Will Mortgage Companies Get the Right to Redeem in the Tax Foreclosure Process?

By Jacob Wolf, GOPC intern The Ohio Supreme Court will hear the appeal of a case that could have a major impact on efforts to redevelop foreclosed properties in the state. Under Ohio law, a property owner whose property is in danger of foreclosure due to unpaid taxes may pay off those taxes and keep the property without it going up for auction at a sheriff’s sale. This is called the right of redemption. The issue in this case—with the unwieldy name of In the Matter of the Foreclosure of Liens for Delinquent Taxes v. Parcels of Land Encumbered with Delinquent Tax Liens et al.—is whether a mortgage company has the same right of redemption as a property owner.

Coshocton County started tax foreclosure proceedings on the property in question in April of 2011. Six months later, the property was sold at a sheriff’s sale.  Two weeks after the sale, the company that held the mortgage on the property—Vanderbilt Mortgage and Finance—filed motions to vacate the sheriff’s sale and to redeem the property by paying the delinquent tax bill. The trial court accepted Vanderbilt’s redemption and voided the sale, but the county appealed. The 5th District Court of Appeals sided with the county, overturning Vanderbilt’s redemption.

In its appeal to the Ohio Supreme Court, Vanderbilt argues that it was protecting its mortgage interest in the property. However, the appellate court found that Vanderbilt could have protected its interests in one of two ways:

  1. by advancing the tax money to the homeowners and allowing them to exercise their right of redemption before the sheriff’s sale, or
  2. by bidding on the property at the sheriff’s sale.

The land sold for more than $15,000 at the auction. Conversely, the homeowners owed only $825.84 in taxes; and Vanderbilt paid a total of $6,000 to the county in their attempt to redeem the property. It appears as though the Court of Appeals thought Vanderbilt was attempting to take ownership of the property without bidding at the sheriff’s sale.

If the Ohio Supreme Court rules in favor of Vanderbilt, it will allow banks and mortgage lenders to acquire foreclosed properties at deep discounts. Currently, these properties often wind up in city and county land banks, where they can be prepared for redevelopment. This court case, and its decision regarding property acquisition by private lenders, will influence the future of urban redevelopment and revitalization efforts in Ohio.