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Iowa Foreclosure Law, Iowa Bankruptcy Attorney Jeff Mathias

4800 Mills Civic Parkway, Suite 205,
West Des Moines, Iowa 50265
Tel. 515-261-7526
Toll Free: 1-800-997-1395
Email Jeff Mathias

See Jeff's Iowa Bankruptcy Law site for more Iowa bankruptcy information. Also see Jeff's Iowa Bankruptcy Law guide and Iowa Personal Bankruptcy video's.
See Jeff's IowaChapter7bankruptcy site.

Feel free to Email Jeff at or call 1-800-997-1395 or locally at 515-261-7526. Feel free to call after hours as Jeff forwards calls to his cell as time allows.

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How long can I stay in my Home during Foreclosure?

Most lenders in Iowa do not pursue the deficiency, meaning if you are going through foreclosure and they sell your home for less than what you owe, they do not plan to sue you for the difference. If the lender states in the foreclosure petition an intent NOT to pursue the deficiency, you can file a Demand for Delay of Sale and stay 6 more months. If they do not waive the deficiency, you can Demand a 12 month delay.

Iowa Code Section 654.21 Demand for delay of sale.

At any time prior to entry of judgment, the mortgagor may file a demand for delay of sale. If the demand is filed, the sale shall be held promptly after the expiration of two months from entry of judgment. However, if the demand is filed and the mortgaged property is the residence of the mortgagor and is a one-family or two-family dwelling, the sale shall be held promptly after the expiration of twelve months, or six months if the petition includes a waiver of deficiency judgment, from entry of judgment. If the demand is filed, the mortgagor and mortgagee subsequently may file a stipulation that the sale may be held promptly after the stipulation is filed and that the mortgagee waives the right to entry of a deficiency judgment. If the stipulation is filed, the sale shall be held promptly after the filing. At any time prior to judgment, the mortgagor may pay the plaintiff the amount claimed in the petition and, if paid, the foreclosure action shall be dismissed. At any time after judgment and before the sale, the mortgagor may pay the plaintiff the amount of the judgment and, if paid, the judgment shall be satisfied of record and the sale shall not be held.

January 10, 2010

Walk Away From Your Mortgage!

By ROGER LOWENSTEIN

John Courson, president and C.E.O. of the Mortgage Bankers Association, recently told The Wall Street Journal that homeowners who default on their mortgages should think about the “message” they will send to “their family and their kids and their friends.” Courson was implying that homeowners — record numbers of whom continue to default — have a responsibility to make good. He wasn’t referring to the people who have no choice, who can’t afford their payments. He was speaking about the rising number of folks who are voluntarily choosing not to pay.

Such voluntary defaults are a new phenomenon. Time was, Americans would do anything to pay their mortgage — forgo a new car or a vacation, even put a younger family member to work. But the housing collapse left 10.7 million families owing more than their homes are worth. So some of them are making a calculated decision to hang onto their money and let their homes go. Is this irresponsible?

Businesses — in particular Wall Street banks — make such calculations routinely. Morgan Stanley recently decided to stop making payments on five San Francisco office buildings. A Morgan Stanley fund purchased the buildings at the height of the boom, and their value has plunged. Nobody has said Morgan Stanley is immoral — perhaps because no one assumed it was moral to begin with. But the average American, as if sprung from some Franklinesque mythology, is supposed to honor his debts, or so says the mortgage industry as well as government officials. Former Treasury Secretary Henry M. Paulson Jr. declared that “any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator — and one who is not honoring his obligation.” (Paulson presumably was not so censorious of speculation during his 32-year career at Goldman Sachs.)

The moral suasion has continued under President Obama, who has urged that homeowners follow the “responsible” course. Indeed, HUD-approved housing counselors are supposed to counsel people against foreclosure. In many cases, this means counseling people to throw away money. Brent White, a University of Arizona law professor, notes that a family who bought a three-bedroom home in Salinas, Calif., at the market top in 2006, with no down payment (then a common-enough occurrence), could theoretically have to wait 60 years to recover their equity. On the other hand, if they walked, they could rent a similar house for a pittance of their monthly mortgage.

There are two reasons why so-called strategic defaults have been considered antisocial and perhaps amoral. One is that foreclosures depress the neighborhood and drive down prices. But in a market society, since when are people responsible for the economic effects of their actions? Every oil speculator helps to drive up gasoline prices. Every hedge fund that speculated against a bank by purchasing credit-default swaps on its bonds signaled skepticism about the bank’s creditworthiness and helped to make it more costly for the bank to borrow, and thus to issue loans. We are all economic pinballs, insensibly colliding for better or worse.

The other reason is that default (supposedly) debases the character of the borrower. Once, perhaps, when bankers held onto mortgages for 30 years, they occupied a moral high ground. These days, lenders typically unload mortgages within days (or minutes). And not just in mortgage finance, but in virtually every realm of our transaction-obsessed society, the message is that enduring relationships count for less than the value put on assets for sale.

Think of private-equity firms that close a factory — essentially deciding that the company is worth more dead than alive. Or the New York Yankees and their World Series M.V.P. Hideki Matsui, who parted company as soon as the cheering stopped. Or money-losing hedge-fund managers: rather than try to earn back their investors’ lost capital, they start new funds so they can rake in fresh incentives. Sam Zell, a billionaire, let the Tribune Company, which he had previously acquired, file for bankruptcy. Indeed, the owners of any company that defaults on bonds and chooses to let the company fail rather than invest more capital in it are practicing “strategic default.” Banks signal their complicity with this ethos when they send new credit cards to people who failed to stay current on old ones.

Mortgage holders do sign a promissory note, which is a promise to pay. But the contract explicitly details the penalty for nonpayment — surrender of the property. The borrower isn’t escaping the consequences; he is suffering them.

In some states, lenders also have recourse to the borrowers’ unmortgaged assets, like their car and savings accounts. A study by the Federal Reserve Bank of Richmond found that defaults are lower in such states, apparently because lenders threaten the borrowers with judgments against their assets. But actual lawsuits are rare.

And given that nearly a quarter of mortgages are underwater, and that 10 percent of mortgages are delinquent, White, of the University of Arizona, is surprised that more people haven’t walked. He thinks the desire to avoid shame is a factor, as are overblown fears of harm to credit ratings. Probably, homeowners also labor under a delusion that their homes will quickly return to value. White has argued that the government should stop perpetuating default “scare stories” and, indeed, should encourage borrowers to default when it’s in their economic interest. This would correct a prevailing imbalance: homeowners operate under a “powerful moral constraint” while lenders are busily trying to maximize profits. More important, it might get the system unstuck. If lenders feared an avalanche of strategic defaults, they would have an incentive to renegotiate loan terms. In theory, this could produce a wave of loan modifications — the very goal the Treasury has been pursuing to end the crisis.

No one says defaulting on a contract is pretty or that, in a perfectly functioning society, defaults would be the rule. But to put the onus for restraint on ordinary homeowners seems rather strange. If the Mortgage Bankers Association is against defaults, its members, presumably the experts in such matters, might take better care not to lend people more than their homes are worth.

Roger Lowenstein, an outside director of the Sequoia Fund, is a contributing writer for the magazine. His book “The End of Wall Street” is coming out in April.

This article has been revised to reflect the following correction:

Correction: January 10, 2010
An essay on Page 15 this weekend about underwater mortgages misstates the parties who believe their homes will go up in value quickly. It is the homeowners — not the “mortgagees,” who issue mortgages.

Why don't banks want to modify loans?

July 30, 2009

New York Times: Lucrative Fees May Deter Efforts to Alter Troubled Loans

By PETER S. GOODMAN

This week, the Obama administration summoned mortgage company executives to Washington to demand they move faster to lower payments for homeowners sliding toward foreclosure. Treasury officials called on the companies to hire and train more people quickly to field applications for relief.

But industry insiders and legal experts say the limited capacity of mortgage companies is not the primary factor impeding the government’s $75 billion program to prevent foreclosures. Instead, it is that many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.

Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.

“It frustrates me when I see the government looking to the servicer for the solution, because it will never ever happen,” said Margery Golant, a Florida lawyer who defends homeowners against foreclosure and who worked in the law department of a major mortgage company, Ocwen Financial. “I don’t think they’re motivated to do modifications at all. They keep hitting the loan all the way through for junk fees. It’s a license to do whatever they want.”

Rich Miller, a governance project manager at Countrywide Financial and Bank of America before he left in January, said Bank of America had been reluctant to modify loans, which hurt the bottom line.

Also see, How Banks are Worsening the Foreclosure Crisis, Business Week.

Loan bundling also impairs Modifications

Analyzing the Loan Modification Process

Seventy-year-old Barbara Harris can’t help crying when she walks around her neighborhood. She says she hates seeing possessions piled up on front lawns — the remnants of foreclosure. Three times, the Harrises received foreclosure notices and thought they’d be next.

For two years, the Harrises have been trying to get Wells Fargo to modify their mortgage to something they can afford. But they face one big catch: Though Wells Fargo services their mortgage and is participating in the federal modification program, it doesn’t actually own their loan. And the investors that do own the loan, Wells Fargo told the Harrises, won’t allow the modification.

Like one in eight homeowners, the Harrises’ loan is part of a mortgage-backed security, a bundle of loans packaged together and sold off to investors. Ambiguous rules and the dispersed web of interests involved in securitized mortgages have created little accountability, leaving homeowners trapped. For homeowners with securitized mortgages, once they’re told an investor says no, there is little recourse.

Read the entire article about loan modification problems.

Quick Iowa Foreclosure Answers

Can I file bankruptcy and keep my home?

Because our homestead exemption amount is unlimited in Iowa, the answer for most clients is yes. In practical terms, you normally make the decision on whether to keep your home, not the bank(s). I encourage you to consider the realistic current market value, total debt and whether you can reasonably afford the payments and other costs of ownership. But if you want to keep your home and can afford it, normally you can.

If I am behind on my home, can I incorporate the back payments into a repayment plan under Chapter 13?

Yes. But beware, these plans have a high failure rate. Most people who are behind on their home cannot afford the higher cost of making the monthly house payments plus a new monthly payment to the Court for the Chapter 13. Many people who try this end up unable to make the Chapter 13 payments on top of their regular monthly payment and lose the home after all. Most of these people should have filed a Chapter 7 bankruptcy in the first place.

Can I file a Chapter 7 bankruptcy and keep my home?

Yes, this is what most of my clients do, and it is the best approach as a rule if you are up to date or close to up to date on your home or of course if you are surrendering the home. There is no repayment in Chapter 7 bankruptcy so once discharged you just keep making your same regular monthly payments on your home and it is all good.

How does bankruptcy affect my credit?

Creditors know you cannot refile Chapter 7 within 8 years. They also know you have more disposable income after bankruptcy. Many of my clients receive offers of credit immediately after their bankruptcy and many buy homes with good interest rates within two years of bankruptcy. But after your bankruptcy you should try to live on cash, use your debit card and avoid credit to the extent possible.

How long can I stay in my home?

If you are surrendering your home in Chapter 7 you normally have at least 60 days from the date of filing to make other arrangements. During that time you do not make house payments.

More Iowa Bankruptcy/Foreclosure Questions?

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Iowa Foreclosure TimeLines

Answer to foreclosure due from homeowner within 21 days; hearing on the receiver within 25 days; motion for summary judgment within 20-30 days; hearing on the motion for summary judgment within 30-60 days; ruling on the motion for summary judgment within 60-90 days; trial on the merits; execution for sheriff’s sale within 30 days after trial; sheriff’s sale 6 weeks after execution; redemption period of 1 year (generally), unless deficiency is waived (then 90 days); receipt of sheriff’s deed.

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