The mortgage documents homeowners sign at real estate closings in Ohio are contracts. This means that they are governed under Ohio contract law. Not only does contract law apply to the initial promissory note and mortgage, but also to any future revisions to those documents. If a homeowner obtains a mortgage modification from his lender, this modification must be in writing in order for it to be enforceable in court.
Ohio contract law follows a doctrine called the statute of frauds. Simply put, the statute of frauds ensures that both parties agree to all the terms of a contract. It requires that all terms be expressly written into the contract. Thus, if there is a disagreement over what a contract covers, courts will review the terms of the contract and will interpret the deal solely on that was put in writing.
An enforceable contract signed by both parties will be valid unless there is evidence of another signed agreement modifying the contract. While courts may sometimes take outside factors into consideration when interpreting a contract, these outside factors are difficult to prove. Therefore, if parties agree to modify a contract, it is in their best interest to make any changes in writing and have it signed by all parties.
A recent Butler County case decided by the Twelfth District Court of Appeals applied the statute of frauds to mortgage modifications. The court disregarded the claims by a homeowner that he obtained a modification with a bank’s loss mitigation department. These assertions were based on oral statements made between the parties and not a written agreement. Without evidence of an actual written modification, homeowners are unable to contest foreclosure actions when the bank attempts to enforce the original mortgage. When dealing with contracts, particularly mortgages, word often is not sufficient bond in the eyes of the courts.
Homeowners that obtain mortgage modifications should ensure they have a written agreement with their bank providing evidence of the modification. In addition, homeowners should keep records of payments that they made to the bank as well as evidence of the bank’s acceptance of these payments. Errors by mortgage servicers are not rare and homeowners may find themselves in a situation facing a wrongful foreclosure. Keeping track of their mortgage paperwork and payments can prevent homeowners from being victims of these mistakes.