Duty to release.
Indiana’s General Assembly has made it clear that lenders/mortgagees must release their mortgages when the underlying debt has been paid in full, including interest. First, Indiana Code 32-29-1-6 provides:
After a mortgagee [lender] of property whose mortgage has been recorded has received full payment from the mortgagor [borrower] of the sum specified in the mortgage, the mortgagee [lender] shall, at the request of the mortgagor [borrower], enter in the record of the mortgage that the mortgage has been satisfied. An entry in the record showing that a mortgage has been satisfied operates as a complete release and discharge of the mortgage.
A virtually identical statutory requirement exists at Indiana Code 32-29-11-1: “… if the debt … and the interest on the debt … that a mortgage secures has been fully paid … [then] the [lender/mortgagee] … or custodian of the mortgage shall:
(1) release;
(2) discharge; and
(3) satisfy of record;
the mortgage as provided in IC 32-28-1.
Indiana Code 32-28-1-1 (for the third time) redundantly states, in pertinent part:
(b) When the debt … and the interest on the debt … that the mortgage … secures has been fully paid … the [lender/mortgagee] … or custodian shall:
(1) release;
(2) discharge; and
(3) satisfy of record;the mortgage….
Consequences.
The General Assembly added teeth to the release obligation by assigning a deadline and financial repercussions in Indiana Code 32-28-1-2.
15 days:
(a) This section applies if:
(1) the mortgagor [borrower]… makes a written demand, sent by registered or certified mail with return receipt requested, to the [lender/mortgagee] … or custodian to release, discharge, and satisfy of record the mortgage…; and
(2) the [lender/mortgagee] … or custodian fails, neglects, or refuses to release, discharge, and satisfy of record the mortgage … not later than fifteen (15) days after the date [of receipt of] the written demand.
Fine and fees/costs:
(b) A [lender/mortgagee] or custodian shall forfeit and pay to the mortgagor [borrower] or other person having the right to demand the release of the mortgage or lien:
(1) a sum not to exceed five hundred dollars ($500) for the failure, neglect, or refusal of the [lender/mortgagee] … or custodian to:
(A) release;
(B) discharge; and
(C) satisfy of record the mortgage or lien; and(2) costs and reasonable attorney’s fees incurred in enforcing the release, discharge, or satisfaction of record of the mortgage….
(c) If the court finds in favor of a plaintiff who files an action to recover damages under subsection (b), the court shall award the plaintiff the costs of the action and reasonable attorney’s fees as a part of the judgment.
(d) The court may appoint a commissioner and direct the commissioner to release and satisfy the mortgage….. The costs incurred in connection with releasing and satisfying the mortgage … shall be taxed as a part of the costs of the action.
Settlements/Compromises. The statutory scheme outlined above appears to be limited to situations involving a full and complete payoff – the entire debt including interest. The provisions do not seem to apply to settlements, compromises, short pays, etc. Hence the need, in settlement agreements arising out of loan disputes (commercial or residential), to compel the lender/mortgagee to release the mortgage and when it must be released.
__________
I represent parties involved in disputes arising out of loans that are in default. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.com. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.