Homeownership in Ohio has been on a steady decline since 2005. This is true for many states but Ohio has been busy putting special programs in place to help homeowners purchase or keep their homes, even in challenging economic times. Buyers in the Buckeye State might be in search of alternative financing options, outside of the standard mortgage loans offered by big banks and lenders. Hard money loans offer one option. They are usually faster than a typical loan and require less paperwork. That's because the buyer uses real estate or property as collateral, offering lenders a way to be sure they will not lose their investment should the buyer fall behind on their payments.
Foreclosure Laws in Ohio
In the state of Ohio, all foreclosures are managed with a judicial process, meaning that everything in the matter must go through the court system. In some states, lenders are able to manage foreclosures outside of the court system - which can make things move much faster - but in Ohio, all foreclosures must follow the same process with built-in notification and timelines.
Property Redemption after Foreclosure Sale
In some states, the borrower can redeem (repurchase) the home within a certain period of time after the foreclosure. After the foreclosure sale in Ohio takes place, the court must confirm it. The borrower has up until the court confirms the sale to redeem the home. Ohio Rev. Code § 2329.33.
Deficiency Judgments in Ohio
When a home is sold in foreclosure, they sometimes do not sell for enough money to cover what was owed by the borrower in the first place. That leftover amount can be charged to the borrower in what is called a deficiency judgement. Some homeowners are surprised by this additional cost so it is important to seek professional legal assistance if there is a concern about a possible deficiency judgement. A lender must get the courts to approve their claim and that has to happen within two years of the foreclosure. Also, the lender cannot deliberately sell the home for way less than market value and then turn around and charge the borrower with leftover costs. The law protects homeowners by limiting deficiency judgements this way. The property cannot be sold for less than two thirds of its appraised value if the lender wants to get a deficiency judgement. Code §§ 2329.20, 2329.17.
Deed in Lieu of Foreclosure
Homeowners in Ohio who are no longer able to afford their mortgage payments may have other options to consider in lieu of foreclosure. This alternative agreement is known as a “deed in lieu of foreclosure” and it helps lender and borrowers avoid the legal process associated with foreclosure. In this situation, the borrower gives possession of their home to the lender, so the lender can sell it on their own. In certain situations, the borrowers may even be able to get a small cash settlement to cover their moving costs in exchange for helping the bank expedite the process and avoid foreclosure proceedings. When the lender and the borrower can enter into this type of agreement, it provides a quicker solution to getting money from a property instead of bankruptcy, short sales or foreclosures.
Grace Period Notice
Under fairly new regulations that went into effect on January 10, 2014, Ohio lenders must wait until the borrower is more than 120 days delinquent before starting a foreclosure process in court. This 120-day period is designed to give delinquent borrowers sufficient time to explore ways to avoid a foreclosure. The lender is allowed to send pre-foreclosure notices during this time but they cannot officially begin the foreclosure process until after the grace period has expired.
Protections for Military Personnel
Protections under the federal Servicemembers Civil Relief Act are also extended to Ohio National Guard service members, if they are ordered by the Governor into active duty or training. Ohio Rev. Code Ann. § § 5919.29, 5923.12
High Risk Mortgage Protections
The Ohio Homebuyers' Protection Act gives the Ohio Attorney General enforcement authority over abusive lending practices committed on or after January 1, 2007 by loan officers, mortgage brokers or non-bank lenders. The Act prohibits these businesses from committing unfair, deceptive or unconscionable acts in connection with a residential mortgage loan. If a borrower feels they might be in an unfair or high risk mortgage, it is important to seek qualified legal counsel.
Additional State Laws
The maximum legal interest rate on a loan in Ohio is 8%. As a matter of practice, consumers regularly pay higher interest rates than what is legally allowed -- by waiving these protections in order to agree to a loan's terms. So while they're relatively meaningless in most situations, most states have laws capping the amount of interest allowed. Ohio interest rates laws, for instance, cap interest at 8 percent.
Specifically, Ohio's interest rate law states that parties may agree to a higher interest rate than the 8 percent statutory limit when:
- The original amount of principal is greater than $100,000
- Payment is to a broker or dealer registered under the Securities and Exchange Act of 1934 (which includes all publicly traded companies)
- Debt is secured by a mortgage or deed of trust
- Debt is payable on demand or in one installment and not secured by household goods
- Any business loan
Ohio is a homestead state. Ohio homestead laws allow up to $25,000 worth of a person's property to be declared a homestead and exempted from property taxes. For example, a homeowner with a home valued at $100,000 may deduct up to $25,000 as a homestead, which means they would only have to pay property tax on $75,000 worth of the property. This translates into an average annual savings of $400. Typically, this exemption is sought out by those in bankruptcy and/or facing foreclosure. But Ohio also extends homestead protections to homeowners who are senior citizens (over 65), disabled persons, or surviving spouses.
Mortgage Broker Branch License
A license is required for all offices, other than the main office identified on the Mortgage Broker License, whether located in Ohio or not, which conducts business with Ohio consumers.
Hard Money Legal Issues In the News in Ohio