific legal questions you may have.