The Iowa legislature recently amended its laws related to mortgage releases and to shorten the period of time for redeeming real property from foreclosure and delaying sale of foreclosed property and to adjust the statute of limitations period for executing judgments on claims for rent.  All the legislation discussed in this memorandum is effective July 1, 2018.

Iowa House File 2232

When the amount due on a mortgage is paid off, the mortgagee, the mortgagee’s personal representative or assignee, or those legally acting for the mortgagee, and in case of payment of a school fund mortgage the county auditor, within thirty days (previously forty-five days) of payment in full, must acknowledge satisfaction thereof by execution of an instrument of satisfaction which is in writing, refers to the mortgage and is duly acknowledged and recorded.  If the mortgage secures a revolving line of credit, future advances, or other future obligations, the mortgagee is not required to file a satisfaction upon payment in full unless the borrower makes a written request to the mortgagee that the mortgage be released and, if such written request is made, the mortgagee must file the release within thirty days after payment in full or such written request is made whichever occurs later.

If a mortgagee, or a mortgagee’s personal representative or assignee, upon full performance of the conditions of the mortgage, fails to discharge such mortgage as required, the mortgagee is liable to the borrower and the borrower’s heirs or assigns, for all actual damages caused by such failure and a penalty of $500, plus reasonable attorney fees.

A mortgagee is not liable under the above provision if all of the following apply:

• The mortgagee established reasonable procedures to achieve compliance with its obligation to discharge the mortgage;
• The mortgagee complied with that procedure in good faith;
• The mortgagee was unable to comply with its obligations because of circumstances beyond its control.

When the judgment is paid in full, the mortgagee must file with the clerk a satisfaction of judgment which releases the mortgage underlying the action.  A mortgagee who fails to file a satisfaction within thirty days of receiving a written request will be subject to reasonable damages and a penalty of $500 (previously $100) plus reasonable attorney fees incurred by the aggrieved party, to be recovered in an action for the satisfaction by the party aggrieved.

Iowa House File 2234

When a foreclosure of a mortgage on real property results from the enforcement of a due-on-sale clause, the borrower may redeem the real property at any time within eighteen months (previously three years) from the day of sale under the levy, and the borrower must, in the meantime, be entitled to the possession of the property; and for the first fifteen months (previously thirty months) thereafter such right of redemption is exclusive.  The times for redemption are extended to sixteen months (previously thirty-three months) in any case in which the borrower’s period for redemption is extended by this provision.

After the expiration of a period of ten years (previously five years) from the date of entry of judgment of a court not of record, or twenty years from the date of entry of judgment of a court of record, in an action on a claim for rent, exclusive of any time during which execution on the judgment was stayed pending a bankruptcy action or order of court, such judgment will be null and void, all liens will be extinguished, and no execution will be issued.

The borrower and the lender of real property consisting of less than ten acres in size may agree and provide in the mortgage instrument that the period of redemption after sale on foreclosure of said mortgage be reduced to six months, or reduced to three months if the property is not used for an agricultural purpose, provided in all cases that the lender waives in the foreclosure action any rights to a deficiency judgment against the borrower which might arise out of the foreclosure proceedings.  In such event, the borrower will, in the meantime, be entitled to the possession of the real property; and if such redemption period is so reduced, for the first two months (previously three) after sale such right of redemption will be exclusive to the borrower, and the time period will be reduced to three months (previously four).

If the mortgaged property is not used for an agricultural purpose, the plaintiff in an action to foreclose a real estate mortgage may include in the petition an election for foreclosure without redemption.  The election is effective only if the first page of the petition contains the following notice in capital letters of the same type or print size as the rest of the petition:

NOTICE

THE PLAINTIFF HAS ELECTED FORECLOSURE WITHOUT REDEMPTION.  THIS MEANS THAT THE SALE OF THE MORTGAGED PROPERTY WILL OCCUR PROMPTLY AFTER ENTRY OF JUDGMENT UNLESS YOU FILE WITH THE COURT A WRITTEN DEMAND TO DELAY THE SALE.  IF YOU FILE A WRITTEN DEMAND, THE SALE WILL BE DELAYED UNTIL SIX MONTHS (OR THREE MONTHS IF THE PETITION INCLUDES A WAIVER OF DEFICIENCY JUDGMENT) FROM ENTRY OF JUDGMENT IF THE MORTGAGED PROPERTY IS YOUR RESIDENCE AND IS A ONE-FAMILY OR TWO-FAMILY DWELLING OR UNTIL TWO MONTHS FROM ENTRY OF JUDGMENT IF THE MORTGAGED PROPERTY IS NOT YOUR RESIDENCE OR IS YOUR RESIDENCE BUT NOT A ONE-FAMILY OR TWO-FAMILY DWELLING.  YOU WILL HAVE NO RIGHT OF REDEMPTION AFTER THE SALE. THE PURCHASER AT THE SALE WILL BE ENTITLED TO IMMEDIATE POSSESSION OF THE MORTGAGED PROPERTY. YOU MAY PURCHASE AT THE SALE.

At any time prior to entry of judgment, the borrower may file a demand for delay of sale.  If the demand is filed, the sale must 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 borrower and is a one-family or two-family dwelling, the sale must be held promptly after the expiration of six months (previously twelve months), or three months (previously six months) if the petition includes a waiver of deficiency judgment, from entry of judgment.