May 19, 2008

Ohio's Eighth Appellate District Affirms Class Certification Against Fannie Mae Based On Untimely Recordation Of Mortgage Releases

On August 7, 2003, Rebekah R. Radatz filed a putative class action lawsuit against Federal National Mortgage Association (FNMA) alleging violations of Ohio Revised Code Section 5301.36. O.R.C. Section 5301.36 provides that a mortgagee must record a satisfaction of mortgage within 90 days of receiving a payoff. The statute imposes a penalty of $250.00 per violation. The lawsuit was filed in the Court of Common Pleas for Cuyahoga County, Ohio.

Radatz's putative class included all persons who, since May 9, 1997 and thereafter, paid off residential mortgages in Ohio, where FMNA was mortgagee at the time of mortgage satisfaction, and where the mortgage satisfaction was not recorded within 90 days.

On November 1, 2006, the trial court granted Radatz's motion for class certification, and FNMA filed an appeal to Ohio's Eighth Appellate District. On April 24, 2008, the Court of Appeals affirmed the trial court's decision.

In so holding, the Court rejected FMNA's argument that the mortgage servicers were the proper parties against whom to impose liability. Instead, the Court held that the statute expressly applies only to "mortgagees." As such, if FNMA is the mortgagee when the satisfaction is recorded, FNMA – not the loan servicer – is responsible for the statutory penalty. Whether a loan servicer breaches its contract with FNMA in failing to timely record the satisfaction is irrelevant to whether FNMA is liable under the statute.

Full text of Radatz v. Fed. Natl. Mtge. Assn., 2008-Ohio-1937

This E-alert was prepared by Justin W. Ristau. Please contact any member of the Bricker & Eckler Creditor Rights & Bankruptcy group for more information.