Foreclosure is all the rage these days, as banks are foreclosing on homes at a record rate.Â (Just recently, one lender even got in trouble for instigating foreclosure proceedings on the wrong property.)Â 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:
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 â€œnot payingâ€).Â 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, itâ€™s cheaper and easier to get a borrower to pay without going through the legal processâ€”lawyers are expensive!).
The date the mortgage was executed controls the pre-foreclosure period between filing the lawsuit and the foreclosure sale date.Â 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.Â This of course depends on the terms of the mortgage.Â (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 Courtâ€™s order is issued to the sheriff.Â After receiving the order, the sheriff proceeds with the foreclosure sale.
At any time before the foreclosure sale, a borrower may â€œsatisfyâ€ the judgment by paying the debt, interest, and costs owed.Â If this happens, the complaint must then be dismissed, and the lender remains in his/her home.Â The foreclosure proceedings stop completely. This is called a borrowerâ€™s â€œredemption rightâ€ â€“ everyone gets the chance to redeem his/her credit!
Mechanics of the Notice of Sale and AuctionÂ
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.Â 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.Â The sheriff also must post the notice in a least three public places, as well as the county courthouse.Â 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 â€œwaste,â€ which essentially means tearing up the property.
Immediately after the foreclosure sale, the sheriff transfers the property ownership to the winning bidder.Â If a lender postpones the sale, another sheriffâ€™s sale request must be filed, and the notices must be re-served and republished.Â (Some lenders will postpone sheriffâ€™s sales to try and work out a resolution with the borrower.)Â 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.