Iowa Tax Information
The state has a very stringent policy when it comes to foreclosure, especially if these involve loans for agricultural property. However, there are two ways to foreclose on non-agricultural property and these is through the alternative non-judicial voluntary foreclosure procedure, in which the borrower deeds the property over to the lender and filing a lawsuit and obtaining judicial foreclosure under equity law.
Alternative Non-judicial Voluntary Foreclosure
Both the lender and the borrower sign an agreement, that they have sought voluntary foreclosure. The lender sends by certified mail, notice of the voluntary foreclosure to all junior lien holders, who have 30 days to exercise any rights of redemption they may have. The borrower must sign a statutory voluntary foreclosure form.
The borrower conveys title of the property to the lender. The lender gets immediate access to the property and waives any rights to sue the borrower for any other claim, such as a deficiency. Moreover, the borrower surrenders any statutory right to reclaim the property within one year and the right to continue to occupy the property.
If a borrower agrees to the voluntary redemption procedure, the lender may not report the borrower to the credit bureau as being delinquent on the loan, but the lender may state that the voluntary foreclosure procedure was used.
Judicial Foreclosure
Other than the voluntary foreclosure procedure described immediately above, the only way a lender can foreclose a deed of trust or a mortgage on Iowa real estate is by a lawsuit in court, governed by principles of equity law. The lender must choose either to sue on the note or sue to foreclose the mortgage, but not both. When a mortgage or deed of trust is foreclosed, the court will render judgment for the entire amount due, and direct the sale of the mortgaged property, or as much as is necessary. The lender may sue a borrower for a foreclosure with or without redemption, but the latter requires the borrower to sign a waiver.
Foreclosure with Redemption The borrower retains a right to redeem the property after the sale, unless the lender has chosen to sue for foreclosure without redemption.
Foreclosure without Redemption In the event that a lender undertakes foreclosure without redemption, neither the borrower nor junior lien holders have rights to redeem. However, if the borrower bids an amount equal to the amount owed on the loan at the foreclosure sale, then the borrower gets the property regardless of the fact that junior lien holders might bid more at the sale.
Right to Cure
In Iowa a borrower has a general right to effect cure by making up missed payments prior to foreclosure. The lender must send the borrower a notice of the borrower's rights to cure as a prerequisite to foreclosure.
Before filing a lawsuit or taking any action to foreclose on a borrower's one- or two-family home, any regular lender, such as a bank, S&L or mortgage company, who believes in good faith that a borrower is in default on a deed of trust or mortgage on a homestead, must give the borrower a notice of the right-to-cure default. Individuals who are lenders do not have to give the notice.
Mailing of Notice of Right to Cure
Regular lenders must give the notice by direct delivery or by mail to the borrower's residence. The notice does not have to be given in nonresidential situations.
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