Yes, You Really Do Have to Follow the Notice and Cure Provisions in the Promissory Note
And now, a cautionary tale about the importance of actually paying attention to what a promissory note and mortgage say. In the recent case of National City Mortgage Co., v, Richards. 182 Ohio App.3d 534, 2009-Ohio-2556 (10th App. Dist.), the Bank found out that failing to comply with the relatively simple provisions in a note and mortgage concerning notice to be given a delinquent borrower was a costly mistake.
REALLY COSTLY >>>>>> as in DISMISSAL of a FORECLOSURE
FACTS. The facts here are numbingly similar to those in any number of other cases. Ms. Richards, the borrower had a loan from the Bank secured by a mortgage on her property in Columbus - presumably her residence, although the decision doesn't really say. Anyway, when Richards defaulted, the Bank apparently sent her a notice of default by certified mail only; no notice was sent by regular mail. The certified mail receipt came back "unclaimed".
In December 2005, the Bank initiated a foreclosure action. Richards, acting pro se, filed an answer in January 2006 indicating that she had made a payment of $3,329,70 consisting of the January payment, the past-due amount and other fees totaling, all as indicated by her December 2005 statement, and therefore was not in default. The Bank responded by sending Richards a letter stating that, not counting the payments already made by Richards it would take payment of $6,838.09 -which included payment of attorneys' fees - to reinstate her loan.
Richards filed a second response to the foreclosure Complaint indicating she had sent additional funds exclusive of the attorney fees to the Bank to bring her account current and had sought a payment plan for the attorney fees. The Bank then returned all of the payments sent by Richards since the commencement of the foreclosure.and sought summary judgment on its foreclosure complaint. Several months later, while the case was still pending, the Bank [for some inexplicable reason as far as I can see] sent a "demand/acceleration letter" to the property address; the case doesn't say whether the letter was sent by regular or certified mail and it doesn't appear to have figured in the decision.
Richards alleged among other arguments that the Bank had failed to provide proper notice of default and opportunity for cure, thereby failing to satisfy a condition precedent to acceleration of the note and foreclosure of the mortgage securing the note. The trial court eventually granted summary judgment in favor of the Bank. The Court of Appeals REVERSED....
>>>>>> Here's where everyone needs to pay attention! >>>>>>
THE NOTICE PROVISIONS. The promissory note had a relatively ordinary notice of default provision providing for a thirty day cure period:
If I am in default, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of Principal which has not been paid and all the interest that i owe on that amount. That date must be at least 30 days after the date on which the notice is mailed to me or delivered by other means,
In addition, both the promissory note and mortgage had explicit provisions requiring notice to be given by first class mail. The note said:
[A]ny notice that must be given to me under this Note will be given by delivering it or mailing it by first class mail to me at the Property Address above or at a different address if i give the Note Holder a notice of my different address.
Similarly, the mortgage provided:
All notices given by Borrower or Lender in connection with this Security Instrument must be in writing. Any notice to Borrower in connection with this Security Instrument shall be deemed to have been given to Borrower when mailed by first class mail or when actually delivered to Borrower's notice address if sent by other means.
LESSON TO BE LEARNED >>>> Most lenders have realized by now that in the current economic environment, courts are not exactly tending to be sympathetic to lenders failing to cross all their "t"s and dot ail their "i"s. This is yet another reminder that ESPECIALLY where it is easy to comply, it is most certainly in the lender's best interests to do so .... to the letter.
It is easy enough to send a demand letter by both regular mail and certified mail; even if the certified mail comes back "unclaimed", the lender will get the benefit of the "mailbox' rule that the regular mail got through. Fed. Natl. Mtge. Assn. v. Doyle, (Oct. 9, 1998), 6th Dist. No. L-98-1010, 1998 WL 700663.
And if your documents say first class mail, then make sure it at least gets done that way. By the same token, if your documents provide for a cure period, make sure your demand letter incorporates the time period provided.
IN SHORT, READ YOUR LOAN DOCUMENTS BEFORE YOU START THE FORECLOSURE AND DO WHAT THEY SAY.
For those particularly "in" to this issue, the decision also provides several helpful drafting pointers about ways the Bank's attorneys could have put together a tighter better drafted Complaint that might have helped their cause somewhat with respect to certain procedural issues.
