Chapter 20-8 MORTGAGE LENDING ACT

CHAPTER 20-8
MORTGAGE LENDING ACT

GENERAL PROVISIONS

20-8-1 Purpose

The Prairie Band Potawatomi Nation enacts this Tribal Mortgage Lending Act (the “Act”) for the purpose of encouraging home ownership on trust or restricted lands within the Nation’s jurisdiction by members of the Nation. This Act is intended, and shall be construed, to provide prompt and effective remedies to lenders upon default of any loan secured by a mortgage on a Tribal member’s interest in a lease on trust or restricted lands while, at the same time (i) protecting the rights of members by providing due process and permitting the recovery of the member’s equity and (ii) protecting the sovereignty of the Nation by assuring the Nation’s interest in preventing alienation of Trust Lands to anyone other than a member of the Nation.

20-8-2 Scope.

The Act shall apply to all mortgage lending on trust land within the Nation’s jurisdiction except as may be otherwise provided by Tribal law, resolution or statute.

20-8-3 Definitions.

For purposes of this Act,

(A) “BIA” means the Bureau of Indian Affairs.

(B) “Guarantor” means any entity that guarantees a loan secured by a Mortgage.

(C) “Lease” means the residential ground lease or other agreement for use of Trust Land (defined below) between the Nation, as Lessor, and a member of the Nation, as a lessee or sublessee (“Lessee”).

(D) “Leased Premises” means the property and improvements subject to a Residential Lease.

(E) “Leasehold Interest” means the interest of a Lessee (defined below) in the Residential Lease.

(F) “Member(s)” means one or more registered members of the the Nation.

(G) “Mortgage” means a security interest in the Leasehold Interest given to secure a Note.

(H) “Mortgagor” means a Lessee who has executed a Mortgage on his or her Leasehold Interest and its successors and assigns.

(I) “Mortgagee” means any lender approved by the Tribal Council in writing, by memorandum of understanding, resolution, or express reference in a lease document, to make and hold a Mortgage and its successors and assigns.

(J) “Nation” or “Tribal” refers to the Prairie Band Potawatomi Nation.

(K) “Note” means a promissory note executed by a Member in favor of a Mortgagee.

(L) “Recording Clerk” means the Realty Office Director or such other person designated by the Nation to perform the recording functions required by this document or any deputy or designee of such person.

(M) “Secretary” means the Secretary of the Interior or his or her delegate.

(N) “Subordinate Lienholder” means the holder of any lien, including any security interest in a Leasehold Interest, perfected subsequent to the recording of a Mortgage under this Act.

(O) “Tribal Court” means the Prairie Band Potawatomi Tribal Court.

(P) “Trust Land” means land within the jurisdiction of the Nation, (i) title to which is held by the United States or any state for the benefit of the Nation or a Member or (ii) that is subject to restrictions against alienation imposed by federal treaty, statute, Executive Order, or the Nation.

(Q) “Waste” shall mean spoilage, damage or destruction of land, buildings, gardens, trees or other improvements beyond normal wear and tear on the Mortgaged property which result in substantial injury to such property.

20-8-4 Right of Access.

Any Lender or Guarantor, or prospective Lender or Guarantor, of a loan secured by a Mortgage shall have the right of access to tribal lands for the purpose of servicing and evaluating properties that are mortgaged or may be mortgaged pursuant to this Act.

PRIORITY AND RECORDING OF MORTGAGES AND LIENS

20-8-5 Mortgages of Leasehold Interests in Tribal Trust Land.

A Residential Lease may be mortgaged, provided that the lender or lending program has been approved by the Tribal Council by written agreement, memorandum of understanding, resolution or express provision in a Residential Lease. All mortgages shall comply with this Act.

20-8-6 Recording of Mortgages by the County Clerk and the Bureau of Indian Affairs.

All mortgages shall be recorded with the Bureau of Indian Affairs to the extent required by federal law. Pending certification by the Tribal Council of an approved tribal land records system, mortgages shall also be recorded with the county register of deeds. Upon certification of the tribal land records system, recording with the county register of deeds shall no longer be required.

20-8-7 Recording of Mortgages by Tribal Recording Clerk.

(A) Effective Date. This section shall become operative upon the Tribal Council’s certification of a tribal Land Records system.

(B) The Recording Clerk shall record each Mortgage or other document in a log, which shall contain, at a minimum, the following information:

(1) The name(s) of the Mortgagor of each Mortgage, identified as such;

(2) The name(s) of the Mortgagee of each Mortgage, identified as such;

(3) The name(s) of the grantor(s), grantee(s) or other designation of each party named in any other documents received for recordation;

(4) The date and time of the receipt;

(5) The filing number to be assigned by the Recording Clerk, which shall be a unique number for each Mortgage or other document received for filing; and

(6) The name of the Recording Clerk or designee receiving the Mortgage or document.

(C) The Recording Clerk shall endorse the following information from the log upon any Mortgage or other document received for recording:

(1) The date and time of receipt of the Mortgage or other document;

(2) The filing number assigned by the Recording Clerk; and

(3) The name of the Recording Clerk or designee receiving the Mortgage or document.

(D) The Recording Clerk shall make a true and correct copy of the endorsed Mortgage or other document and shall certify the copy as follows:

I certify that this is a true and correct copy of a document received for recording this date.

Given under my hand and seal this _______ day of _________________.

_______________________________________

(Signature)

_______________________

(Date)

(E) Post-Recording Procedures.

(1) The Recording Clerk shall maintain a public tract index where copies or images of all certified Mortgages or other documents recorded against a Leased Premise are located and may be retrieved by a search based on the legal description of the Leased Premises.

(2) The Recording Clerk shall send the original Mortgage for filing with the Land Titles and Records Office of the BIA in accordance with 25 C.F.R. Parts 150 and 162 and shall obtain approval of the Secretary of the Mortgage or other document if required by federal law and such approval has not be granted in the Lease or Mortgage.

(3) If, following recording by BIA, the original Mortgage is returned to the Recording Clerk, the Recording Clerk shall retain a copy of the endorsed, BIA-recorded Mortgage or other document and transmit the original to the Mortgagee or person who delivered the document for recording to the Recording Clerk.

(F) Copies of the certified Mortgage and other documents and the log shall be made available for public inspection and copying. The Recording Clerk shall establish rules for copying and may assess reasonable charges therefore.

(G) Upon the Mortgagee’s commencement of a foreclosure action or application for the appointment of a receiver in connection with an assignment of a Leasehold Interest in lieu of foreclosure, the Recording Clerk shall not accept any other Mortgage or other document for recording until the Leasehold Interest has been transferred according to the terms of this Act.

20-8-8 Priority of Liens.

(A) Except as provided under subsection (B), the priority of a mortgage or other lien or encumbrance shall be determined by the date and time such mortgage, lien or encumbrance is recorded by the Jackson County register of deeds.

(B) After certification by the Tribal Council of the tribal land records system and public notice of such certification, priority of any Mortgage or other lien or encumbrance shall be determined by the date and time it was received by the Tribal Recording Clerk for recording (unless the Mortgage or other document expressly states that it is made subordinate to other liens). That priority shall be superior to all Subordinate Liens other than liens for Tribal taxes. Notwithstanding the date and time endorsed on the Mortgage, the log shall definitively establish the date and time a Mortgage or other document is received for recording. This subsection (B) shall not effect the priority of existing mortgages and liens recorded pursuant to subsection (A).

ASSIGNMENT OF LEASEHOLD INTEREST IN LIEU OF FORECLOSURE

20-8-9 Procedure for Assignment.

At any time after a default, the Mortgagor may enter into a written assignment of his or her interest in lieu of foreclosure, subject to the following provisions:

(A) Thirty (30) days shall have expired after the Mortgagee has given the Nation written notice of the Lessor’s Option pursuant to Section 20-8-12(B) and the Nation, as Lessor, has not exercised the same.

(B) The assignment shall contain (i) the Mortgagor’s warranty that the Mortgagor, in good faith, believes that the value of the Interest is equal to or less than the amount currently due, or to become due after a foreclosure, under the Mortgage and (ii) the Mortgagee shall release the Mortgagor from the obligation to repay the Note;

(C) The Mortgagee shall petition the Tribal Court to appoint the Nation, as receiver, to receive title to the Interest and to liquidate it in accordance with the provisions of this Act;

(D) Such petition shall include a copy of the assignment and shall be served on the Mortgagor and the Nation;

(E) The order appointing the receiver shall assign the Interest to the receiver, with a right to sell the Interest at private sale or rent the Premises subject to the same conditions as provided in this Act for a foreclosure.

20-8-10 Designation of Receiver.

Except as expressly agreed by the Nation, the Receiver shall be the Nation.

FORECLOSURE

20-8-11 Jurisdiction.

Jurisdiction over all actions relating to foreclosure of interests in tribal lands, agreements by the Tribal Council relating to mortgage lending programs and other matters within the scope of this Act shall lie exclusively in Tribal Court.

20-8-12 Satisfaction of Conditions Prior to Commencing Foreclosure.

(A) Prior to commencing foreclosure proceedings, Mortgagee shall provide all written notices and take such other actions as may be required by the Note, Mortgage and any tribal, state or federal government program that applies to the Mortgage.

(B) Lessor’s Option:

(1) Upon the expiration of any right to cure provided in the Mortgage, Mortgagee shall provide a written notice to the Nation, as Lessor, that (i) identifies the Lessee, the address of the Leased Premises, the amount due under the Note and Mortgage (including, principal, interest, costs and fees, including reasonable attorney fees), and (ii) offers to assign the Lender’s interest in the Note, Mortgage and any other documents, judgments or orders, to the Lessor upon payment in full of the outstanding obligations.

(2) Lender shall not accept any assignment of Leasehold Interest in lieu of foreclosure or commence a foreclosure action until thirty (30) days after the delivery of such notice.

(3) Upon receipt of such notice, the Nation may, but is under no obligation to, pay to the Lender the amounts due under the Note and Mortgage. The Nation may exercise the Lessor’s Option at any time prior to the sale or transfer of the Leasehold Interest to a Member or a Tribal Housing Entity under the Act’s foreclosure provisions. Upon payment of such amounts, the Lender shall take all such action, and execute all such documents, as may be necessary to immediately transfer all of its interests to the Lessor. Thereafter, the Nation shall have the same rights as the Lender hereunder. No merger of title of the Nation shall occur until the Note is paid in full.

20-8-13 Complaint.

Upon fulfillment of the conditions to commencing a foreclosure, the Mortgagee may commence a foreclosure action by filing a verified complaint, which shall include:

(A) The name of the Mortgagor and each person or entity claiming an interest in the Leasehold Interest, including each Subordinate Lienholder (except for the Nation with respect to a claim for a Tribal taxes), as a defendant;

(B) A description of the Leased Premises;

(C) A concise statement of the facts concerning the execution of the Mortgage and the Lease, if applicable; the facts concerning the recording of the Mortgage; the facts concerning the alleged default(s) of the Mortgagor; and such other facts as may be necessary to constitute a cause of action;

(D) True and correct copies of each Note, Mortgage, deed of trust or other recorded real property security instrument, Lease (if applicable) and any assignment of any of these documents; and

(E) Any applicable allegations concerning compliance with any relevant requirements and conditions prescribed in (i) federal statutes and regulations, (ii) Tribal codes, ordinance acts and regulations, and/or (iii) provisions of the Note, Mortgage and the Lease.

20-8-14 Service of Process.

A copy of the summons and complaint shall be served on the all defendants and the Nation in accordance with Tribal law.

20-8-15 Receiver: Appointment, Duties and Responsibilities

(A) In addition to appointing a receiver upon petition of the Mortgagee in connection with an assignment of Leasehold Interest in lieu of foreclosure, the Tribal Court shall appoint a receiver upon commencement of a foreclosure action and shall have the authority to prevent waste from occurring on the Lease Premises during the pendency of the proceeding.

(B) Except as otherwise agreed by the Nation pursuant to a memorandum of understanding or other agreement with a Mortgagee, the receiver shall be a person designated by the Nation. The receiver shall have the authority to hire such professionals as directed by the Mortgagee to manage and secure the Leased Premises.

(C) The receiver shall be an officer of the Tribal Court and shall be immune from all liability except that arising from its own negligence or willful acts. All contracts for services entered into by the receiver shall be satisfied solely from the proceeds from the sale or rental of the Leased premises or shall be advanced by the Mortgagee.

(D) The Tribal Court shall discharge the receiver when the Leased Premises are sold and the proceeds are distributed according to this Act.

20-8-16 Judgment and Remedy.

A foreclosure action shall be heard and decided in a prompt and reasonable time period not to exceed sixty (60) days from the date of service of the complaint on the defendants. If the mortgagor has no defense to the foreclosure and has failed to satisfy requirements for reinstatement of the Mortgage (if permitted under the terms of the Mortgage), and the Tribal Court finds for the plaintiff, the Tribal Court shall enter judgment:

(A) Foreclosing the interest of the Mortgagor, other defendants and anyone else acquiring an interest in the Leased Premises after the commencement of the foreclosure action;

(B) Assigning title to the Leasehold Interest to the receiver, with authority to sell the Leasehold Interest or rent the Leased Premises;

(C) Issuing a Writ of Restitution to law enforcement personnel to remove the defendants and all other occupants, and their personal property, from the Leased Premises;

(D) Ordering a public sale not earlier than three months from the date of judgment or, in the event the Premise are abandoned, not earlier than 30 days from the date of judgment, and advertising the terms of such sale in a newspaper, or other means of communication typically used by the Nation for notices to members, and posting the notice on the Leased Premises and in the Tribal offices; In the event the Mortgagee seeks a deficiency judgment, no sale may be held earlier than one year after the date of judgment;

(E) Providing for a right of redemption at any time before public sale upon payment by the Mortgagor of the amount specified in the judgment of foreclosure, which shall consist of (i) all principal and accrued interest secured by the mortgage and due as of the date of the judgment, (ii) all costs allowed by law, (iii) costs and expenses approved by the court, (iv) to the extent provided for in the mortgage and approved by the court, additional costs, expenses and reasonable attorneys’ fees incurred by the mortgagee, (v) amounts paid by a Mortgagee, with court approval, in connection with liens, encumbrances or interests reasonably necessary to preserve the status of title, and (vi) per diem interest from the date of judgment to the date of redemption calculated at the mortgage rate of interest applicable as if no default had occurred; and the amount of other expenses authorized by the court which the mortgagee reasonably incurs between the date of judgment and the date of redemption;

(F) Providing for the distribution of any funds in excess of the amounts due to the Mortgagee to the Subordinate Lienholders (if any) in order of lien priority and then to the Mortgagor;

(G) Requiring that all sales of the Leasehold Interest be made only to a Member, the Nation, the Tribal Housing Authority or, as may be expressly agreed in writing by the Nation, to any other party;

(H) Providing that the Leased Premises may be rented prior to a sale, to financially qualified Members, the Nation or the Tribal Housing Authority;

(I) Awarding monetary damages to the plaintiff for damages caused to the Leased Premises in excess of ordinary wear and tear.

20-8-17 Rights of the Mortgagee.

Subject to this Act and the terms of the Mortgage, a Mortgagee has the following rights in connection with an assignment of Leasehold Interest in lieu of foreclosure or a foreclosure judgment:

(A) The receiver shall follow the directions of the Mortgagee in setting the terms of, and conducting, a public or private sale and the acceptance of any offer to buy the Property, subject to the following:

(1) All assignments shall be in form and substance satisfactory to the Mortgagee.

(2) All assignees shall be bound by the terms of the Lease.

(3) The receiver shall obtain the consent of the Secretary if such consent is required by law and has not been given.

(B) The Mortgagee need not accept any offer at the public sale other than a bona fide cash offer, to be paid within forty-five (45) days of the public sale, in an amount equal to or greater than the amount due on the judgment, plus all accrued interest and expenses to date of sale.

(C) If no offer is accepted at the public sale, the receiver may sell the Leasehold Interest at private sale; the Mortgagor shall have no interest in the proceeds and all proceeds, including any proceeds in excess of the amount due under the judgment, shall be paid to the Mortgagee.

(D) The Receiver shall follow the directions of the Mortgagee in renting the Leased Premises, subject to the following:

(1) All rental agreements shall be in a form approved by the Nation.

(2) Only Members, the Nation, a Tribal Entity or, as may be expressly agreed in writing by the Nation, any other party are ineligible renters.

(3) All renters shall be provided with a copy of the Lease and shall agree in writing to be bound by the terms thereof.

(4) All rental proceeds shall be paid to the Mortgagee and shall be applied to amount outstanding under the Note or judgment.

(5) The receiver shall obtain the consent of the Secretary if such consent is required by law and has not been given.

20-8-18 Enforcement of Writ of Restitution.

Upon issuance of a Writ of Restitution, Tribal law enforcement officers shall enforce it by removing from the Leased Premises the Mortgagor and any other persons occupying the Leased Premises together with their personal property. Alternatively, a Writ of Restitution may be enforced by county law enforcement officers pursuant to any applicable intergovernmental cooperation agreement with the Nation. The Writ of Restitution shall be enforced no later than five days before the date set for public sale.

20-8-19 No Merger of Estates.

If the Nation takes an assignment of lease, the lease shall continue with the Nation in the position of both Lessor and Lessee for as long as the lease is subject to a mortgage.

20-8-20 Right of Nation, as Lessor, to Notice and Right to Intervene

(A) In any Mortgage foreclosure proceeding in which the Nation is not named as a defendant, a copy of the summons and complaint shall be served on the Nation in accordance with the court rules relating to service of process or, alternatively, by certified mail, return receipt requested, within five (5) days after the issuance of the summons.

(B) The Nation may petition the Tribal Court to intervene in any foreclosure proceeding under this Act. Neither the filing of a petition for intervention by the Nation, nor the granting of such petition by the Tribal Court shall operate as a waiver of the sovereign immunity of the Nation, except as may be expressly authorized by the Nation.

(Enacted by PBP TC No. 2007-130 on July 6, 2007.)

(Enacted by PBP TC No. 99-63, April 28, 1999; amended by PBP TC No. 99-67, May 12, 1999; amended by PBP TC No. 99-103, July 7, 1999; enacted by PBP TC No. 99-155, December 21, 1999; amended by PBP TC. No 2005-024; amended by PBP TC. No 2006-185, September 7, 2006; amended by PBP TC No. 2006-185a, October 10, 2006; enacted by PBP TC No. 2007-130 on July 6, 2007; enacted by PBP TC No. 2007-166, September 6, 2007; amended by PBP TC No. 2007-180, October 10, 2007, amended by PBP TC No. 2007-180A, December 3, 2007; amended by PBP TC No. 2008-064, March 6, 2008; amended by PBP TC No. 2008-074, March 19, 2008; amended by PBP TC No. 2008-099, April 28, 2008; enacted by PBP TC No. 2007-130 on July 6, 2007.