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BEWARE IF YOU ARE COLLECTING YOUR OWN MORTGAGE NOTES

The Eighth District Court of Appeals (Cleveland-Cuyahoga County) recently held that “non-bank mortgage lenders” that collect their own mortgage debts are subject to the Ohio Consumer Sales Practices Act.

In the subject case, Green Tree, an assignee of National City Bank, sent a letter to a debtor who had been discharged in a Chapter 7 bankruptcy. The letter contained a standard bankruptcy disclaimer and stated that the debtor was in default, demanded payment and threatened legal action. The Debtor brought an action under the OCSPA. Green Tree filed a motion to dismiss which was sustained by the trial court.

The debtor appealed. On appeal Green Tree argued that it was not subject to the Act because it is acting in a mortgage servicing role. Mortgage services have specifically been exempted from the Act by prior decision of the Ohio Supreme Court.

The Court of Appeals rejected Green Tree’s argument finding that, since it was the assignee of the mortgage, it stands in the shoes of the original mortgagee and cannot be classified as a servicer. The Court of Appeals reversed and remanded the case for further proceedings. Powers v. Green Tree Servicing, LLC, 2015-Ohio-3355 (8th Dist. August, 2015).

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