03 Jun Indiana and Iowa Legislative Update
The Indiana legislature recently amended the First Lien Mortgage Lending Act, the Uniform Consumer Credit Code, laws governing closing protection letters and foreclosures. The Iowa legislature recently amended its laws governing conveyances. All the legislation discussed in this memorandum is effective July 1, 2013.
INDIANA HOUSE BILL 1081
Our May 17, 2013 Compliance Memorandum discussed provisions of House Bill 1081, effective January 1, 2013, which amended the definition of a “consumer loan.” The provisions of House Bill 1081 addressed in this memorandum, are amendments to the First Lien Mortgage Lending Act (the “Act”) and the Indiana Uniform Consumer Credit Code (the “UCCC”). A future Compliance Memorandum will address provisions of House Bill 1081 that are effective July 1, 2014.
To discover violations or to secure information necessary for the enforcement of the Act, the Department of Financial Institutions (the “Department”) may investigate any:
- Licensee; or
- Person that the Department suspects to be operating:
- Without a license, when a license is required; or
- Otherwise in violation of the Act.
The Department has all investigatory and enforcement authority that the Department has with respect to financial institutions. If the Department conducts an investigation, the licensee or other person investigated must pay all reasonably incurred costs of the investigation in accordance with the fee schedule adopted by the Department.
Under the UCCC, a sale or loan transaction does not occur in Indiana if a borrower who is an Indiana resident entered into a consumer sale or loan transaction at a lender’s place of business in another state.
INDIANA SENATE BILL 370
A “closing protection letter” is a written indemnification of or undertaking to a party to a real estate transaction by a principal that specifies the extent to which the principal is responsible for intentional or unintentional misconduct or errors of an agent of the principal in connection with the closing of the real estate transaction.
A “title policy” is a policy issued by a company that is authorized to do business as a title insurance company and insures or indemnifies persons with an interest in real property against loss or damage caused by a lien on, an encumbrance on, a defect in, or the unmarketability of the title to the real property.
In a first lien purchase money mortgage transaction or a refinance transaction closed by a closing agent in which a title policy is issued by a company or title insurance producer on behalf of a company and the company or title insurance producer will also act as a settlement or closing agent, the company or title insurance producer must issue a closing protection letter to the lender, borrower, buyer, and seller of the property. A company authorized to do the business of title insurance in Indiana will charge an approved fee to each party receiving the benefit of a closing protection letter.
A closing protection letter must indemnify the party to which the closing protection letter is issued against any loss of settlement funds (under the terms and conditions of the closing protection letter) that results from the following acts of the company or title insurance producer that issues the closing protection letter:
- Theft or misappropriation of settlement funds in connection with a transaction in which the title policy is issued, only to the extent that the theft or misappropriation relates to the status of title or validity, enforceability, and priority of the lien of the mortgage on the party’s interest in land.
- Failure to comply with the written closing instructions agreed to by the company or title insurance producer acting as the settlement agent, only to the extent that the theft or misappropriation relates to the status of title or validity, enforceability, and priority of the lien of the mortgage on the party’s interest in land.
The issuance of a closing protection letter in contemplation of or in conjunction with the issuance of a title insurance policy is part of the business of title insurance. The amount of the fee a company authorized to do the business of title insurance charges to each party receiving the benefits of a closing protection letter must be submitted to and approved by the Insurance Commissioner and is not subject to an agreement requiring a division of fees or premiums collected on behalf of the company.
INDIANA SENATE BILL 279
A person who is assigned a mortgage and fails to have the assignment properly placed on the mortgage record (previously or has an interest in the mortgage and is not made a party to the foreclosure action) is bound by the court’s judgment or decree as if the person were a party to the suit.
A person holds the premises free and discharged of the lien if he or she:
- Purchases a mortgaged premises or any part of a mortgaged premises under the court’s judgment or decree at a judicial sale or claims title to the mortgaged premises under the judgment or decree; and
- Buys the mortgaged premises or any part of the mortgaged premises without actual notice of an assignment that is not of record. The provision providing for buyers without actual notice of the transfer of a note, of which the holder is not a party to the action, has been deleted.
The following provision has been deleted from Indiana’s foreclosure laws:
Any assignee or transferee may redeem the premises, like any other lender, during the period of one year after the sale or during another period ordered by the court in an action to terminate an interest of an omitted party, but not exceeding 90 days after the date of the court’s decree in the action.
IOWA SENATE FILE 358
When the record shows that a contract or bond for a deed was executed more than 10 years earlier, the contract or bond will be deemed abandoned by the buyer and void and the land will be freed from any lien or defect on account of the contract or bond in any of the following situations:
- The record does not indicate the contract or bond has been performed and more than 10 years have elapsed since the contract or bond by its terms was to be performed.
- A performance date for the contract or bond is not stated in the contract or bond or any extensions thereof and more than 20 years have elapsed from the date the contract or bond was executed.
The contract or bond will be deemed abandoned 10 years from the date that the contract or bond is to be performed according to the recorded instrument. However, if the recorded instrument does not refer to a performance date for the contract or bond, the contract or bond will be deemed abandoned 20 years (previously 10 years) after the date that the instrument containing the reference is recorded.
The above provisions will not apply to a buyer or a buyer’s successor in interest if the buyer or buyer’s successor in interest is in possession of the property or has been continuously paying the total amount due for the taxes levied against the property for the preceding 5 years.
A buyer and the buyer’s successor in interest of a real estate contract or bond for deed, the seller of which is time barred from maintaining an action to foreclose or enforce the contract or bond, or a buyer who is entitled to immediate issuance of a deed in fulfillment of contract or bond and who is in physical possession of the property, may serve the seller with a demand for a deed as provided in the contract. The notice may be served personally or by publication, on the same conditions, and in the same manner as is provided for the service of original notices, except that when the notice is served by publication an affidavit will not be required before publication. Service by publication will be deemed complete on the day of the last publication. Service may be made on a judgment creditor of the deceased seller or any other person who is, as a matter of record, interested in the estate of a deceased vendor, pursuant to Iowa law.
The demand must state that if a deed is not provided within 45 days of service and an action to foreclose or forfeit the contract has not been commenced within such 45-day period, the buyer may file an affidavit showing service and compliance with the above requirements. The auditor will then correct the county records to indicate that the rights of the seller have vested in the buyer.
An action must not be commenced by a buyer who is not in possession of the property, or by a party to the forfeiture proceeding who is other than a buyer or seller, that asserts a claim against real estate previously subject to a forfeiture proceeding, and the claim is based upon a defect in the forfeiture proceeding, in which the proof and record of service of notice of forfeiture has been filed of record for more than 10 years.
A buyer who is not in possession of the property, or a party to the forfeiture proceeding who is not the buyer or seller, may commence an action due to a defect in the forfeiture proceedings at any time prior to July 1, 2014, if, as of June 30, 2014, more than 9 years but less than 10 years have elapsed since the proof and record of service of notice of forfeiture was filed of record.