by Doreen Martel

Created on: November 20, 2011   Last Updated: November 21, 2011

Property owners have very specific rights during a foreclosure in Iowa. Some of these rights may not be very clear when reading Chapter 654 of Iowa Code or when reviewing the companion section known as Chapter 615 and Chapter 628 which pertain to the rights of redemption that are granted to a homeowner.

Types of foreclosure

When an Iowa homeowner takes out a mortgage on their property, the property itself acts as collateral for the loan. This means that the lender has the right to seize the property for non-payment of their mortgage. In most cases, foreclosures in Iowa are dealt with through the court system, known as a judicial foreclosure. Lenders must file a complaint with the court and be granted the right to foreclose on the property.

Homeowner rights

After a court has granted a lender the right to foreclose, a homeowner has the right to contest the foreclosure. In many cases, lenders may not have the proper underlying documents (e.g., the mortgage) since many lenders sold their original mortgages. If a homeowner feels that their documents may be part of the ongoing robo-signing scandal, then it is generally a good idea to contest the foreclosure. k

In addition, a homeowner who feels that they may be able to catch up on their mortgage over time may also want to consider the possibility of filing for Chapter 13 bankruptcy protection. This process allows the homeowner to file a plan with the court to repay the arrears on their mortgage over a period of time between three and five years.

Uncontested foreclosure

Homeowners who elect to not contest a foreclosure may also consider providing a deed in lieu of foreclosure. In these cases, the homeowner agrees to allow the lender to seize their property. There may be benefits to this process including not granting the lender the right to seek a deficiency judgment after the foreclosure sale.

Redemption rights

When a homeowner does not exercise their rights to contest a foreclosure, they may still have redemption rights. These rights are spelled out in the Iowa statutes and allow a homeowner the ability to “make the lender whole”. Under this process, the homeowner is allowed to pay back the full amount of their mortgage plus any associated costs for a period of one year after the foreclosure sale takes place.  It is important to note that redemption rights may be shortened to as few as 60 days in certain circumstances.

Deficiency judgments

Lenders have the right under specific conditions to seek a deficiency judgment. However, when the lender has accepted a deed in lieu of foreclosure, they are not allowed to seek this judgment. In addition, Iowa Code, Chapter 654.6 allows the homeowner and the lender to agree to no judgment.  This must be done at the time of the foreclosure filing or may be done with a subsequent agreement. The maximum amount of a deficiency judgment is the difference between the foreclosure sale price and the amount of the loan.

It is imperative to understand the rights of property owners in Iowa during a foreclosure sale. When dealing with foreclosure it is important to understand what options are available. Lenders may be willing to negotiate with a homeowner to avoid the foreclosure process completely.

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