If you’re an Indiana homeowner and you're behind in your mortgage payments, it’s a good idea to learn how a foreclosure works. In this article, you’ll get details about each step in an Indiana foreclosure, as well as useful information about both federal laws and state laws that are designed to protect homeowners during the process.
Foreclosures in Indiana are judicial, which means a court handles the process. State law primarily governs the process, though federal law also provides certain protections to homeowners.
Here’s what homeowners can expect if they default on their mortgage in Indiana.
In Indiana, the homeowner gets the following preforeclosure notices based on federal law, state law, and (sometimes) the terms of the mortgage contract.
Notice under federal law. Under federal law, the servicer (on behalf of the lender) must attempt to contact the homeowner to discuss ways to avoid a foreclosure no later than 36 days after the homeowner misses a payment, and again within 36 days after each subsequent delinquency. Also, no later than 45 days after a missed payment, the servicer must inform the homeowner in writing about loss mitigation (foreclosure alternative) options that might be available. (To learn more about federal laws that protect homeowners in the foreclosure process, see Federal Laws Protecting Homeowners: Foreclosure Protections.)
Notice under state law. Indiana law requires lenders to send homeowners a pre-foreclosure notice by certified mail at least 30 days before filing the foreclosure suit. The notice must:
Notice required by the mortgage. Many mortgages in Indiana contain language requiring the lender to send the borrower a letter (usually referred to as a “breach letter”) that provides the opportunity to get current on the loan and prevent a foreclosure.
In Indiana, a lender must file a suit in court to foreclose a home.
At least 30 days after the lender sends the pre-foreclosure notice and 120 days after the borrower becomes delinquent (in accordance with federal foreclosure laws), the lender begins the lawsuit by filing a “Complaint” with the court.
The lender then serves the Complaint to the homeowner, along with a summons. After receiving the Complaint and summons, the homeowner gets 20 days to file a response, called an “Answer.” (Learn about the difference between a Complaint and summons.)
In Indiana, the summons notifies the homeowner of the right to request a settlement conference. The homeowner must make the request no later than 30 days after receiving the summons. The settlement conference provides an opportunity for the homeowner and lender to discuss options that might prevent foreclosure. (For more information on ways to avoid foreclosure, see Avoiding Foreclosure: Basic Workout Options. For more information about settlement conferences, see Indiana's Foreclosure Mediation Program.)
If the homeowner doesn’t file an Answer to the lawsuit, the lender automatically prevails, and the court issues a default judgment allowing a foreclosure sale. But if the homeowner answers the suit, the case will go through litigation. Should the court then decide that the lender wins, the court will issue a judgment and an order permitting the lender to sell the home at a foreclosure sale.
In most cases, the foreclosure sale can’t occur until three months after the Complaint is filed (longer for mortgages prior to July 1, 1975). This pre-sale waiting period provides ample opportunity for the homeowner to discuss possible alternatives for avoiding foreclosure with the lender.
After the judgment, a public auction of the home is scheduled. The auction must be scheduled no later than 120 days after judgment has been entered (60 days for abandoned homes). Notice of the sale must be:
The sheriff will conduct the auction, usually at the sheriff’s office, courthouse, or other location that’s likely to attract bidders in the county where the property is located.
Immediately upon sale, the sheriff provides a deed of conveyance to the purchaser and files a deed in the county records. At this point, the foreclosed homeowner faces eviction if he or she has not vacated the property.
If the sale proceeds fail to completely satisfy the mortgage debt, the lender may seek a deficiency judgment against the homeowner. Sometimes, though, the lender waives its right to a deficiency judgment in exchange for the homeowner waiving his or her right to the pre-sale waiting period. (Learn more about deficiency judgments after foreclosure in Indiana.)
To read the federal laws that provide foreclosure protections to homeowners, go to 12 C.F.R. § 1024.30 and following. To read Indiana’s foreclosure laws, go to Title 32, Articles 29 and 30, and Title 24, Article 9 of the Indiana Code.
Federal and state laws—in theory—establish a structured, predictable foreclosure process and timeline. But lenders sometimes make mistakes and violate the law when processing foreclosures. If the lender makes a mistake, you might have a defense to the foreclosure that could derail the process, at least temporarily.
If you want to learn about potential defenses in your situation, consider contacting a local foreclosure attorney. Homeowners facing foreclosure are also encouraged to contact a HUD-approved housing counselor to learn about different loss mitigation options.