Post-Sale Redemption Mystery Unsolved
October 12, 2012
Last week, the Indiana Supreme Court said much about Mortgage Electronic Registrations Systems, Inc. (“MERS”) in Citimortgage v. Barabas, 2012 Ind. LEXIS 802 (Ind. 2012). The Court also said a lot about who should receive notice of a foreclosure proceeding. I hope to discuss those matters next week.
No comment. Just as important was what Citimortgage didn’t say. I’m referring to the issue of the enigmatic post-sheriff’s sale statutory right of redemption found at Ind. Code § 32-29-8-3 entitled “Good faith purchaser at judicial sale; right to redeem of assignee or transferee not made a party.” For background, please click on my August 2 and November 1, 2011 posts regarding Citimortgage. Subsequently, the Indiana General Assembly amended portions of Section 3, but as I wrote in March of this year the obscure one-year redemption language remained untouched by the legislature. Here is the statute, and the key language is underlined:
Sec. 3. A person who:
(1) purchases a mortgaged premises or any part of a mortgaged premises under the court's judgment or decree at a judicial sale or who claims title to the mortgaged premises under the judgment or decree; and
(2) buys the mortgaged premises or any part of the mortgaged premises without actual notice of:
(A) an assignment that is not of record; or
(B) the transfer of a note, the holder of which is not a party to the action;
holds the premises free and discharged of the lien. However, any assignee or transferee may redeem the premises, like any other creditor, during the period of one (1) year after the sale or during another period ordered by the court in an action brought under section 4 of this chapter, but not exceeding ninety (90) days after the date of the court's decree in the action.
When the Supreme Court accepted transfer in Citimortgage, many thought the Court would interpret the redemption language in Section 3. No such luck. The Court expressed “no opinion as to whether Citimortgage had the right to redeem the property under [Section 3].” This is because the Court decided the case on other grounds. The opinion provided no help with the confusion and uncertainty created by the analysis of the Court of Appeals in Citimortgage, which precedent has now been vacated.
Status. It’s my understanding Indiana’s legislature may consider clearing up I.C. § 32-29-8-3 in the 2013 session. For now, while Indiana law is well settled that a sheriff’s sale terminates the right of redemption for borrowers/mortgagors, the law remains unclear as to whether there exists some kind of post-sheriff’s sale right of redemption for mortgage assignees whose assignments were not recorded before the filing of the foreclosure complaint. As I often say, foreclosing lenders should invest in a foreclosure (title) commitment, and purchasers at sheriff’s sales should buy title insurance.
NOTE: In the 2013 session, Indiana's General Assembly deleted much of Section 3(2)(B) so as to resolve the matter once and for all. My post.