Bulletin: IN2008001

Dear Associates:

The following information is a summary of legislation enacted by the Indiana General Assembly for the year 2007. This listing is by no means comprehensive as to all new legislation dealing with real property and includes only legislation that may be of interest or significance to Stewart Agents. Please distribute this information to your escrow officers, title examiners, title officers, searchers and anyone else that you feel should know about it. If you have any questions or would like a copy of particular legislation, please contact me with your inquiries.

HB 1111-Recording of Copy

Effective Date: July 1, 2008
Prior law allowed recorders to exercise discretion in whether or not to accept a copy of a document for recording. This bill provides that a copy of a document submitted for recording must comply with other statutory recording requirements, must be a clear and unobstructed copy and must be marked as a copy in order to be accepted for recording. This bill also provides that a recorded copy will have the same effect as if the original document was presented for recording.

Last year, legislation was passed providing that mortgages recorded with defective acknowledgments were still constructive notice of the recording of the mortgage. Attorneys and bankruptcy trustees argued that the law passed last year with an effective date of July 1, 2007 was not applicable to mortgages recorded prior to July 1, 2007. HB 1111 provides that a recorded mortgage not meeting certain statutory requirements (i.e defective acknowledgments) constitutes constructive notice regardless of when the mortgage was recorded.

HB 1359 Mortgage Fraud Legislation

Effective Date: July 1, 2008 except for Sec. 1 and Sec. 35-38 which were effective upon passage (these sections provide for the creation of the toll free mortgage fraud hotline and the joint mortgage fraud taskforce, require the Indiana Housing and Community Development Authority to report on new and existing funding to help borrowers refinance to avoid foreclosure and require the Securities Commissioner and the Director of the Dept. of Financial Institutions to determine which state agency is appropriate to oversee regulation of licensees).

HB 1359 addresses increased regulation of mortgage brokers, the creation of a mortgage fraud task force and a toll free hotline for reporting fraudulent residential real estate transactions to be operated or sponsored by the Office of the Attorney General. Please note that the final version of this bill signed by the Governor does not contain a requirement that documents must be provided to borrowers 48 hours to closing. This requirement was deleted from the final version of the bill. The following is a summary of the relevant bill provisions affecting closing agents.

• For single family residential purchase money mortgage or refinancing transactions closing after December 31, 2009, closing agent is required to submit the names and license numbers of certain real estate professionals involved in the transaction to an electronic database on a form to be created by the Indiana Department of Insurance (DOI)
• The DOI shall establish and maintain the electronic database, to include an appropriate form for reporting, for the collection and storage of information no later than September 1, 2009
• The form prescribed by the DOI shall allow for the closing agent to input information to identify the subject property and respond to the following questions: “On what date did you receive the closing instructions from the creditor in the transaction?” and “On what date did the transaction close?”
• The following persons involved in a real estate transaction are required to provide their legal names and licensing information to the closing agent prior to closing or face a $100 penalty enforceable by the applicable regulatory authority:
  
  
  • Any loan brokerage business
  • Originator
  • Principal broker
  • Salesperson or Broker-Salesperson
  • Title insurance underwriter
  • Title insurance agency
  • Closing agent
  • Appraiser
  • Mortgagee
    
• Lenders and brokers are required to report the names and licensing numbers for any appraisers involved in the transaction
• Realtors may report the name and licensing number for any principal broker involved in the transaction
• Closing agent is not liable for failure to report the parties’ information if information cannot be determined or certain parties are not involved in the transaction
• Closing agent is not liable to any customer for failure to submit the information to the DOI database
• The DOI, closing agent, and enforcement authorities that have access to the database information shall exercise all necessary caution to avoid disclosure of any information except as authorized by federal or state law
• The DOI is authorized to adopt rules to implement these requirements and to establish and collect an administrative fee to cover the DOI’s expenses in creating and maintaining the electronic database.
• Any fee established by the DOI shall be paid by the borrower and collected by the closing agent.
• The DOI may authorize the closing agent to retain a portion of the fee to cover the closing agent’s costs to input and submit the information. The remainder of the fee is to be deposited in the title insurance enforcement fund.
• The purposes of the title insurance enforcement fund are expanded and clarified to include funding of investigations and enforcement actions pertaining to title insurance transactions in Indiana including investigation and enforcement activities involving title insurance transactions brought by other federal, state and local law enforcement agencies and funding for educational materials to provide information to consumers about residential title insurance.

HB 1293-Sales Disclosure Form

Effective Date: July 1, 2008
(Section 54 effective upon passage-this section requires DLGF to adopt rules prior to 1/1/2009 to ascertain whether person claiming homestead credit may properly do so.)
This bill modifies the sales disclosure form to constitute an application for homestead and other property tax deductions and extends the deadline for filing the same. The final bill incorporated the recommendations of the summer advisory committee on sales disclosures. The following is a summary of the relevant provisions of this bill:

• For purposes of determining which conveyance transactions require the filing of the sales disclosure form (SDF), a conveyance now includes a transfer to charity and any transfer as a result of foreclosure, express threat of foreclosure (deed in lieu), divorce, court order, condemnation, probate or partition of land.
• One party to a transaction may sign an SDF on behalf of multiple parties.
• A separate SDF is required for each parcel conveyed, except that only one form (with a single combined sales price) is required for the conveyance under a single conveyance document of two or more contiguous parcels in a single taxing district.
• A permanent filing fee of $10 is established except no fee is due if transfer is to a charity or if the transfer is under a conveyance document arising out of foreclosure, express threat of foreclosure, divorce, court order, condemnation, probate or partition of land.
• Fee revenue is to be split equally between the county sales disclosure fund and the state assessment training fund.
• The SDF shall be revised by the Department of Local Government Finance (DLGF) by July 1, 2008 to incorporate newly required information including the address if the parcel is improved, a legal description for each parcel, the key number of each parcel conveyed, an estimate of the value of any personal property included in the transfer and with respect to each parcel, whether the entire parcel is being conveyed.
• The SDF shall also be revised to provide whether the transferee is using the form to claim the homestead credit and whether transferee owns or is buying residential real property in any other county and township.
• The SDF may not be rejected (and the deed rejected for recording) if the SDF does not contain the information with respect to whether the transferee is using the form to claim a homestead credit or other property deductions or other information required by the DLGF not specifically set forth in the statute.
• The county recorder may record a conveyance document only if a SDF is approved by the county assessor.
• The criminal penalty for knowingly and intentionally falsifying or omitting information on a SDF is increased to a Class C Felony.
• If party to a conveyance files an SDF that contains inaccurate information and receives written notice from the assessor of the problems and fails to correct the SDF within thirty (30) days after the date of the notice, the party is subject to a monetary penalty.
• A paper or electronic SDF may be used with respect to a homestead assessed as real property to also apply for the homestead credit and property tax deductions for solar heating or cooling systems, wind power devices, hydroelectric power devices and geothermal heating and cooling devices.
• Filing of statements to claim the homestead credit and property tax deductions is allowed any time during a calendar year with respect to real property, or any time during the designated 12 month filing period with respect to mobile homes and manufactured homes not assessed as real property.
• A taxpayer that files for the homestead credit or a property tax deduction must be the owner or contract buyer only on the filing date, and not on the assessment date to which the credit or deduction applies.
• Regardless of a change of ownership, the homestead credit or a property tax deduction applies automatically in a year if: (1) the credit or deduction applied in the immediately preceding year; and (2) the current title holder or contract buyer is eligible for the credit or deduction.
• A county auditor may reduce the assessed value used to set tax rates to take into account deductions resulting from applications filed late in the year.
• The DLGF is required to adopt rules to establish guidelines to enforce the application of the homestead credit only to an individual's principal place of residence by January 1, 2009.

SB 62 (Foreclosure Sale)

Effective Date: July 1, 2008
SB 62 eliminates the requirement that a sheriff post notice of a foreclosure sale in at least three public places in each township where the real estate is located.

SB 257-Mechanics Liens

The bill originally provided for the creation of an electronic database for filing notices of commencement, notices of completion, preliminary notices and notices of mechanics liens effectively eliminating the recorder’s office as the proper place to file a mechanic’s lien. After much debate, the final bill requires the legislative council to assign to an interim or a statutory committee the topic of modernizing the system for filing mechanic's liens through incorporation of a statewide online registry for mechanic's liens. The Indiana Land Title Association will participate in this committee.

SB 0046-Environmental Restrictive Covenants

Effective Date: July 1, 2008
For determinations of marketable record title after June 20, 2008, marketable record title to real property is subject to all interests of the Department of Environmental management arising from the recording of a restrictive covenant under the environmental laws regardless of whether the recording occurred before July 1, 2008.

SB 0078-Probate and Trust Matters

Effective Date: July 1, 2008 (Property tax exemption and credit provisions are effective upon passage and apply to property taxes due and payable after December 31, 2008.)
Specifies that a qualified personal residence trust is entitled to certain property tax deductions and the homestead credit during the period in which the grantor of the trust is entitled to occupy the residence rent free under the terms of the trust and is otherwise eligible for the deduction or credit. Specifies the order in which beneficiary interests in a trust must be abated if the trust property is insufficient to fully satisfy the interests of all beneficiaries. Permits a power of attorney to be signed at the principal's direction. (Current law requires a power of attorney to be signed by the principal to be valid.) Provides that if a power of attorney is signed at the direction of the principal, the notary must state that the individual who signed the power of attorney did so at the principal's direction. Provides that if a parent was convicted of causing the death of the other parent by murder, voluntary manslaughter, or another criminal act, and the death does not result from the operation of a vehicle, the parent may not receive an intestate share of the child's estate.

A complete copy of these bills and other bills passed this year is available at http://www.in.gov/apps/lsa/session/billwatch/billinfo.

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