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Indiana Amends Foreclosure Mediation Law

Indiana has enacted a new foreclosure law surrounding the state's pre-judgment mediation program, outlining changes related to borrower notification and loss mitigation documentation.
[IMAGE] ""Senate Bill 582"":http://www.in.gov/legislative/bills/2011/PDF/FISCAL/SB0582.008.pdf passed both chambers of the state Legislature by a near unanimous vote, with only one senator casting a nay, and was quickly signed into law by Gov. Mitch Daniels. The law becomes effective for all new residential foreclosure filings as of July 1.

""Making homeowners aware of their options to work out new payment arrangements with their lender is the most successful means of avoiding foreclosure,"" said Sen. Karen Tallian (D-Portage), author of the bill.

Under the new law, lenders are required to provide ""notice to borrowers"":http://www.in.gov/ihcda/files/SB_582-Revised_Summons.pdf of their right to participate in a settlement conference, directly on the first page of the foreclosure summons.

Earlier regulations require that a separate notice be included with the complaint served, but the ""Indiana Housing and Community Development Authority"":http://www.in.gov/ihcda/index.htm (IHCDA) says based on feedback it received over the past two years, this one notification was “not meeting the legislative intent as well as it could.”

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The state housing agency found that homeowners would be more apt to request settlement conferences if the notice were more plainly located on the first page of the foreclosure summons.

Delinquent borrowers will receive a third notice of their right to a face-to-face negotiation with their lender from the court itself upon the filing of the complaint by the creditor.

If a settlement conference is requested, the lender is given a 30-day window to provide the borrower with a payment record substantiating the default and an itemized list of all money and charged owed on the mortgage.

Courts can impose monetary civil penalties on lenders who failed to comply with the new requirements. Any fines collected will go toward the state’s efforts to support and educate homeowners.

Prior to the scheduled mediation session, borrowers are required to submit to both the creditor's attorney and the court, copies of their completed loss mitigation packages, which include a Dodd-Frank Certification form and an application for the federal government's Making Home Affordable program.

IHCDA provides a set of the required ""loss mitigation forms"":http://www.in.gov/ihcda/files/Loss_Mitigation_Forms.pdf on its Web site, as well as a ""borrower checklist"":http://www.in.gov/ihcda/files/Loss_Mitigation_Package.pdf outlining additional financial paperwork that must be submitted.

The new law also allows a judge to make a determination of modified mortgage payments for the homeowner to yield to a special fund while negotiations with the lender are in play.

The payments are credited to the borrower should the parties enter into a foreclosure prevention agreement, or are put toward the amount of owed if the ultimate outcome is a judgment of foreclosure.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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