Posts in News
January 09, 2013
WSJ: "The States Of Foreclosure"
Today's Wall Street Journal contains an interesting opinion that "housing prices stabilize when lenders can enforce contracts" (in other words, foreclose). Click here for the piece. Although the article focuses upon residential real estate, its theme and theory apply with equal vigor to commercial properties. As you read the opinion, you should remain mindful that Indiana is one of the country's 23 judicial foreclosure states. Click here for a prior post about what that means. The nature of Indiana foreclosure law rests, in part, upon the notion that Indiana follows the "lien theory" of mortgages.
Posted at 04:11 PM in Mortgages
December 08, 2012
Please Forgive The Delay - New Posts To Resume Next Week
With the Thanksgiving holiday, the press of my day job and a trip to Georgia last week for my dad's 70th birthday, I have been unable to post anything of late. I apologize.
After over 300 posts and 6+ years of purely business-related features, I thought I'd take a moment to post something personal and recognize my dad, pictured below on the left, who turned 70 in October. Dad is a retired attorney from Washington, Indiana, where I grew up, and is very dear to me. My little brother Matt, pictured on the right - with me in between - had the privilege of playing Augusta National this past Wednesday. Matt, who works in the golf industry in Atlanta, was able to get us on the course through his contact, Danny Yates, pictured in the center.
For those who may be a fans of The Masters, you'll recognize #12 green in the background, as we stand on Hogan Bridge over Rae's Creek. My dad, a life-long average golfer at best, birdied this hole. Needless to say, it was a special day. Kudos to Matt and Mr. Yates for making this dream come true.
Happy holidays, and thanks to all who read my blog. Back to work next week.....
Posted at 04:15 PM in News
April 26, 2012
The "Indiana Lawyer" Writes Story on 2012 Foreclosure Legislation
I recently worked with reporter Jenny Montgomery in connection with her piece in the April 27th edition of the Indiana Lawyer. Here is a link to the story, which quotes me: 2 Cases Prompt New Real Estate Law. Ms. Montgomery tackled complicated topics in a relatively short space, and in my view she helped make the "big picture" understandable.
As a reminder, for a more in-depth assessment of the statutory amendments and how they might affect secured lenders and other parties involved in the foreclosure of commercial mortgage loans, please click on one or more of my four recent posts on the issues: Abandonment, Redemption, Strict Foreclosure, Citimortgage Transfer.
Posted at 09:33 AM in News
April 12, 2012
Indiana Legislation, 2012: Part 3 Of 3 – Sheriff’s Sale Buyers And Omitted Junior Lien Holders Impacted By Creation Of Strict Foreclosure Statute
Senate Bill 298, which amends Ind. Code § 32-29-8, creates a new section: 4. The legislation responds to the Indiana Supreme Court’s opinion in Citizens State Bank of New Castle v. Countrywide Home Loans, Inc. and the Court of Appeals’ holding in Deutche Bank v. Mark Dill Plumbing. The amendments hit on technical subjects related to Indiana’s strict foreclosure remedy and doctrine of merger. The practical effect is a solution to problems associated with junior liens missed during the foreclosure process.
Citizens and Deutche revised. These are dense topics tough to cover in a single post. For background, please read my 10-07-11 and 07-20-09 posts on Citizens and Deutche, respectively. In Citizens, the Supreme Court applied the doctrine of merger and permitted the omitted junior lien holder to leap frog into a senior priority position. In Deutche, the Court of Appeals concluded there was no merger (leap frog) and discussed remedies for the post-sale title defect. With the new Section 4, it appears that the Citizens merger (and leap frog) would not have occurred. The result in Deutche also would have been different because courts now have a statutory road map for dealing with the aftermath of a foreclosure suit that improperly excluded a junior lien holder.
Section 4. The new statute appears to be effective immediately and can be found at this link: Section 4. Here are the highlights as I read them:
A. Applicable parties: Section 4 applies to two groups, defined as “interested persons” and “omitted parties.” An “interested person,” which I’ll label a “Buyer,” basically includes (1) plaintiff mortgagees, (2) purchasers at a sheriff’s sale or (3) assignees of (1) or (2). An “omitted party,” which I’ll call a “Junior Lienor,” essentially is a junior lien holder improperly omitted from foreclosure proceedings .
B. New cause of action: “At any time” after the entry of a foreclosure judgment, either the Buyer or the Junior Lienor can file an action, the purposes of which are (1) to determine the extent of a Junior Lienor’s lien and (2) to terminate such lien on the mortgaged property sold at a sheriff’s sale. Generally, the action – a lawsuit – is a statutory strict foreclosure case, though the statute does not use that terminology.
C. Junior Lienor’s right to payment: If a Junior Lienor had a right to receive any proceeds from the sheriff’s sale, its lien cannot be terminated until the Junior Lienor is paid for such losses. (The statute does not spell out who must pay. For now, I’ll simply note that sheriff’s sale surpluses are incredibly rare due to the absence of equity in most foreclosed-upon real estate.)
D. Junior Lienor’s right to purchase: There are three key factors a court must consider when determining a Junior Lienor’s right of redemption in the strict foreclosure action. (The “redemption” language used in Section 4 refers to a Junior Lienor’s right to pay off the Buyer and thus acquire title to the property.) Here are the factors: (1) whether the Junior Lienor had actual knowledge of the foreclosure proceedings and an opportunity to intervene, (2) the value of any post-sale improvements made by the Buyer to the property and (3) the amount of the post-sale taxes and interest paid by the Buyer. Factor (1) seems to provide a basis for the right of redemption to be terminated outright, and factors (2) and (3) help make the Buyer whole for any ownership-related carrying costs incurred.
E. Junior lien terminated: If the court concludes the Junior Lienor was entitled to redeem, then the amount the Junior Lienor must pay for redemption cannot be less than the sheriff’s sale price plus statutory interest (8%). (The court also must consider the factors in (D) when determining the amount the Junior Lienor must pay.) The Junior Lienor has ninety days to submit the payoff. If the Junior Lienor does not submit such payment, then the Junior Lienor’s rights will be terminated without compensation, just as they would have been in the foreclosure process.
F. Anti-merger statute: Section 4 specifically provides that there is no merger of the senior lien and title to the property until a Junior Lienor’s interest is terminated. This new legislation appears to resolve many uncertainties surrounding Indiana’s common law doctrine of merger. Thus the Buyer, which presumes that it’s acquiring title free and clear, has protections it did not previously have.
G. Other Buyer safeguards: Section 4 also states that the Buyer’s senior interest in the property cannot be denied even if the Buyer had (1) had actual or constructive notice of the Junior Lienor’s interest, (2) been negligent in examining county title records, (3) been engaged in the business of lending or (4) obtained a title insurance policy commitment. This language constitutes a preemptive strike against any defenses to the strict foreclosure action, and without these carve outs Section 4 would be meaningless.
I’m planning a follow-up post to identify some holes in SB 298. For today, it’s important for secured lenders and other lien holders to know that Indiana now has a statutory method to clear up title when a buyer learns that a junior lien survived a sheriff’s sale. While Section 4 is not perfect, I agree with my partner Tom Dinwiddie that this was a necessary and fair bill that protects both buyers and junior lien holders.
Posted at 10:52 AM in News
, Sheriff's Sales
, Strict Foreclosure