The house burned, was rebuilt, and sold - then an 18-year-old mortgage came knocking
An Indiana appeals court shut down U.S. Bank's attempt to foreclose on a mortgage dormant for 18 years.
The Court of Appeals of Indiana on September 24 affirmed summary judgment against U.S. Bank National Association, trustee of the NRZ Inventory Trust. The underlying debt was time-barred, the court ruled, and the mortgage died with it.
In 2002, a couple bought a home in Danville, Indiana, with an adjustable-rate note and mortgage from Moore Financial Enterprises, d/b/a Lenders Diversified. The loan was assigned to JPMorgan Chase Bank as Trustee. The couple defaulted, and in September 2006 Chase accelerated the full balance and won a default judgment and foreclosure decree for $94,944.67.
The court ordered the property sold at sheriff's sale. That never happened. Chase filed requests four times between 2007 and 2010. None went through. The docket went quiet for fourteen years.
In 2018, the house was damaged by fire and the couple abandoned it. They sold the parcel for $20,000 to Hebrews Holdings, LLC, which tore down the structure and built a new home. Hebrews Holdings sold it to the current owner for $240,000, financed by Ruoff Mortgage Company.
In February 2024, Chase assigned the 2002 mortgage to U.S. Bank, which filed a second foreclosure two months later - more than seventeen years after the 2006 judgment.
Under Indiana law, acceleration starts a six-year clock on the note. Chase accelerated in 2006. Even with an eleven-month bankruptcy stay, the note was time-barred by October 2013.
U.S. Bank argued it was chasing the mortgage, not the note. The court pointed to Indiana's lien theory, where a mortgage is "mere security" for a debt - when the debt is barred, the mortgage goes too. The bank cited a statute extending liens to ten years past the maturity date. The court cited a 2020 Indiana Supreme Court decision holding that once a lender accelerates, maturity no longer controls.
U.S. Bank also pointed to loan modifications the couple signed with GMAC Mortgage in 2010 and 2011. The court found no evidence GMAC had authority to act on Chase's behalf, that either modification was recorded, or that payments were made.
Chase and its successors sat on the judgment eighteen years while the property was damaged, abandoned, sold for $20,000, and rebuilt into a $240,000 home. Indiana's limitations statutes place that risk on the lender, not the good-faith purchaser.
For servicers and investors buying old debt, a judgment without a sheriff's sale is a wasting asset.
