Foreclosure Prevention Agreements & Settlement Conferences

By Andrew J Thompson

Indiana law offers a rare advantage to homeowners in foreclosure through its requirements for a Settlement Conference between the bank and the borrower.   The purpose of the Settlement Conference is for the parties to try to come to terms on a foreclosure prevention agreement, so that the homeowner is not forced to leave his or her home, without having a good way to get into other suitable housing.

The Indiana legislature has recognized that it is in the public interest for the state to modify the foreclosure to encourage mortgage modification alternatives.  The purpose of the changes in the law is to avoid unnecessary foreclosures of residential properties and provide greater stability to Indiana’s statewide and local economies by

(1) requiring early contact and communications among creditors, their agents, and debtors in order to engage in negotiations that could avoid foreclosure; and

(2) facilitating the modification of residential mortgages in appropriate circumstances.

A primary tool in accomplishing this purpose is the Foreclosure Prevention Agreement.  A Foreclosure Prevention Agreement is defined under Indiana law as a written agreement that:

(1) is executed by both the creditor and the debtor; and

(2) offers the debtor an individualized plan that may include:

(A) a temporary forbearance with respect to the mortgage;

(B) a reduction of any arrearage owed by the debtor;

(C) a reduction of the interest rate that applies to the mortgage;

(D) a repayment plan;

(E) a deed in lieu of foreclosure;

(F) reinstatement of the mortgage upon the debtor’s payment of any arrearage;

(G) a sale of the property; or

(H) any loss mitigation arrangement or debtor relief plan established by federal law, rule, regulation, or guideline.

The homeowner is required to prepare a “Loss Mitigation Package” that includes financial information about income, assets and debts that is sufficient for a creditor to make underwriting decisions about the debtor and any modification to the mortgage and to bring documents in support of this information to the Settlement Conference.

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Under Indiana Code 32-30-10.5-10 (4), in any foreclosure proceeding of which the homeowner has properly requested a settlement conference, the creditor is required to:

(A) In a foreclosure action filed after June 30, 2011, send the debtor, by certified mail a the following transaction history for the mortgage:

(i) A payment record substantiating the default, such as a payment history.

(ii) An itemization of all amounts claimed by the creditor as being owed on the mortgage, such as an account payoff statement.

(B) Bring the following to the settlement conference:

(i) A copy of the original note and mortgage.

(ii) A payment record substantiating the default, such as a payment history.

(iii) An itemization of all amounts claimed by the creditor as being owed on the mortgage, such as an account payoff statement.

(iv) Any other documentation that the court determines is needed.

For a free consultation concerning Settlement Conferences and Foreclosure Prevention Agreements under Indiana law, call the Thompson Law Office at (317) 564-4976 today.