I attended the American Legal & Financial Network’s informative and productive “Foreclosure Intersect” Conference in Dallas this week. One of the many issues that struck me was how wide ranging the country’s redemption laws are. This is due, in part, to the fact that, unlike Indiana, twenty-six states have non-judicial foreclosures. Even judicial foreclosure states have different laws regarding when and how to redeem. Anyway, I thought a quick reminder about Indiana’s right of redemption was in order.
Pre-sale. If a borrower defaults, and if a secured lender exercises its rights under a mortgage to foreclose, the borrower still is able to avoid losing the real estate collateral. This is because, in Indiana, borrowers have a right of redemption. “Redeem” means “to buy back. To free property from mortgage . . . by paying the debt for which it stood as security.” Black’s Law Dictionary. Redemption (basically, a payoff) is the way for a borrower to keep the property, end the litigation and free itself of the lender’s mortgage interest.
Indiana Code § 32-29-7-7 “Redemption by owner before sheriff’s sale” outlines this right:
Before the [sheriff’s] sale under this chapter, any owner or part owner of the real estate may redeem the real estate from the judgment by payment to the:
(1) clerk before the issuance to the sheriff of the judgment and decree; or
(2) sheriff after the issuance to the sheriff of the judgment and decree;
of the amount of the judgment, interest, and costs for the payment or satisfaction of which the sale was ordered. If the owner or part owner redeems the real estate under this section, process for the sale of the real estate under judgment may not be issued or executed, and the officer receiving the redemption payment shall satisfy the judgment and vacate order of sale . . ..
Post-sale. There is, however, no post-sale right of redemption for a borrower/owner/mortgagor. I.C. § 32-29-7-13 states: "There may not be a redemption from the foreclosure of a mortgage executed after June 30, 1931, on real estate except as provided in this chapter [Section 7 noted above and 32-9-8 noted below]." Well-settled Indiana case law provides that "a foreclosure sale cuts off a mortgagor's rights of redemption." Patterson v. Grace, 661 N.E.2d 580, 585 (Ind. Ct. App. 1996); Overmyer v. Meeker, 661 N.E.2d 1271, 1275 (Ind. Ct. App. 1996); Vanjani v. Federal Land Bank of Louisville, 451 N.E.2d 667, 672, n.1 (Ind. Ct. App. 1983).
Basically, a borrower must pay the debt amount (pre-judgment) or the judgment amount (post-judgment) before the sheriff’s sale. Otherwise, in Indiana. the right to redeem terminates with the sale. In Re Collins, 2005 Bankr. LEXIS 1800 (S.D. Bankr. 2005). “Once a sheriff’s sale takes place, a mortgage-debtor is no longer the title holder . . ..” Id. Judge Coachys concluded, in Collins, that a sheriff’s sale is complete when the hammer falls and that the actual delivery of the sheriff’s deed is purely ministerial. Id. At the sale, when the sheriff's deputy or the auctioneer says "Sold!" the party's over.
Post-sale exception. There is narrow exception to the post-sale rule, but the exception does not apply to borrowers. As explained in detail in my April 12, 2012 post, certain lienholders mistakenly omitted from the foreclosure process have limited remedies under I.C. § 32-9-8.
I represent lenders, loan servicers, borrowers, and guarantors in foreclosure and real estate-related disputes. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at email@example.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.