Iowa foreclosure laws allow lenders to collect deficiency judgments in Iowa by obtaining a judgment in court. Lenders do have the choice to elect foreclosure without redemption and to state in their foreclosure petition that they will not pursue a foreclosure judgment against you. The reason they elect to do so on single-family and two family dwellings is the redemption period would be extended to 6-12 months, and that means they lose money. So they would just rather foreclose and not pursue the judgment. Also, if your lender obtains a default judgment “In Rem” against your property and not “In personam” against you, then you know they will not be pursuing a judgment against you. You should check the Iowa deficiency laws if you are facing foreclosure or your home has already been sold at a foreclosure auction. It is a good idea to speak with an Iowa foreclosure defense attorney as well.
How Much Can They Collect?
The lender can collect the difference between the fair market value of your home at the time of the sale and your loan balance, and they may be able to collect their legal fees, any accelerated interest payments, back principal payments, pre-payment penalties, and other fees and costs associated with the judgment. So you could end up owing more than you originally borrowed. Your lender loses the ability to use funds that they are required to deposit in the Federal Reserve bank to cover potential losses in order to obtain additional loans from the Federal Reserve Bank. These costs cannot be passed on to you though. So lenders would much rather find a solution for you to keep your home and avoid foreclosure. Foreclosure does no one any good and costs everyone time and money.
Factors Influencing Lender's’ Decisions
Major factors that lenders take into account when deciding to pursue deficiency judgments in Iowa include:
- The borrower’s assets and liabilities. The lender has this information on file from when the borrower filled out an application to obtain the loan. This way the lender can see what assets the borrower has to go after to collect on their judgment. The lender won’t pursue the judgment if there are not enough assets.
- Lender may not have a forwarding address to serve the borrower. It’s harder for the lender to track down the borrower to serve the judgment on the borrower after the foreclosure because the borrower has moved. The lender would rather spend their time and money on generating money and making loans.
- Lenders don’t like to sue their former customers because they may want to do business with them at a later date.
Chances that your lender will pursue a deficiency judgment against you are slim, but you should be aware that they have the right to do so.
Attorney Help
If you are involved in a foreclosure or your lender has obtained a deficiency judgment against you, you should contact an Iowa foreclosure defense attorney right away to help you settle the matter with your lender. The attorney is knowledgeable about Iowa foreclosure and deficiency laws and will be able to represent you in court.
