Secured Lender Loses Mortgage Due to Indiana Tax Sale
Borrowers/Guarantors Beware: Federal Magistrate Judge Strikes Undeveloped Affirmative Defenses

Bank Merger Rule Applied In Indiana Foreclosure/Tax Sale Case

In my 1/15/13 post, Successor-In-Interest Banks As Plaintiffs In Foreclosure Actions, I discussed the Indiana Court of Appeals decision in CFS v. Bank of America, 962 N.E.2d 151 (Ind. Ct. App. 2012)CFS supported the idea that a predecessor bank in a mortgage foreclosure action need not assign its loans to the successor bank in order for the surviving bank to have legal standing to foreclosure a mortgage.  Such a transfer occurs as a matter of law by virtue of the merger/acquisition itself pursuant to 12 U.S.C. § 215(a)(e).

Last week's post, Secured Lender Loses Mortgage Due to Indiana Tax Sale, talked about the Iemma case, which dealt with whether a tax deed should have been set aside.  As a part of its analysis, the Court in Iemma cited to and relied upon the CFS opinion. 

In Iemma, Chase was the successor-in-interest to the original lender/mortgagee as identified in the subject mortgage on file with the county.  LRB, the tax sale purchaser in Iemma, argued, among other things, that Chase was not entitled to notice of the tax sale because Chase's status as a mortgagee was not recorded.  Essentially, LRB's contention was that Chase should have recorded an assignment of mortgage showing that Chase, not the predecessor bank, was the current holder of the mortgage.  Although Chase ultimately lost the case, Chase won on this particular point.  The Court held:

Under federal law pertaining to bank mergers, Chase was not required to file anything or to give public notice of its interest in the [real estate] because [the predecessor bank/original mortgagee] had alreay done so, and Chase acquired [the predecessor's] interest as a matter of law.

The main point of this post is to remind secured lenders and their counsel that the rule in 12 U.S.C. § 215(a)(e) is out there and that Indiana courts follow the principle that successor-by-merger banks don't need to record assignment documents.  They can, but they don't have to.