Through Senate Enrolled Act 298, mortgages will now expire 10 years after their stated maturity date. If a mortgage does not set forth the loan maturity date, then the mortgage will expire ten years from the earlier of the date of execution, or the date of the recording.

A critical issue exists relating to mortgages recorded prior to July 1, 2002 which do not set forth the loan maturity date. Under SEA 298, which will become effective July 1, 2012, mortgages with no stated maturity date will expire 10 years after the date the mortgage is recorded.

As was permitted with prior law, a lender can extend the expiration date of a mortgage that does not include a maturity date by filing an affidavit with the appropriate county recorder before the applicable expiration date that states when the debt becomes due.

The law places bankers in a situation in which reviewing files could become a time-consuming task as electronic files may be harder to search than the paper files of days-gone-by to seek the mortgage expiration dates, or lack thereof.

The attorneys of Bose McKinney & Evans are working with lenders to develop strategies to assess and reduce the risk of early mortgage expiration. Bose McKinney & Evans attorneys will share the developing concepts during the roundtable discussion. Ideally, bankers attending this conference also will share the plans and strategies they are considering to address the mortgage expiration issue so that all lenders may benefit from collective attempts to define best practices to deal with the changes in law.

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More details and issues to consider: 

Due to a recent amendment in Indiana law, some mortgages may expire as early as July 1, 2012. 

Prior to 2012, Indiana law provided that mortgages expired twenty (20) years from the maturity date of the loan as stated in the mortgage, or if the maturity date is not referenced in the recorded mortgage, twenty (20) years from the execution date of the mortgage, or the date the mortgage was recorded (if no execution date is provided). 

In 2012 the Indiana Legislature enacted an amendment reducing the expiration period for mortgages to ten (10) years.  The 10 year expiration period is effective July 1, 2012.

If a mortgage does not contain a maturity date, a lender may take remedial action to establish the maturity date of the mortgage by recording an affidavit providing the loan maturity date for any effected mortgage.  The affidavit does not require the signature of the borrower, and upon recording has the same legal effect as though the maturity date of the loan had been stated in the mortgage at the time of recording.

Thus, a critical issue is presented to financial institutions to determine those mortgages it has in effect that were executed or recorded prior to July 1, 2012 which do not state a later maturity date of the debt.  This class of mortgages will expire on July 1, 2012

In order to assess the potential risk of this change in the law on mortgages held by your institution, we suggest that you consider the following:

1. Can you identify the loan origination date for mortgage loans through the “current” loan number on your system?  If so, determine which loans were originated on or before July 1, 2002 and make an immediate analysis to determine if the maturity date is referenced in the recorded mortgage.
2. How is the due date of mortgage loans tracked on renewals, extensions, modifications and amendments to loans?  Review your loan file to determine if the due date of the loan has changed, and if so, whether the current maturity is reflected in the mortgage. 
3. If your institution has been through an entity transition, you may need to determine if the maturity date of acquired loans is reflected in the mortgage securing those loans. 
4. Is it possible to go to each county and obtain a search to determine mortgages of a financial institution recorded prior to July 1, 2002?  If so, will the recorder’s records readily reflect which of those mortgages have been released?
5. After those mortgages that may be impacted on July, 1, 2012 are corrected, review all loans in your system to determine if any mortgages are impacted.

If any loans are affected by this new law, banks may need to prepare and record an affidavit to reflect the current maturity date in the affected mortgages.