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Kentucky: Recent Legislative Updates

Posted By USFN, Tuesday, May 6, 2014
Updated: Monday, October 12, 2015

May 6, 2014


by Bill L. Purtell
Lerner, Sampson & Rothfuss – USFN Member (Kentucky, Ohio)

The Kentucky Legislature wrapped up its legislative session on March 15, 2014. Topics that affect the mortgage industry include redemption rights, the statute of limitations, service of process, and loan modifications.

The Bills that Became Law
Senate Bill 36 amends KRS 426.530 to reduce to six months the time period for the right of redemption at foreclosure sale. The amendment allows the purchaser at sale to recoup expenses for taxes, insurance, and necessary repairs to bring the property up to code that were incurred during the redemption period. Signed by the governor on April 10, 2014.

House Bill 369 amends KRS 413.160 to reset the statute of limitations for actions on a written contract to ten years instead of the current 15-year period; amends KRS 413.090 to conform. Only affects contracts executed after the effective date of this act. Signed by the governor on April 25, 2014.

Senate Bill 138 amends KRS 454.210 to allow a court clerk to electronically transmit court process to the secretary of state when that office is responsible for service of process. This affects out of state corporations and defendants under Kentucky’s long-arm jurisdiction. Signed by the governor on April 9, 2014.

House Bill 206 amends the mortgage modification statute, KRS 382.520, to allow interest rate reduction agreements to be secured by the original mortgage without the need to record an amended mortgage or modification agreement. Signed by the governor on April 7, 2014.

Effect on the Mortgage Industry
The biggest change is the shortening of Kentucky’s foreclosure redemption statute to six months. The amendments also put to rest a debate over whether taxes and maintenance during the redemption period could be added to the redemption price. Redemptions were already rare in Kentucky, since a sale bid of at least two-thirds of the appraised value will cancel the redemption, but now the amendments allow for more predictability in this area.

The statute of limitations for enforcement of mortgages has been shortened to ten years, which is still longer than the six-year statute of limitations to enforce a note under Kentucky’s UCC. This limitation comes due in April 2024, since the ten years only applies to new mortgages executed after April 25, 2014.

The other two bills involved minor changes. Service of process upon the secretary of state has been expedited by the use of electronic summons, but this only affects service upon out-of-state corporations and defendants with no local agent in Kentucky. This may save a week of delay during the foreclosure. The loan modification amendment was technical in nature, as a reduction in interest rate does not change the secured balance of the loan. This prevents any challenges by other lienholders to the priority of a modified mortgage.

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