Tax / Law

Foreclosure is all the rage these days, as banks are foreclosing on homes at a record rate.  (Just recently, one lender even got in trouble for instigating foreclosure proceedings on the wrong property.)  All of this foreclosure activity is obviously not a good thing, but if you are ever faced with foreclosure, here are the basics you should know:

Foreclosure Lawsuit

The foreclosure process begins when a lender files a lawsuit in court against the borrower because the borrower has defaulted on the loan (default is just a fancy term for “not paying”).  Indiana law does not require a lender to send a default notice to the borrower before filing the lawsuit, but most lenders do that as a practical matter (after all, it’s cheaper and easier to get a borrower to pay without going through the legal process—lawyers are expensive!).

The date the mortgage was executed controls the pre-foreclosure period between filing the lawsuit and the foreclosure sale date.  The pre-foreclosure period is a time when action can be taken to avoid the foreclosure, which they have been warned is coming. Most often this is three months, but for older mortgages it can be six or twelve months.  This of course depends on the terms of the mortgage.  (However, there is no waiting period for foreclosure on abandoned properties.)

Order of Foreclosure and Redemption Rights

After the pre-foreclosure period expires and the Court orders the foreclosure, a copy of the Court’s order is issued to the sheriff.  After receiving the order, the sheriff proceeds with the foreclosure sale.

At any time before the foreclosure sale, a borrower may “satisfy” the judgment by paying the debt, interest, and costs owed.  If this happens, the complaint must then be dismissed, and the lender remains in his/her home.  The foreclosure proceedings stop completely. This is called a borrower’s “redemption right” – everyone gets the chance to redeem his/her credit!

Mechanics of the Notice of Sale and Auction 

If the borrower does not exercise her right of redemption after the Court enters a final judgment of foreclosure, the sheriff appoints an auctioneer to conduct the foreclosure sale.  The notice of sale must be published once a week for three weeks in a local newspaper, and the first publication must occur 30 days before the sale to give ample notice.  The sheriff also must post the notice in a least three public places, as well as the county courthouse.  Finally, the sheriff must notify the borrower of the notice of sale. The owner may reside in the property, rent free, until the foreclosure sale, provided the owner is not committing “waste,” which essentially means tearing up the property.

Immediately after the foreclosure sale, the sheriff transfers the property ownership to the winning bidder.  If a lender postpones the sale, another sheriff’s sale request must be filed, and the notices must be re-served and republished.  (Some lenders will postpone sheriff’s sales to try and work out a resolution with the borrower.)  Once the sale is complete, however, a borrower no longer has redemption rights. The property is foreclosed upon, and the process is over.

Indiana Foreclosure Laws

The laws that govern Indiana foreclosures are found in the Indiana Code, Article 29 (Mortgages), Chapter 7 (Foreclosure, Redemption, Sale, Right to Retain Possession). You can view these statutes on the Web.

editor’s note:
This web-site is not a lawyer, but Stan Wruble is. Comments are open, but if you need specific legal advice,  please contact him directly.

South Bend hosts a public hearing on House Bill 1001 to reform Indiana property taxes 11 am Thursday January 10th at IUSB’s Student Activities Center.

The hearing is unfortunately timed on a weekday during working hours, but should feature local politicians thoughts on the matter as well as resident’s concerns.

You can read a lengthier write-up of the meeting on the South Bend Tribune.

Here is a Google Map to the Student Activites Center and a campus map of IUSB.

Indiana governor Mitch Daniels, speaking about the state’s property taxes stated “The status quo is not tolerable and we must act to fix it.” He then presented a plan for Indiana property tax reform this evening. It requires enactment by the state legislature, but is one plan that would make a striking difference in the bills homeowners receive and to the funding of certain local services. It’s highlights, briefly:

• 1% (of assessed value) cap on tax of owner occupied housing, added to state constitution
• 2% cap on tax of rental properties
• 3% cap on tax of business properties
• The elimination of our political assessment system - to be replaced with a single assessor appointed by each county council who will oversee future appraisals.
• The removal of remaining school operating costs and the costs of protecting abused and neglected children from local to state government through a one cent increase in the state’s sales tax (to seven percent) and the use of some of state budget surplus.
• county tax boards to review total of local spending
  
  plans and trim budgets.
• Required public referendums on any spending beyond the growth in local income and for new capital projects such as building new schools.

You can view the announcement at the governor’s Web-site:

St Joseph County property tax bills were recently mailed and have increased in many cases. Local media reports:

•  The county did a study which showed most property taxes increased 15 percent.
•  There have been problems with inaccurate assessments, especially for businesses in Clay Township.
• There are systemic problems that cause some tax bills to be calculated without exemptions, even when the property qualifies for them.
• There is a move, spearheaded by landlords, to revise the tax code or eliminate property taxes altogether.

Do you have anthing to correct from these reports, or to add to the property tax discussion? The comments are below.