New Changes in Indiana Foreclosure Law

By Zarksis Daroga, Esq.

This past legislative session, the Indiana House and Senate passed two bills that will affect Indiana foreclosures. The two bills passed both the House and Senate and are before the Governor for his signature. The bills will become law in Indiana once signed by the Governor and will take effect as of July 1, 2012.  
 
Senate Bill 298
 
The two areas of interest for our purpose are that SB298 shortens the lien period for a mortgage, and allows for a strict foreclosure by a purchaser at sheriff sale, for an omitted lien in the foreclosure action.
 
The bill removes a provision specifying that a mortgage or vendor’s lien that was created before September 1, 1982, on real estate in Indiana expires 20 years after the last installment of secured debt is due. It provides that if a mortgage or vendor’s lien does not show the due date of the last installment, the mortgage or lien expires 10 years (instead of 20 years under current law) after the date of execution of the mortgage or lien. SB298 provides that if: (1) the record of the mortgage or lien does not show the due date of the last installment; and (2) the execution date is omitted from the mortgage or lien; the mortgage or lien expires 10 years (instead of 20 years under current law) after the mortgage or lien is recorded. Exceptions to these expiration periods are provided if a foreclosure action is brought or maintained not later than the applicable expiration period. Corresponding changes in the provision allows the mortgagee or lienholder to file an affidavit stating when the debt becomes due.

SB298 provides that at any time after a judgment and decree of sale is entered in an action to foreclose a mortgage on an interest in real property in Indiana, an interested person or an omitted party may bring a civil action concerning an omitted party’s interest in the property. Upon the filing of such an action, it provides that the court shall determine the extent of the omitted party’s interest and issue a decree terminating that interest, subject to the right of the omitted party to redeem the property if the omitted party would have had redemption rights under existing law. Factors are set forth that the court must consider in determining the terms of redemption, provides for the amount to be paid for redemption, and the time allowed for payment. SB298 furthermore provides that: (1) the senior lien on which the foreclosure action was based is not extinguished by merger with the title to the property conveyed to a purchaser at the judicial sale until the interest of any omitted party has been terminated; and (2) until an omitted party’s interest is terminated, the purchaser at the judicial sale is the equitable owner of the senior lien. An interested person’s rights under the new provisions may not be denied because of certain acts or omissions by the interested person.
 
House Bill 1238
 
HB1238 could very well reduce foreclosure timelines in Indiana by providing an avenue for lenders to file for abandonment of the mortgaged property with the court and move to judgment.
 
The bill provides a procedure that allows: (1) a creditor in a mortgage; or (2) an enforcement authority with jurisdiction in the location of the mortgaged property; to petition the court having jurisdiction over an existing mortgage foreclosure action to find that the mortgaged property is abandoned. Upon receiving a petition for a determination of abandonment, the bill provides that the court shall issue an order to show cause as to why the property should not be found to be abandoned and to direct the appropriate parties to appear before the court on a date and time specified in the order. A party subject to the order has the right to: (1) present oral or written evidence or objections on the issue of abandonment to the court; and (2) be represented by an attorney when appearing before the court. Certain specified conditions existing with respect to the mortgaged property constitute prima facie evidence that the property is abandoned.  For example, windows or entrances to the property are boarded up or closed off, multiple window panes on the mortgaged property are broken, one or more doors on the property are smashed or broken off, or if continuously unlocked, rubbish trash or debris has accumulated on the property. HB1238 also provides that the debtor’s failure to either: (1) present written evidence or objections on the issue of abandonment before the appearance date; or (2) appear before the court on the appearance date; constitutes prima facie evidence that the property is abandoned.

Moving forward it is important that lenders, throughout the foreclosure process, inform their foreclosure counsel if the property is abandoned or not, as soon as that information becomes available. 

If you have any questions on this matter, please contact Mr. Zarksis Daroga, Esq. Zarksis practices in the Real Estate Default Group focused on foreclosure services and is located in the Cincinnati office of Weltman, Weinberg & Reis Co., LPA. He can be reached at 513.333.4075 and zdaroga@weltman.com.

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