Indiana 2013 Legislation, Part III: Mortgage Statute Of Limitations Amended

This is my third and final post about the relevant Indiana legislation arising out of this year’s session.  At issue is House Bill 1079 and Indiana Code § 32-28-4-1 through 3, which deal with the expiration of mortgage liens, together with the statutes of limitations applicable to foreclosure actions.  Today’s post will supplement my September 3, 2010 post that touches upon the prior statutory language.  (For more on statutes of limitations, including the statute applicable to promissory notes, please read my March 9, 2009 post.) 

Lien expiration/bar date.  There are two components to the provisions in I.C. § 32-28-4.  The first deals with the expiration of a mortgage lien (general rule).  The second involves the deadline to file a foreclosure action (exception to general rule).  In either instance, the applicable time period is the same.  (HB 1079 and I.C. § 32-28-4 also apply to vendor’s liens, which were the topic of my August 7, 2012 post.)

I.C. § 32-28-4-1:  maturity date identified.  As of July 1, 2012, the general rule is that a mortgage lien expires ten years after the maturity date stated in the recorded mortgage.  The exception is if the mortgagee files a foreclosure action within that ten-year period. 

I.C. § 32-28-4-2(a):  maturity date not identified.  If the recorded mortgage does not identify a maturity date (articulated as when “the last installment of the debt secured by the mortgage lien becomes due”), then the expiration of the mortgage depends on the date of the mortgage.  If the parties created the mortgage before July 1, 2012, the lien expires 20 years after the mortgage execution date, unless the mortgagee files a foreclosure action within that 20-year period.  If the parties created the mortgage after June 30, 2012, the mortgage lien expires 10 years after the mortgage execution date, unless the mortgagee files a foreclosure action within that 10-year period.  (Please note that amended I.C. §§ 32-28-4-1(b) and (c) deal with instances in which there is no date of execution in the document.) 

I.C. § 32-28-4-3:  affidavit of maturity date.  Indiana law provides a remedy for situations in which a mortgage fails to identify a maturity date.  The solution is to record an affidavit stating a maturity date.  Such filing triggers the application of 10-year/20-year rules. 

Retroactive?  The General Assembly placed an effective date on the amendment of July 1, 2012.  As a matter of law, post-2012 mortgages omitting a maturity date will expire in 10 years, unless a Section 3 affidavit is recorded.  It’s my understanding there was some confusion about whether a prior change in the law (from 20 years to 10 years) could have applied to pre-2012 mortgages.  The concern was that mortgages over 10 years old suddenly expired with the enactment of the law.  I’m told that, through some litigation that has since been dismissed, the Indiana Attorney General has opined that retroactive application of the date change would be unconstitutional.  In practice, therefore, the 10-year rule does not apply to pre-2012 mortgages (without maturity dates). 

Pointers.  The critical lesson here is that secured lenders should always identify a maturity date in an Indiana mortgage.  Additionally, parties holding mortgages would be wise to examine their Indiana mortgage portfolios to ensure that all mortgages have a maturity date defined.  If the mortgage omits such date, mortgagees should take steps to record the necessary affidavit to protect their lien.