Foreclosure process in Iowa: steps, timeline and redemption

Is foreclosure judicial in Iowa?

Yes, in almost every case. Section 654.1 says a mortgage or deed of trust “shall not be foreclosed in any other manner than by action in court by equitable proceedings,” with one exception for a voluntary procedure that borrower and lender agree to in writing (§ 654.18).

Chapter 655A allows a non-court foreclosure by written notice, but it does not apply to “a one or two family dwelling which is, at the time of the initiation of the foreclosure, occupied by a legal or equitable titleholder” (§ 655A.9). For a typical owner-occupied house, expect a court case.

Step by step: the timeline

Two details matter. The right to cure is not unlimited: it is not available if the creditor gave a proper notice for an earlier default within the prior 365 days (§ 654.2D(7)). And if the lender did not serve the counseling notice, the court can delay the sale, or the recording of the sheriff’s deed, by up to 60 days if the owner asks and wants counseling or mediation (§ 654.4B(2)).

Can the owner stay in the home?

Yes, during redemption. Section 628.3 says the debtor “will, in the meantime, be entitled to the possession” of the property.

How long is the right of redemption?

The default is one year, but Iowa lets lenders choose shorter paths, and the notice you receive will tell you which one applies:

Example: a court sells a house at a sheriff’s sale on March 1. With the default period, the owner can redeem until March 1 of the next year, and no one else can redeem before September 1 (six months). Other creditors may redeem within nine months, until December 1.

If the lender elects foreclosure without redemption, the sale happens “promptly after entry of judgment” unless the owner files a written demand to delay it. With that demand, the sale is delayed six months for a one- or two-family home that is the owner’s residence (three months if the lender waived a deficiency judgment), or two months otherwise (§ 654.21). The owner may also pay the judgment before the sale to stop it.

What about a deficiency judgment?

If the sale does not cover the debt, a general execution may be issued against the borrower, unless the parties agreed otherwise (§ 654.6). Iowa limits this in two ways:

• In a no-redemption foreclosure of an owner-occupied one- or two-family home where the lender did not waive a deficiency, no deficiency judgment can be entered if the owner did not file a demand to delay the sale (§ 654.26). Filing the demand reopens that risk.
• For a mortgage signed on or after July 1, 2009 on a one- or two-family residence, a foreclosure judgment becomes “null and void” two years after entry, with liens extinguished and no execution allowed except as a setoff or counterclaim (§ 615.1).

Also, property the debtor redeems is “free and clear from any liability for any unpaid portion of the judgment” (§ 628.3).

Voluntary foreclosure

Under § 654.18, borrower and lender can agree in writing to a voluntary foreclosure: the borrower conveys the property, and the lender waives any deficiency. The borrower gets a “Disclosure and Notice of Cancellation” and five business days to cancel. The tradeoff is stated on the form: you give up the right to reclaim or occupy the property, and you also are not paid any surplus over the debt. The form itself notes possible income tax effects and suggests talking to your lender or an attorney (see our attorney page).

Help for homeowners in default

• Counseling: Iowa Mortgage Help, an Iowa Finance Authority initiative with partners including the Attorney General’s office and Iowa Legal Aid, offers mortgage counseling to homeowners who are behind or expect trouble.
• Your servicer’s duties: under federal rules, if you submit a complete loss mitigation application more than 37 days before a sale, the servicer may not move for a foreclosure judgment or order of sale, or hold the sale, except in listed cases. It must evaluate a complete application within 30 days (12 CFR 1024.41(g), (c)).

Buying a foreclosed home? The seller disclosure law excludes court-ordered and foreclosure transfers (see seller disclosure in Iowa). Local context for the capital is on our Des Moines page.