How to Stop a Foreclosure in Iowa

Iowa has one of the lower foreclosure rates in the nation, ranking forty-third, though the approximately 10,000 foreclosure victims each year would certainly like to stop foreclosure. As a lien theory state, the property serves as security for a mortgage loan, and the lender may seek judicial foreclosure in the courts. There is no right of non-judicial foreclosure, which makes the process longer, lasting often between 150 and 180 days. However, homeowners may have a right of redemption for up to one year, depending on their agreement and how the foreclosure proceeds. An Iowa lender generally has a right to file a deficiency judgment for the difference between the sale amount and the mortgage balance as well. Clearly, most homeowners would hope to find alternatives to foreclosure in order to save their homes.

Foreclosure Relief from Lenders

There are means by which lenders may provide assistance to struggling homeowners in these difficult times. Lenders are overwhelmed with the cost and complications for the many foreclosures they are already processing. If they believe a borrower may be able to solve their financial problems with a bit of help, some are willing to do so, often through their loss mitigation department.

• Reinstatement – if a borrower is expecting additional income soon, the lender may allow them to schedule a number of large payments or one lump sum payment to bring the mortgage current.

• Forbearance – if a lender believers the borrower is facing a short setback, they may be willing to forgive those payments that have been missed or incomplete, as long as they can set a time, often at the end of the loan, when they will be made up.

• Modification – a lender may believe that a borrower will be able to sustain their loan payments if they were modified or adjusted to fit their budget.

Foreclosure Relief from the Federal Government

Several programs exist to assist struggling homeowners. The federal government has allocated money to use as incentives for borrowers to refinance or adjust the rates of untenable mortgage loans. Not all borrowers qualify for all of these programs, so seeking advice from a knowledgeable attorney and a counselor from the U.S. Department of Housing and Urban Development (HUD) is wise.

• Sometimes all a homeowner needs is to adjust from a variable rate to a fixed rate loan, and the Hope for Homeowners Act provides incentives for lenders to provide this option. FHA backed loans are made more available, and often some of the principal amount, early payment fees, and late payment fees may be waived as well.

• Another program that provides these types of incentives is the Homeowner Affordability and Stability Plan.

• Any time any debt amount is forgiven, it is now protected from the IRS taxing it as income because of the Mortgage Forgiveness Debt Relief Act of 2007.

Foreclosure Relief through Bankruptcy

While these assistance programs can be very helpful, they cannot save every home. Some require the homeowner to actually seek bankruptcy relief, in spite of the damage it does to one’s credit rating.

• Court-ordered stay – this puts a hold on all collection actions and foreclosure processes, though a lender may be able to have that hold lifted for certain debts.

• Chapter 13 Bankruptcy – this process provides assistance to those who have enough disposable income to make regular, smaller, debt payments each month. If they and their attorney can create an acceptable plan, and the borrower can follow it through to the end, they may be able to save their home.

• Chapter 7 Bankruptcy – this process allows many of the filer’s debts to be discharged, or erased. However, it may also order some personal property to be liquidated. Iowa protects the filer’s residence in this type of bankruptcy through an unlimited homestead exemption for most primary residences.

Foreclosure Relief through Selling the Home

Despite all their efforts, some homeowners may still be unable to save their home. A pre-foreclosure sale may provide them with the funds to pay off their mortgage and have some money to relocate as well. In today’s market, that is often not the case, but they may still be able to avoid foreclosure.

• Short Sale – by which the lenders agrees to accept the sale price of the home, even if it is less than the mortgage amount, as full satisfaction for the loan. However, since Iowa allows lenders to sue for deficiency, this agreement must be put in writing.

• Deed in Lieu of Foreclosure – by which lender agrees to accept the deed to the home as payment in full of the mortgage amount. When this occurs, the state of Iowa requires that the lender give up their right to file for a deficiency judgment.

Getting Legal Help Stopping Foreclosure in Iowa

Free foreclosure avoidance counselors are available throughout the country through HUD to not only help struggling homeowners learn if they qualify for government assistance programs, but to help borrowers work with their lenders to stop foreclosure. FHA and VA offices can help encourage those lenders to work with borrowers as well. A committed attorney looking out for a borrower’s interests can also protect them from scams, help find the best options for which their client qualifies through both federal and Iowa state programs, and guide them through any legal processes that are required.