Indiana operates as a lien theory state, this means that the property acts as security for the loan, and the legal instrument of security is known as a “Mortgage Lien”. Indiana laws do not allow for the non-judicial foreclosure process to take place, and power of sale clauses are not included in mortgage agreements, the power of sale is only applicable to a trust deed.
In the judicial foreclosure process the lender has to go through the courts in order to obtain a foreclosure, and after final judgment is passed the property is sold to the highest bidder. It is done in an attempt for the lender to recover the debt owed on the loan. This sale has to be publicly notified; generally speaking the lender has to wait until three consecutive mortgage payments have been missed before they are allowed to file for a foreclosure suit.
There is also a wait period between the time that the foreclosure is file and the day it is sold and this varies. It can be from as little as three to as much as 12 months. But generally speaking a foreclosure in Indiana takes about 150 days to finalize, as long as the law suit is not contested by the borrower. The borrower may also waive the right to the wait period in which case the process will proceed more quickly. The owner may live in the property rent free until such time as the actual sale of the property takes place. But they are not allowed to commit waste, which means tear up the property, often referred to in the property market as “buyers revenge”.
Because the judicial methodology of foreclosure is pursued in Indiana, the lender is allowed to file for a deficiency judgment. Rights of redemptions apply on behalf of the borrower.