Mortgagee Beware

In Indiana, a mortgage generally expires ten years after its maturity date – the date on which the last installment of the debt secured by the mortgage becomes due. However, when information respecting the maturity date is missing from the documents on file with the county recorder’s office, the time a mortgagee can bring a foreclosure action on the mortgage can be greatly reduced. On July 1, 2012, Indiana mortgage law was amended to cut in half the automatic expiration time for recorded mortgages that lack information respecting the maturity date.

In the event the mortgage or related information on file with the local recorder does not show the maturity date but shows the date on which the mortgage was executed, the mortgage automatically expires ten years after the date on which the mortgage was executed. Ind. Code § 32-28-4-2(a). If both the maturity date and the date of execution are missing, the mortgage automatically expires ten years after the date on which the mortgage was recorded. Ind. Code § 32-28-4-2(b). For mortgages executed before July 1, 2012, the automatic expiration period is twenty years.

The consequences for not having the maturity date in the mortgage or otherwise of record can be severe. Consider a Borrower on a $5,000,000 twenty-year term loan, secured by a mortgage dated in 2013, who defaults in year 11 of the loan. If the required information is not of record, the lender will find itself unsecured.

This law affects most mortgages in a lender’s portfolio. If the lender has not already done so, it should audit its mortgages to ensure that the requisite information about the maturity date of the loan is of record. If the required information is not of record, the “fix” is relatively simple. An affidavit needs to be filed with the recorder of the county where the mortgage is recorded specifying the date when the final payment secured by the mortgage is due. The deadline for taking such corrective action is ten years after the date the mortgage was executed (if the mortgage contains the date of execution) or ten years after the mortgage was recorded (if the mortgage does not contain the date of execution).

For questions please contact a member of Barrett McNagny’s Financial Institutions group. 

About the Author: Michael P. O’Hara

A partner with Barrett McNagny, Michael P. O’Hara works with clients in the areas of corporate law, business transactions, finance, and creditors’ rights. He is an AV^® Preeminent™ rated attorney based on Martindale-Hubbell's peer review ratings and was selected for inclusion in The Best Lawyers^® in America 2016, 2017 and 2018 publications. He can be reached directly at (260) 423-8838 or via email at mpo@barrettlaw.com.