Real Estate Part I—Real Estate Transfer

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Real Estate Part I—Real Estate Transfer Powered By Docstoc
					                             REAL ESTATE TRANSFER & FINANCE

                                     Part I—Real Estate Transfer
I.   Introduction
     A. Conveyances and Mortgages. This law is really old and static until the 1970’s when we had
        double digit inflation and interest.
       1. The Common Law Mortgage. Was like a pawn shop. Mr granted full title to Me on
          condition that Me would get it back if Mr paid in full on due date. Conveyance of full title so
          Me had right to collect profits and rent with the loan principal, which was important b/c at this
          time interest was not allowed.
       2. Equity of redemption. Courts of equity began allowing late payment for a good reason, then
          they allowed it for any reason w/in a ―reasonable‖ time.
       3. Equity of foreclosure. Only way to kill equity of redemption.
       4. The American Development of Mortgages. Mr had both the right to redeem late and the
          right to insist that the Me foreclose. In addition, any attempt by Me to have Mr waive these
          rights was invalid as a clog on Mr’s equity of redemption.
          a) Foreclosure by sale. Strict foreclosure is fairly rare in the U.S., generally, foreclose by
             public sale. Property is sold to the highest bidder and Me applies the proceeds toward the
             debt w/surplus going to Dr or next junior lienholder (or deficiency giving rise to deficiency
             (1) Judicial foreclosure. Court-supervised proceeding in which all parties in interest
                 participate. Is the only foreclosure method available in many states.
             (2) Power of sale. A non-judicial method of foreclosure available in some states that allows
                 the Mr, after varying degrees of notice requirements, to sell the property at a public sale
                 (either by a trustee that the loan documents designate, by some third party, by a public
                 official or sometimes even by the Me himself).
          b) Statutory Redemption. Corrects market failures in foreclosure sale. Differs from equity of
             redemption in that Dr can redeem after the foreclosure sale, while the equity of redemption
             allowed the Dr to redeem until a valid foreclosure sale. Have to pay purchase price, not
             debt, and redeem land, not debt.
          c) Title, Lien And Intermediate Theories Of Mortgage Law.
             (1) title theory. Me has legal title (and  the right to possession of property until Mr pays
                 the debt). Generally, the right to possession is rarely utilized before default in the U.S.
             (2) lien theory. Mr has legal and equitable title (and  right to possession) until a valid
                 foreclosure has taken place—Me has security interest only.
             (3) intermediate theory. Mr has right of possession until default.

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         d) The deed of trust. Most common instrument for mortgages in a number of states. Trustor
            (like Mr) conveys title to Trustee (usually Me’s attorney) to be held as security for payment
            to the Beneficiary (Me). Upon default, at beneficiary’s request, the trustee conducts a
            public sale. Is essentially a mortgage w/the power of sale. Traditional Mr protections like
            equitable/statutory redemption apply here also. Basically, it has the same law as a
            mortgage, it is just easier to foreclose and sell it.
    B. Surrounding Economic Conditions. Land prices in Iowa are on their 1st decline in a number of
       years. Factors for land prices are: 1) supply of land, 2) interest rates, and 3) market for the
       products the particular type of land can produce.
II. Contracts for the Sale of Land
    A. Real Estate Brokers.
      1. Subagency—a contract w/broker and MLS that is like an open listing. It says to all agents if
         town—if you come up w/a buyer, you get ½ of the commission. Both agents are agents of
         seller, but the buyer often thought the subagent was his agent, so now they have to disclose in
         writing that both are agents of the seller. This changed in 1996. Now the subagent represents
         the buyer, and selling agent can be a dual agent w/informed consent of parties.
      2. Listing Contracts. Used to always be exclusive right to sell (if it sells in this period, I get
         6%). Now also have exclusive agency agreement (if I or any other RE agent cause the sale,
         the I get a commission, but if seller sells it himself, no commission), and open listing (says to
         everyone, who ever comes up w/a buyer gets a commission, and agent has to prove he found
         the buyer).
      3. § 543B.1 License Mandatory. Cannot act as RE broker for valuable consideration w/o
         getting license.
      4. §543B.3 Broker—Definition. Real Estate Broker means a person acting for another for a fee,
         commission or other compensation or promise ... who engages directly or indirectly in any of
         the following:
         a)   Sells, exchanges, purchases, rents or leases RE.
         b)   Lists, offers, attempts, or agrees to list RE for sale, exchange, purchase, rent or lease
         c)   Advertises or holds oneself out as being engaged in the business of selling ... or managing RE.
         d)   Negotiates, or offers, attempts, or agrees to negotiate, the sale ... of RE
         e)   Buys, sells, offers to buy or sell, or otherwise deals in options on RE or improvements on RE.
         f)   Collects, or offers, attempts or agrees to collect, rent for the use of RE.
         g)   Assists or directs in the procuring of prospects, intended to result in the sale ... of RE.
         h)   Assists or directs in the negotiation of any transaction intended to result in the sale ... of RE.

      5. § 543B.4 Real Estate—definition—real property wherever situated, including any and all
         leaseholds or any other interest or estate in land, and business opportunities which involve
         any interest in real property.
      6. § 543B.6 Acts constituting dealing in RE. You are dealing in RE if you do any act in 543B.3
         for (or w /intention of receiving) money regardless of how important the act was to the Tx.
      7. § 543B.7 Acts excluded from provisions. This chapter does not apply to the sale ... or
         advertising of any RE in any of the following cases:
         a) Can do it for yourself, your spouse or for partnership of which you are a general partner.

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    b) By any person acting as attorney in fact under a duly executed and acknowledged power of attorney from the
    c) a licensed attorney admitted to practice in Iowa, acting solely as an incident to the practice of law.
    d) A person acting as a receiver, trustee in bankruptcy, administrator, executor, guardian, or while acting under
       court order or under authority of a deed of trust, trust agreement or will.
    e) The acts of an auctioneer in conducting a public sale or auction. His role, however, is limited to establishing
       the time, place and method of the auction, advertising the auction including a brief description of the
       property, and crying the property at the auction. If the auctioneer closes or attempts to close the sale of the
       property or otherwise engages in acts listed in 543B.3 and B.6, then the requirements of this chapter apply to
       the auctioneer.
    f) An isolated RE transaction by an owner’s representative on behalf of the owner; such transaction not being
       made in the course of repeated and successive transactions of a like character.
    g) Sale of a time-share as defined in 557A.2
    h) A person acting as a resident manager when he resides in the dwelling and is engaged in the leasing of real
       property in connection w/his employment.
    i) A government officer in the conduct of his official duties.
    j) A person employed by a public or private utility who performs an act w/reference to property owned, leased
       or to be acquired by the utility employing the person, where such act is performed in the regular course of, or
       incident to, the management of the property and the investment in the property.
    k) A nonlicensed employee of a licensee (e.g., a secretary) who provides information to another licensee
       concerning the sale ... or advertising of RE which has been provided to the employee by they employer
       licensee either verbally or in writing.

 8. §543B.9 Rules. The RE commission has authority to make rules.
 9. § 543B.15(8). Brokers’ Qualifications—Experience/Education. Must complete at least 60
    contract hours of commission approved RE education w/in 24 months before take broker
    exam. Have to have been a licensed RE salesman actively engaged in RE for at least the last
    24 months before the exam or have substantially equal experience....
 10.§543B.15(9). Qualifications—Short Course for salesmen. A qualified applicant for a
    license as a RE salesman shall complete a commission approved short course in RE education
    of at least 30 hours during the 12 months prior to taking the salesman exam.
 11.§543B.20 Written Exam....An exam for RE broker shall be harder than the salesman exam
    and shall require more knowledge of RE...
12.§543B.29. Revocation or suspension. A license to practice the profession of RE broker and
   salesperson may be revoked or suspended when the licensee is guilty of the following acts or
  a) Fraud in procuring a license.
  b) Professional incompetency.
  c) Knowingly making misleading, deceptive, untrue or fraudulent representations in the practice of the profession
     or engaging in unethical conduct or practice harmful or detrimental to the public. Proof of actual injury need
     not be established.
  d) Habitual intoxication or addiction to the use of drugs.
  e) Conviction of an offense included in section 543B.15(3) [fraud type offenses].

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 f) Fraud in representations as to skill or ability.
 g) Use of untruthful or improbable statements in advertisements.
 h) Willful or repeated violations of the provisions of this Act.
 i) Noncompliance with insurance requirements under section 543B.47.
 j) Noncompliance with the trust account requirements under section 543B.46.
 k) Revocation of any professional license held by the licensee in this or any other jurisdiction...
13.Punishment: no fees and criminal misdemeanors. 543B.30 (even if there is a contract, agent
   cannot get his commission if he is not a duly licensed RE broker or salesman at the time the
   cause of action arose); 543B.43 (violation of §1-42 simple misdemeanor).
14. §543B.46(1) Trust Accounts. Each RE broker must maintain a common trust account in a
   bank, savings and loan, credit union or savings bank for the deposit of all down payments,
   earnest money deposits, or other trust funds received by the broker or the broker’s salesman
   on behalf of the broker’s principal.... Broker shall not benefit from interest received on funds
   of others in the broker’s possession.
15.§ 543B.47(1) Insurance Requirement. All RE licensees have to carry E&O insurance
   covering all activities contemplated under this Chapter.
16.Administrative Provisions—193E
   a) 1.20 Terms or conditions. Broker has duty to ensure that all contracts comply w/the RE
      laws. A licensee shall not write, prepare or otherwise use a contract containing terms or
      conditions that would violate RE laws in Chapter 543B or administrative rules of 193E.
      The broker shall be responsible to ensure that all preprinted documents and forms used are
      in compliance w/this rule.
   b) 1.23 Listings. All agreements shall be in writing, properly identifying the property and
      containing all of the terms and conditions under which the property is to be sold, including
      the price, commission, signatures of all the parties, and a definite expiration date. Shall
      contain no provision requiring a party to notify the broker of the listing party’s intention to
      cancel the listing after such definite expiration date. An exclusive agency or exclusive right
      to sell listing shall clearly indicate that it is such an agreement. A legible copy of every
      written listing agreement or other written authorization shall be given to the owner of the
      property by a licensee as soon as reasonably practical after the signature of the owner is

      No Quantum Meruit Damages. If not in writing, now fee, not even quantum meruit,
      regardless of services a broker provides, b/c the public policy behind the requirement that
      these agreements be in writing is similar to the SOF requirements—i.e., to protect the
      public from false oral testimony—quantum meruit would frustrate the purpose behind the
      writing requirement. This is different than cases where attorneys’ fee arrangements have
      been held invalid for one reason or another and quantum meruit damages have been
      awarded b/c in those cases, the public policy is in favor of reasonable compensation, which
      quantum meruit damages achieves. Maynes Real Estate, Inc. v.McPherron, 353 N.W.2d
      425 (Iowa 1984).

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      (1) a RE licensee shall not negotiate a sale ... directly w/an owner if it is known that the
          owner has a written unexpired K in connection w/the property granting an exclusive
          right to sell to another broker, or which grants an exclusive agency to another broker.
      (2) Net listing prohibited [net listing is where agree for x purchase price, and anything over
          x the broker keeps as a commission].
      (3) Cannot talk to someone in an exclusive agreement w/another agent about signing up
          w/you after the agreement expires unless they initiate the conversation.
      (4) A listing agreement cannot be assigned or transferred in any way.
   c) 1.27(7) Disbursing Funds from Trust. No funds shall be disbursed from the trust account
      prior to the closing w/o the informed written consent of all the parties, except in
      accordance w/this rule. In the event of a dispute over the return or forfeiture of any earnest
      or escrow $ the broker holds, he shall continue to hold the deposit in the trust account until
      the dispute is settled.
         (a) In the absence of a pending civil action or written agreement, after 30 days from the
             date of the dispute, the broker can pay the earnest $ to the buyer or lessee based on a
             good faith decision that a contingency has not been met, but he can only make the
             disbursement after he has given 30 days’ written notice by certified mail to all parties
             concerned at their last known address, setting forth the broker’s proposed action and
             the grounds for his decision.
         (b) In the absence of a pending civil action or written agreement, after 6 months from the
             date of the dispute, the broker can pay the earnest $ to a seller or lessor in a Tx based
             on a good faith belief that the buyer or lessee has failed to perform as agreed, but he
             can only do so after he gives 30 days’ written notice ... to all parties....
         (c) The dispute must be legitimate; if a buyer or a seller, or a lessor or lessee, demands
             the return of the earnest $, the broker shall consult w/the other party who may agree
             or disagree w/the return.
         (d) this provision is a safe-harbor and does not specify a specific duty
         (e) Property management funds may be withdrawn at any time for the purpose of
             returning the funds to the payee in accordance w/the terms of the K or receipt.
         (f) Property management funds may be withdrawn when and if the broker reasonably
             believes, from evidence available, that the tenant has obtained a rental through
             information supplied by or on behalf of the broker. When an offer is withdrawn or a
             acceptance is revoked w/o liability ... any earnest $ deposit shall be promptly
             returned to the buyer w/o delay. The seller’s consent and agreement to release the
             funds is not required....
   d) 1.27(8) cannot take commission out of earnest $, have to sue principal
17.Duties and Agency. Agent/principal relationship arises when contract is signed (need
   contract). The seller’s broker does not owe a fiduciary obligation to the buyer unless the seller
   has consented to the broker acting as the agent for both the buyer and the seller. Garren v.
   First Realty, Ltd., 481 N.W.2d 335 (Iowa 1992)

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     a) broker is agent of 1st party to hire him and cannot become agent of other party to Tx w/o
        first party’s assent. Any contract w/2nd party is void as against public policy unless the 1st
     b) Disclosure: statute now requires disclosure and puts liability on seller (still no duty for
        broker to disclose if he does not know of problem b/c he is not buyer’s agent).
        (1) 558A—very broad disclosure requirements. Can walk away from deal anytime w/in 3
            days from getting disclosure form.
     c) Lender Liability. Where lender undertakes to perform an appraisal, it can be liable to buyer
        (borrower) for negligently performing that appraisal (or failing to properly disclose the
        details of the appraisal) where the buyer relied on the accuracy of the appraisal.
     d) negligence—there is still a duty of care the agent owes to the buyer (even though there is
        no fiduciary/agency relationship).
B. Statute of Frauds. A contract to purchase or convey any interest in land, other than a leasehold
   interest of less than one year in duration, must be in writing. Iowa, however, has codified the
   traditional common law exceptions to this doctrine dealing w/part performance. The most
   common of these exceptions is partial payment of the purchase price. Iowa also requires the
   conveyance of a homestead to be in writing and signed by both parties, but the Iowa Supreme
   Court has applied equitable estoppel to limit a party’s homestead to land originally claimed.
  1. Generally
     a) Requirement of writing. The Statute requires some written evidence of the terms of the
        contract, it can be a written contract or any other writing, even if the writing was not
        intended to memorialize the agreement.
     b) Multiple Pieces of Paper. Can show the writing by more than one piece of paper, the
        Statute only says that as to these types of contracts, oral evidence is incompetent to show
        their existence, so you have to establish that existence through any written evidence.
     c) Consequences of a lack of writing. Neither party can enforce the contract against the other,
        but the contract is not void.
        (1) If both parties fully perform, the parties’ legal relationship is identical to that if there
            was a writing. Consequently, neither party can rescind the contract after performing.
        (2) Partial performance may make the contract enforceable in equity.
        (3) A party may still bring an action for tortious interference w/a K against a 3rd party.
     d) Essential Elements the Writing Must Contain: 1) the names of the parties; 2) the
        identification of the land (some cases require a legal description, but most will accept a
        general description if extrinsic evidence can make the description unambiguous); 3) words
        indicating an intent to sell the land; 4) courts are divided over whether the seller must
        include terms of financing if the contract is an installment sale contract.
     e) Signature. Most courts require the signature of the party the writing is sought to be used
        against (or his agent). However, the nature of the signature may be in any form

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   f) Rescission and Modification. Parties may attempt to modify or rescind a written contract
      w/o using a written instrument.
      (1) oral rescissions are nearly always enforceable b/c they kill a K, they do not create a K
          for the sale of land.
      (2) oral modifications. Modifications must be in writing to be enforceable if the K remains
          an agreement for the purchase of land. If the modification is unenforceable, the old K
          stands as it was.
      (3) estoppel. If a party detrimentally relies on the modification, the court may estop the
          other party from enforcing the original K terms. The most common example involves an
          extension of time for performance.
   g) Part Performance Doctrine (Iowa has codified this). Is a substitute for a writing,
      consequently, it is still necessary to prove the other components of a K (i.e., offer,
      acceptance, consideration).
      (1) Courts generally recognize the following acts of part performance: 1) payment of all or a
          substantial part of the purchase price; 2) taking possession of the property; 3) making
          substantial improvements on the land.
      (2) rationales
         (a) Evidentiary—Statute serves only an evidentiary function, which partial performance
             replaces b/c the parties have acted as though there was a K.
         (b) Estoppel—some courts, however, reason that it is inequitable for a party to accept
             performance to the other party’s detriment, and then assert the Statute as a defense.
      (3) Which party can assert? It depends on the theory the court relies on. Under the evidence
          theory, either party can assert it b/c the partial performance has served the evidentiary
          function. Under the estoppel theory, courts will only allow the purchaser to assert it b/c
          the acts that constitute the exceptions are acts that only the purchaser can perform, so
          only the purchaser has detrimentally relied.
      (4) enforcement only in equity of the exceptions means that only equitable remedies (i.e.,
          only specific performance) are available (In Iowa, b/c there is a statute, can enforce at
          law also).
      (5) standard of proof K’s terms must be extraordinarily clear and convincing.
2. Iowa’s Statute of Frauds (note that it is in the evidence section of the Code)
   a) 622.32(3) Statute of Frauds. Except when otherwise specially provided, no evidence of
      the following enumerated Ks is competent, unless it be in writing and signed by the party
      charged or by the party’s agent: [t]hose for the creation or transfer of any interest in lands,
      except leases for a term not exceeding one year.
   b) 622.33 Exception (codification of part performance doctrine). The provisions of 622.32(3)
      (the sale of land) do not apply where the purchase money, or any portion thereof, has been
      received by the vendor, or when the vendee, w/the actual or implied consent of the vendor,
      has taken and held possession of the premises under and by virtue of the K, or when there

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     is any other circumstance which, by the law heretofore in force (i.e., the common law
     doctrine of part performance), would have taken the case out of the SOF.
  c) 622.34 Contract not denied in the pleadings. Have to deny the contract (if you were a
     party to it) in the pleadings or SOF does not apply, so oral contracts are enforceable (if the
     other party admits it, which ethically he must).
  d) 622.35 Party made witness. If other party admits the contract, then SOF does not apply.
3. Application of Statute to Married People
  a) As to non-homestead land, the signature of other spouse not required. 557.11 (married
     person may convey or encumber any RE or interest therein belonging to the person, or may
     control the same, or K w/reference thereto, to the same extent and in the same manner as
     other persons).
  b) As to homestead land, however, seller can only convey or encumber w/signature of both
     spouses. Where parties have clearly limited the extent of their homestead and Kd to sell
     adjoining land, the court will estop the sellers from claiming a homestead larger than they
     had originally represented to the buyers.
     (1) Homestead defined—ownership and intent. Have to own it and have to intend to return
         there when away.
     (2) 561.2 Extent and value. If w/in a city plat, it must not exceed ½ acre in extent,
         otherwise, it is limited to 40 acres, w/a minimum guaranteed value of $500.
     (3) 561.3 Dwelling and appurtenances. Only get 1 dwelling house and others that are
         properly appurtenant thereto, but a shop or other building, actually used and occupied by
         the owner in the prosecution of the owner’s ordinary business, and not exceeding $300
         in value.
     (4) 561.13 Conveyance or encumbrance. A conveyance or encumbrance of, or K to
         convey or encumber the homestead, if the owner is married, is not valid unless and until
         the spouse of the owner executes the same or a like instrument, or a power of attorney
         for the execution of the same or a like instrument, and the instrument or power of
         attorney sets out the legal description of the homestead. However, when the homestead
         is conveyed or encumbered along w/or in addition to other RE, it is not necessary to
         particularly describe or set aside the tract of land constituting the homestead, whether
         the homestead is exclusively the subject of the K or not, but the K may be enforced as to
         RE other than the homestead at the option of the purchaser or encumbrancer....
     (5) Recker v. Gustafson, 279 N.W.2d 744 (Iowa 1979)
        (a) Statute of Frauds. Paying part of purchase price takes you out of SOF and, , honors
            the expectation interests of the parties. Important that SOF deals only w/evidence and
            does not invalidate the K itself. Partial payment can be any consideration in any
            form. Anything of value that one party gave and the other accepted as part of the
            price of the good sold, even if seller never cashed the check. Can be very small. This
            prevents people from using the SOF to commit a fraud (is intended to prevent a

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   (b) Ability of check to H to bind W. The statute only requires the seller to have received
       the payment, b/c H put in joint checking account, W received the payment under the
   (c) Evidence of the K.  must prove by a preponderance of clear, satisfactory and
       convincing evidence the terms and existence of the K. When the terms of an
       agreement are definitely fixed so that nothing remains except to reduce them to
       writing, an oral K will be upheld unless the parties intended not to be bound until the
       K was reduced to writing. The terms are sufficiently definite if the court can
       determine w/reasonable certainty the duty of each party and the conditions relative
       to performance. Has to be clear enough that the court knows what to enforce and
       when. Look to the behavior of the parties to determine if they intended to be bound
       before K reduced to writing.
   (d) Homestead Writing Requirement. The portion of the land that included the
       homestead cannot be conveyed w/o a written conveyance signed by both H & W
       separate and apart from the exception to the SOF. This is a special SOF, if you will,
       for homesteads.
      (i) An oral agreement to convey the homestead is invalid, even if it meets the usual
          exceptions to the SOF unless the sellers gave up possession and thereby
          abandoned their homestead rights.
   (e) Estoppel on limitation of homestead. Court has to decide boundaries of homestead
       b/c they will enforce an oral K as to the non-homestead part of the K, but will not
       enforce the oral K as to the homestead portion of the property. Court will not allow
       s to claim full 40 acres available to them under the statute b/c the , by marking off
       the homestead during his negotiations w/the , is estopped from claiming more than
       the 5 acres he marked off. The drawings  made for  during negotiations will
       provide a sufficient legal description for the court to determine the homestead (note:
       if no actions like this, could have claimed whole 40).
(6) Modification. There is a difference b/n modification and rescission. Under Iowa law, the
    parties must have new consideration (performing legal obligations is not adequate
    consideration) for rescission (w/the possible R2d exception, which the court does not
    address, that reasonable modifications do not need new consideration if made in
    response to unforeseen circumstances—changes in land value are not unforeseen
    circumstances). However, the parties do not need new consideration to rescind the K
    and make a new one. Once rescinded, there is nothing to keep the parties from making a
    new agreement w/different obligations and conditions. The court is very clear that there
    is a difference b/n the two. The new agreement was a modification, whereby s
    demanded 10k more to perform legal obligations. This modification was not supported
    by new consideration and is  unenforceable, leaving the original terms of the K in
(7) Specific Performance is available when a K involves property that is unique or has
    special value. RE is presumed to possess uniqueness and special value.  court grants

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           s specific performance as to the non-homestead land but will not enforce oral
           agreement as to homestead land to any extent.
        (8) s also have to account for rents and profits from the date the parties orally agreed to as
            the closing date until the date s actually give s possession of the property.
  4. Actions of law and equity. Iowa still maintains the distinction, however, errors as to type of
     proceeding are waived if not raised. Law = $; Equity = Specific Performance.
     a) 611.3 Forms of action. All forms of action are abolished, but proceedings in civil actions
        may be of two kinds, ordinary or equitable.
     b) 611.4 Equitable Proceedings. [preserves common law distinction] The  may prosecute
        an action by equitable proceedings in all cases where courts of equity, before the adoption
        of the Code, had jurisdiction, and must proceed in all cases where such jurisdiction was
     c) 611.5 Action on note and mortgage. An action on a note, together w/a mtge or deed of
        trust for the foreclosure of the same is an equitable proceeding. An action on the bond or
        note alone w/o regard to the mtge or deed of trust, shall be by ordinary proceedings.
     d) 611.6 Ordinary proceedings. In all other cases, unless otherwise provided, the  must
        prosecute an action by ordinary proceedings.
     e) 611.10 Equitable issues. Where the action has been properly commenced by ordinary
        proceeding, either party shall have the right, by motion, to have any issue heretofore
        exclusively cognizable in equity tried in the manner hereinafter prescribed in cases of
        equitable proceedings; and if all the issues were such, though none were exclusively so, the
         shall be entitled to have them all tried as in cases of equitable proceedings.
     f) 611.12 Errors waived. Waive objection to bringing in wrong court unless object and move
        for correction.
  5. Standard of review. Findings of fact have more deference in actions at law.
     a) IRAP 4. Scope of review. Review in equity cases shall be de novo. In all other cases, the
        appellate courts shall constitute courts for correction of errors at law, and findings of fact
        in jury-waived cases shall have the effect of a special verdict.
     b) IRAP 14 Briefs. References in briefs to legal propositions. The following propositions are
        deemed so well established that authorities need not be cited in support of any of them:
        (1) Findings of fact in a law action ... are binding upon the appellate court if supported by
            substantial evidence.
        (2) In equity cases, especially when considering the credibility of witnesses, the court gives
            weight to the fact findings of the trial court, but is not bound by them.
C. Conditions
  1. Time of Performance. It is not essential that the parties fix a date of performance, and if they
     do not, the court will infer that a reasonable time was intended.

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   a) time of the essence. The parties can make time of the essence by so stating in their K or by
      other language that indicates that time is important to them. If there is no such language,
      the court will presume time is not of the essence unless there are circumstances, known to
      both parties at the time of K, that indicate that time of performance was important.
   b) duties and remedies if time is not of the essence. If time is not of the essence, even if a
      party tenders late performance, he can still enforce the K as long as his performance was
      not unreasonably late. Courts commonly consider delays of 30 or 90 days reasonable. The
      party is liable, however, for damages the delay caused, which might include lost rents or
      profits, additional interest, etc.
   c) if time is of the essence, a late tender of performance by one party fully excuses the other
      party from performing. A very small delay could trigger.
   d) notice making time of the essence. A party can unilaterally make time of the essence by
      providing the other party w/sufficient notice, but it must give the other party time to
   e) waiver of strictly timely performance. Courts often find a party has waived timely
      performance. The SOF does not bar oral waivers. If one party accepts late performance
      from the other, courts will usually find a waiver.
2. Conditions in Realty Sales Ks. Ks of sale often include conditions to a duty of performance.
   The condition may or may not be something w/in the parties’ control. If the condition is
   something w/in the control of one of the parties, the courts will impose a duty of good faith on
   that party to use good faith efforts to make the condition occur.
   a) precedent and concurrent conditions. A condition precedent must occur before a party has
      a duty to perform (title, financing, inspection, etc.). A concurrent condition is expected to
      occur simultaneously w/the party’s performance.
   b) waiver of conditions. If a K has a condition for the sole benefit of one party, that party may
      waive it and proceed to enforce the K.
   c) concurrent conditions and tender. The ―closing‖ of the RE K usually involves concurrent
      conditions—delivery of title and delivery of payment. There is no breach until the other
      party puts you in breach by tendering performance. Most modern cases require only that
      one party communicate to the other party that he is ready, willing and able to perform to
      put that party in breach.
   d) circumstances excusing tender: 1) other party clearly repudiated K; or 2) other
      circumstances make it obvious that the opposing party is unwilling or unable to perform.
      Only have a remedy, however, if you were in fact ready, willing and able to perform.
3. Quality of Title. The parties to a RE K may agree that the title will be of a particular quality.
   Unless the parties agree to the contrary, the law will infer in every RE K a covenant that the
   vendor’s title will be marketable.
   a) marketable title is one that is free from all reasonable risk of attack. It does not have to be
      perfect, but any defects must be sufficiently minor that a reasonable purchaser or lending
      institution would not object to them.

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     b) types of defect that could impair marketability. Nearly any defect that could prevent the
        purchaser from transferring a fee simple absolute can impair marketability.
        (1) Flaws in the chain of ownership. Some conveyance in the chain of ownership was
            forged, undelivered, obtained by fraud or duress, or executed by a minor. A transfer that
            was unrecorded generally does not render title unmarketable if one can show that the
            transfer did in fact occur.
        (2) Encumbrances. Some courts will hold title is still marketable if the purchaser knew of
            the encumbrance at the time of K, if it was readily apparent from an inspection of the
            land or if the encumbrance was beneficial to the land. Also will not make title
            unmarketable if it will be removed by the time of the conveyance.
        (3) Actions depriving the vendor of title. If the vendor has lost the title, then he cannot
            convey marketable title.
     c) Timing of marketable title. Only has to be marketable on the date fixed for transfer of legal
        title. Used to hold that party could not object, even to a complete lack of title, until the
        closing date, but modern courts hold that the purchaser has a right of rescission before the
        closing date if it looks very unlikely that the seller is going to be able to deliver marketable
        title on the closing date. If buyer discovers defects, he must give seller reasonable notice
        and time to fix them, if it happens just before closing, the effect is to extend the closing
     d) Merger. The right of the purchaser to object to defects that make the title unmarketable
        lasts only until a deed is delivered and accepted. When this occurs, the K’s covenants are
        ―merged into the deed‖ and have to rely on deed covenants. Merger only occurs w/respect
        to title covenants and not other covenants relating to the condition of the property, etc.
  4. Conditions for financing. A condition precedent for financing must be sufficiently clear in
     its terms that it tells the courts when to enforce it and to what extent. This means that it must
     specify the rate and length of the terms that the purchaser must receive. Absent these terms,
     the court will presume that the condition was simply that the purchaser must find terms
     acceptable to him. If a condition is impossible, there is a lack of mutuality and the courts will
     not enforce b/c no consideration. Gildea v. Kapenis, 402 N.W.2d 457 (Iowa Ct. App. 1987).
     a) Damages—often give specific performance for seller b/c of the illiquidity of houses
     b) It is not sufficient to merely specify the maximum interest rate, must specify rate (variable
        or fixed); term; and amount (any factor that affects monthly payments). W/o more, the term
        is too indefinite for a ―meeting of the mind‖ as to essential terms, and consequently, the
        court will not enforce it.
     c) If the court can glean from the circumstances that the parties intended ―suitable financing‖
        to mean financing that is acceptable to the buyer (w/a bit of an objective tilt), then the court
        will not enforce the K if the buyer could not find financing on terms he could afford. This
        has the result of implying the term and points provisions into the K.
D. Equitable Conversion and Risk of Loss. Once the seller enters the purchase agreement, his
   rights in the property is reduced to the right to receive payment (personal property). Buyer
   acquires the right to receive the property (RE).

                                            Real Estate
                                Seller                            Purchaser
Pre-Contract                    Legal title/equitable title       nothing
Post-Contract                   Legal title/personal property     Equitable title/real property
                                (the right to receive payment)    (judgment lien can attach)
Post-Closing                    nothing                           Legal/equitable title
Post-Forfeiture-Rescission      Legal title/equitable title       nothing
      1. Origin. The doctrine developed from the willingness of courts in equity to enforce a RE sale
         contract by specific performance. The courts then said that equity should consider as having
         been done that which would be ordered done. So they started treating the K, during the
         executory period, as if it had already been performed for some purposes.
      2. Death. Equitable conversion treats the vendor’s interest as personal property and the
         purchaser’s interest as RE, even though there is no closing. This puts the parties where they
         would be if the court had ordered specific performance, as it could have, prior to the death.
      3. Risk of Loss. Regards purchaser as owner of the RE during executory period. Strict
         enforcement of equitable conversion requires the purchaser to complete K and pay full price
         (i.e., to bear the full risk) if unforeseen loss occurs before closing. Can K around.
         a) Minority view is that risk only passes when either possession or legal title has passed.
         b) non physical losses, like eminent domain actions. The Uniform Vendor & Purchaser Risk
            Act applies the minority view, mentioned above, to physical and eminent domain actions
            but not to other changes in legal status (like zoning).
         c) Impact of insurance
            (1) Risk on purchaser and seller is insured. Most modern courts do not allow the seller
                the windfall of both the purchase price and the insurance. Generally allow the seller to
                enforce the K only if he will reduce purchase price to the extent of insurance recovery.
            (2) Risk on seller and purchaser is insured. Many cases allow the insurance company to
                avoid paying in this case b/c nothing to indemnify. May have a constructive trust
                whereby seller will argue insurance intended for his benefit and court will require
                insurance company to pay but require purchaser to perform.
      4. Time of Conversion. Must be able to specifically enforce the contract. Does not occur until
         there is a fully formed K of sale. An unexercised option or oral K is not enough. If there are
         defects in the title there is no conversion until the defects are cured. If the K is enforceable,
         however, it does not matter that it is later rescinded or abandoned. Unfulfilled conditions will
         generally only prevent conversion when they are dependent on the actions of a 3rd party, not
         where the other party would have a good faith duty to perform the condition anyway.
      5. The Iowa Rule is that risk passes to the equitable owner. There is an equitable conversion
         once the parties could obtain specific performance in equity. O’Brien v. Paulsen, 186 N.W.
         440 (1922).
         a) Means have to pay full purchase price. Does not require delivery of legal title or

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     b) There must be no unsatisfied conditions (likely is a good faith requirement in there) and
        loss must not be due to intentional (or perhaps negligent) act of seller.
     c) Equitable title passes, and along with it the risk of loss, when parties could get specific
        performance. Does not depend on possession, closing, passing of legal title or payment of
        purchase price.
  6. Insurance proceeds. Brady v. Welsh, 204 N.W. 235 (Iowa 1925). When there is insurance
     and price paid, there is a constructive trust of the proceeds. If no insurance paid, are back to
     O’Brien. The result of this is that buyer gets free insurance, so equity would likely require (if
     asked) the purchaser to reimburse seller’s insurance premiums.
     a) Seller has an insurable interest b/c of his legal title.
     b) constructive trust—where owner has received insurance proceeds and purchase price, he
        holds the proceeds in constructive trust for the purchaser.
     c) Davidson deal w/the ins. K itself, not the money. Here, the money was paid and only
        dealing w/where it goes.
  7. Uniform Vendor and Purchaser Risk Act (NOT IOWA LAW)
     a) California §1662. Uniform vendor and purchaser risk act. Any contract hereafter made
        in this State for the purchase and sale of real property shall be interpreted as including an
        agreement that the parties shall have the following rights and duties, unless the contract
        expressly provides otherwise:
        (1) If neither legal title nor possession have transferred, then risk of physical damage or
            eminent domain remains with seller and purchaser can get any money he has paid back;
        (2) Risk is on purchaser, however, if either legal title or possession have transferred (i.e.,
            have to pay full price still).
     b) Illinois 65/1. Risk of loss Is the same as California law, except that if the purchase and sale
        of real property is to be consummated by means of an escrow, title shall not be considered
        to have been transferred for purposes of this act, despite the delivery and recordation of a
        deed to such real property, unless the conditions of the escrow relating to the passing of the
        full legal and equitable title shall have been fulfilled.
     c) New York § 5-1311. Uniform vendor and purchaser risk act. Same as California,
        except that risk does not pass if ―all or a material part‖ of the property is destroyed or is
        taken by eminent domain. If the loss is ―immaterial,‖ then risk still passes (and K still
        enforceable) but the purchase price is reduced by amount of damage.
B. Specific Performance. Either the vendor or the purchaser may generally get an order of specific
   performance. The court can enforce the order either through contempt or through judicial
   conveyance of the property.
  1. Justification. Real property is unique so the remedy at law—damages—is always inadequate.
     Reasoning works much better when purchaser seeks specific performance. The best
     justification when the seller seeks the remedy is that RE is not very liquid and selling it again
     can be a huge pain in the butt. The general rule is that the remedy is mutual. Must, however,
     look at the justification—liquidity or uniqueness of property—b/c court may not grant that

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   remedy in some cases (e.g., agreement to purchase one unit in 3,000 unity condo complex—
   probably won’t grant specific performance to seller but likely would to buyer).
2. Circumstances when not available—when unrealistic or impractical. Seller lacks title, K
   states no specific performance, or sometimes when the purchaser is buying the property only
   to resell it.
3. Fairness and Vagueness. Have to have a higher level of specificity in the K so the court
   knows what to enforce. Court will not specifically enforce a K when such enforcement would
   be unfair or unjust.
4. Additional damages. Sometimes specific performance does not make the wronged party
   whole. Usually this has to do w/the time delay—higher interest, rent for another place to live,
   taxes, etc. The court will, however, offset any gains the wronged party enjoyed b/c of the
   delay (e.g., no mortgage payment).
5. Enforcement
   a) Contempt. The remedy you have to use when the land is outside the jurisdiction of the
      (1) 665.2(3) Acts Constituting Contempt—Court Order. The following acts or
          omissions are contempts, and are punishable as such by any of the courts in this state ...
          (3) Illegal resistance to any order or process made or issued by it.
      (2) 665.4 Punishment. The punishment for contempt, where not otherwise specifically
          provided, shall be ... (2) before district judges, district associate judges, and associate
          juvenile judges by a fine up to $500 or imprisonment in a county jail for up to 6 months
          or both.
      (3) 665.5 Imprisonment. If the contempt is of an act that the party has the power to
          perform, court can put the person in jail until he performs it. Warrant of commitment,
          however, must specify the act that he must do to get out.
   b) Judicial Conveyance. Best remedy when land w/in jurisdiction of the court.
      (1) 624.29 Conveyance by commissioner. Real property may be conveyed by a
          commissioner appointed by the court: (1) where, by judgment in an action, a party is
          ordered to convey such property to another; [or] (2) where such property has been sold
          under a judgment or order of the court, and the purchase price has been paid.
      (2) 624.30 Deed. The deed of the commissioner shall refer to the judgment, orders, and
          proceedings authorizing the conveyance.
      (3) Conveys essentially a quitcalim deed of all parties ordered to convey the land and of all
          parties properly made a party to the action. 624.31; 624.32.
      (4) 624.33 Approval by the court. A conveyance by a commissioner shall not pass any
          right until it has been approved by the court, which approval shall be endorsed on the
          conveyance and recorded w/it.

                                         Real Estate
      (5) 624.34 Form. The conveyance shall be signed by the commissioner only, w/o affixing
          the names of the parties whose title is conveyed, but the names of such parties shall be
          recited in the body of the conveyance.
      (6) 624.35 Recorded. The conveyance shall be recorded in the office in which, by law, it
          should have been recorded had it been made by the parties whose title it conveys.
   c) Lis Pendens If party records action affecting RE, seller cannot convey while action is
      (1) 617.10 RE—action indexed. When a [1] petition (need lawsuit—can be specific
          performance or foreclosure action, but not an action for damages b/c that is not
          ―affecting RE‖) [2] affecting RE is filed, the clerk of the district court where filed shall
          index the action in an index book .... When the cause is finally determined the result
          shall be indicated in the book wherever indexed.
      (2) 617.11 Lis pendens. When so indexed said action shall be considered pending so as to
          charge all 3rd parties w/notice of its pendency, and while pending, no interest can be
          acquired by 3rd persons in the subject matter thereof against the ’s rights (file lis
          pendens w/lawsuit).
      (3) 617.12 Exceptions. If the real property affected is situated in the county where the
          petition is filed it shall be unnecessary to show in said index lands not situated in said
6. Where to bring the action.
   a) 616.1 Real Property. Actions for the recovery of real property or of an estate therein (only
      applies when seeking specific performance, not damages)... must be brought in the county
      in which the subject of the action or some part thereof is situated.
   b) 616.7 Place of contract. When, by its terms, a written K is to be performed in any
      particular place, action for a breach thereof (applies to damages) may, except as otherwise
      provided, be brought in the county wherein such place is situated.
   c) 616.17 Personal Actions. Personal actions, except as otherwise provided, must be brought
      in a county in which some of the s actually reside, but if neither of them have a residence
      in the state, they may be sued in any county in which either of them may be found.
7. Dower—better get the spouses signature b/c if you do not, unless title passed under judicial
   sale (i.e., execution or sheriff’s sale), she gets the property back on his death. This includes all
   encumbrances—will take free of all encumbrances you did not sign off on.
   a) 633.211(1) Share of surviving spouse if decedent left no issue or left issue all of whom
      are issue of surviving spouse. If the decedent dies intestate leaving a surviving spouse and
      leaving no issue or leaving issue all of whom are the issue of the surviving spouse, the
      surviving spouse shall receive the following share: all of the value (not nec. the land
      itself)of all the legal or equitable estates in real property possessed by the decedent at any
      time during the marriage (even if title in H only) which have not been sold on execution or
      by other judicial sale, and to which the surviving spouse has made no relinquishment of

                                          Real Estate
  b) 633.238 Share of surviving spouse who elects to take against will. If the surviving
     spouse elects to take against the will, the share of such surviving spouse shall be: 1) 1/3 of
     the value of all the legal or equitable estates in real property possessed by the decedent at
     any time during the marriage, which have not been sold on execution or other judicial sale,
     and to which the surviving spouse has made no relinquishment of right.
8. Bradford v. Smith, 98 N.W. 377 (Iowa 1904)
  a) Location of action—proper place to bring action, even if for specific performance, is in
     county where land is located. The reasoning being that the action affects rights to land and
     it is best to have judgments that affect land recorded in the county where the land is
     located. Can, however, bring where  lives (under 616.17).
  b) Court will not grant specific performance where not equitable to do so. Remedy at law
     must be inadequate to make  whole (e.g., could not get damages b/c of FMV, but were
  c) Wife’s interest—have to get wife’s release. If not specified as a condition, however, court
     will not require it as a precedent to ordering specific performance. Court may, however,
     alter contract and abate the purchase price.
9. Defenses to specific performance—no marketable title. Kurtz v. Gramenz, 198 N.W. 325
   (Iowa 1924). Any defense on the contract itself that is not subject to res judicata is also an
   appropriate defense to a specific performance action. (issue preclusion—was raised; claim
   preclusion—should have raised).
  a) Issues actually raised in previous action to void a contract are res judicata in an action for
     specific performance. New issues, however, that did not have to be raised in the earlier
     actions may be raised as a defense in an action for specific performance.
     (1) Important that 1st action was prior to time for performance and  had no reason to know
         of alleged defects in title prior to time for performance (don’t need title until closing).
  b) A party cannot seek specific performance unless they can perform. In the case of RE that
     means that the sellers cannot seek specific performance from the buyers unless the sellers
     can convey marketable title.
  c) What is marketable title? (a covenant implied into every purchase agreement)
     (1) Merchantable title is a title that ―can again be sold to a reasonable purchaser, or
         mortgaged to a person of reasonable prudence as security for a loan of money.‖ Whether
         a reasonably prudent man, familiar w/the facts and apprised of the question of law
         involved, would accept such a title in the ordinary course of business.
     (2) Cannot seek specific performance w/o merchantable title, however, there must be more
         that a ―mere possibility that the title is defective.‖
     (3) Easements—can render title unmerchantable if it is an encumbrance (i.e., of no benefit
         to the servient estate) and meets standard of marketable title.
  d) Lack of mutuality—is not a defense after other party has already conveyed title (i.e., after
     they have in fact performed).

                                        Real Estate
     e) fraud or false pretenses in the making of the K can be a defense.
     f) Specific performance is not a matter of grace, it is a matter of right in the proper case,
        unless some good reason is shown why it should not be given.
  10.Defenses to specific performance—fraud: identity of contracting party. Dergo v. Kollias,
     567 N.W.2d 443 (Iowa Ct. App. 1997). Iowa is minority rule and holds that a party has the
     right to know the identity of the party on the other side, when that other party is an agent that
     agent has an affirmative duty to disclose his principal. Note that land is often more valuable to
     neighbors than to anybody else b/c it is the only piece of land in the world that abuts yours
     (esp. true if you are expanding)
     a) party for whose benefit condition is intended can waive it.
     b) Specific performance. Specific performance is fairly automatic but is not always granted
        (equity can still rear its head and refuse to grant it). Review of specific performance is de
        (1) sophistication of the seller makes a difference in this case—kind of an
            equity/unconscionability deal.
        (2) K is still good, just have to disclose to get specific performance. Could still get damages
            (and damages is a hard sell to a jury, have to argue you took advantage of the other
C. Damages. Generally is the difference b/n K price and the market value of the land on the date of
   the breach. The buyer can get damages only if the property’s value has risen above the K price,
   and seller can recover damages only if the value has fallen below the K price (b/c otherwise
   could have sold to someone else and mitigated/covered damages).
  1. Events after breach are generally irrelevant. This includes changes in value. If, however, seller
     resells property shortly after breach, that price may be a good indication of the value of the
     land @ the time of the breach.
  2. Good faith failure of title. About ½ of the courts will not grant a purchaser loss-of-bargain
     damages if the seller’s breach is b/c of a title failure that was not a product of the seller’s bad
     faith. These courts will only give the purchaser restitution. Other courts will grant full
     damages regardless of reason of failure of title.
  3. Special damage recovery. Additional damages that are allowed when they are foreseeable.
     Generally are: 1) expenditures in reliance on the K; 2) lost profits; 3) increased interest
     expense (usually do a present value of the increased payment stream); and 4) partial breach
     (some courts will pro-rate and reduce the price by the portion of the purchase price that that
     portion of the land represented, other courts will reduce the purchase price by the fair market
     value of that portion of the land). Note, that if K is for ―sale in gross,‖ meaning just sold this
     particular tract of land and stated was X acres ―more or less,‖ then court will generally not
     abate purchase price if land conveyed is less than that stated.
  4. Liquidated Damages and Retention of Deposit. Purchaser can usually keep earnest money if K
     states it is liquidated damages. Liquidated damages, however, cannot be a forfeiture or
     penalty. Test is: 1) were actually damages hard to measure as of time of K, and 2) is the
     amount a reasonable estimate, at the time of K, of the probable actual damages. Some courts

                                            Real Estate
     just adopt a rule of thumb that a certain percentage of the purchase price as liquidated
     damages (e.g., 10%) is per se reasonable.
     a) Preclusion of other remedies—liquidated damages clauses prevent other party from
        seeking damages. Also generally have to pick b/n the liquidated damages and specific
     b) Election of remedies—if keep deposit for too long a time, courts will find that you have
        elected that as your remedy and cannot later give it back and seek specific performance or
  5. Iowa rule is that good faith inability to convey good title is a complete defense to damages,
     but performance must be impossible, not just expensive. Defense is only good against
     expectancy damages, buyer can still get restitution (i.e., he gets back what he has already paid
     you). Cornell v. Rodabaugh, 90 N.W. 599 (1902)
  6. Liquidated Damages. Can sue to collect liquidated damages w/o showing actual damages,
     but cannot be a penalty. Must be reasonable in amount and damages must have been
     unforeseeable or hard to determine. Court will look to amount in relation to purchase price
     (10% usually goes), must have some relation to foreseeable damages, and the nature of the
     contract and circumstances of the transaction. Note: if the liquidated damages clause stands, it
     rules regardless of actual damages (so  may try to defend on liquidated damages clause). If
     liquidated damages clause fails, however, can still try to get actual damages. Joeckel v.
     Johnson, 159 N.W. 672 (Iowa 1916).
D. Rescission and Restitution. The opposite of SP b/c are undoing the deal.
  1. Vendor’s Lien. Courts of equity imply a lien, that is similar to a mortgage, in favor of the
     vendor for the unpaid portion of the purchase price on the land.
     a) before closing. Before transfer of title, the lien is on the purchaser’s equitable interest and
        is not very meaningful b/c the owner retains legal title and will likely prefer an action for
        specific performance.
     b) after transfer of title the lien attaches on the legal title in the buyer’s hand. Still not very
        common, however, b/c if purchaser does not pay full purchase price, seller will usually
        require a more specific security interest.
     c) enforcement. Generally by judicial foreclosure or court strict foreclosure.
        (1) foreclosure by sale requires court hearing and court supervised sale of property — like a
            mortgage sale.
        (2) strict foreclosure, the court just orders the purchaser to pay the remaining purchase price
            w/in a period of time and if he does not, the court just gives the property back to the
            seller. Court will generally not allow this remedy if it results in a forfeiture greatly in
            excess of the actual damages.
     d) BFPs. B/c lien is equitable in nature, is generally unenforceable against a BFP from the
        purchaser (cannot be a BFP if land sale K is recorded). Even if BFP knows of prior K, he
        still has bona fide purchaser status unless he had reason to know part of price unpaid.

                                            Real Estate
2. Restitution. Basically means you get back everything you paid or contributed to performance
   of K. Commonly awarded w/rescission.
   a) Relationship to rescission. If one party commits a material breach, the other can demand
      rescission and at the same time get restitution, which essentially seeks to put non-breaching
      party in the same place he would have been in absent the breach.
   b) Restitution is mutual remedy. If you seek restitution, you have to be willing to pay
      restitution. Have to pay even though you did not breach. The idea is to return the status
3. Vendee’s lien. When a purchaser demands rescission, the courts will recognize an equitable
   lien on the RE in his favor as an aid to restitutionary recovery. Do not need specific K
   language to create the lien, but have to foreclose by judicial action. Is inferior in priority to
   any other liens or interest created prior to the K of sale, and to any subsequent liens if it is
   made expressly subordinate to them. Cannot assert against a BFP who takes from the vendor.
4. 557.18 VENDOR’S LIEN. Must record and reserve to have a lien. No vendor’s lien for
   unpaid purchase price shall be enforced in any court of this state after conveyance by the
   vendee, unless such lien is reserved by conveyance, mortgage, or other instrument duly
   acknowledged and recorded, or unless such conveyance by the vendee is made after the suit
   by the vendor, the vendor’s executor, or assigns to enforce such lien. Note: can still enforce
   against vendee, just not against 3rd parties unless vendor can show the 3rd party knew of the
   unpaid purchase price.
5. Still have fraudulent conveyance protection. 557.19 Fraudulent conveyances. Nothing in
   557.18 shall be construed to deprive a vendor of any remedy now existing against [a]
   conveyance procured through the fraud or collusion of the vendess therein, or persons
   purchasing of such vendees w/notice of such fraud or lien.
6. Partial Rescission b/c of mistake. Capps v. Clark, 195 N.W. 372 (Iowa 1923). When the K
   purports to convey a certain amount of land and the parcel is actually less, the courts will
   grant partial rescission and restitution in which they essentially adjust the purchase price.
   Courts will not do this when the deed uses ―M/L‖ and where it purports to convey a specific
   identity of land (at a set price) and does not purport to convey a specific amount of land or
   conveys at a per acre price.
   a) When discover quickly, are more likely to get full rescission, but after a lot of time has
      passed, it is just too hard to return to status quo, and risk messing w/titles. This, however,
      is an equitable remedy, and court will not grant where would work inequitable result.
   b) No fraud required. Courts will grant, at least partial, rescission and restitution where both
      parties had a mistaken belief that the land was a certain size and the purchase price is
      computed on a per acre basis. Usually rule applied to vendee who overpaid, but either party
      can seek.
      (1) must either show that: 1) definite per acre price or 2) price was lump sum but there was
          a representation of definite acreage (and mistake/difference must be material).
      (2) statute of limitations only applies from time mistake is discovered.

                                         Real Estate
   c) relief. courts will generally just adjust the purchase price to what it should have been. It is
      easiest when there is a per-acre price, will just increase or decrease accordingly.
   d) court will grant full rescission for: 1) fraud, 2) failure of title, 3) breach of warranty, or 4)
      failure of consideration.
   e) Is essentially a mistake in the computation of the purchase price. The parties knew the
      identity of the land they were buying and the purchase price was figured per acre, but b/c of
      the mistake in size, the total price was miscalculated. When have a per-acre price the
      ―M/L‖ language is different than when just have identified land and lump sum price. In the
      lump sum case, there is no mistake in purchase price b/c you are paying x for an identified
      piece of land. In the per-acre case, however, are paying X * acreage for an identified piece
      of land. When the acreage is off, then purchase price is off.
   f) Adjustment of purchase price. Generally just reduce on a pro-rata basis. Court indicates
      that if you had proper evidence to support the contention, you could get more by showing
      the shorted land was more valuable than the rest, although this seems to be most
      appropriate where there is a mistake about the boundaries.
7. Vendee’s lien does not end on conveyance. The vendee’s lien is to secure restitution damages.
   Is enforceable against 3rd party who knew of vendee’s action against vendor for
   rescission/restitution, but if 3rd party is BFP should file a Lis Pendens. Larson v. Metcalf, 207
   N.W. 382 (Iowa 1926).
   a) b/c Iowa recognizes equitable title, it recognizes the vendee’s lien.
   b) Iowa, by statute, ends the vendor’s lien on conveyance, but that rule does not apply to
      vendee b/c vendor can protect himself by simply reserving the lien in the conveyance. The
      vendee, however, cannot similarly protect himself. W/no lien, the vendor could just take
      the vendee’s money or improvements and there is no way the vendee could protect himself.
   c) when get full equitable title, can force conveyance against vendor (or his heirs or assigns)
      through specific performance.
   d) there is no concern w/secret liens as to equitable title b/c equity has BFP protection built in.
      (1) vendee’s lien will prevail only against a future grantee of the vendor if the grantee had
          notice of the lack of equitable title
   e) The lien follows the property sold into the hands of heirs and even future vendees with
   f) claim preclusion—IA R.C.P. have changed and may now have to foreclose vendee’s lien
      when you establish liability initially rather than get liability and foreclose in a later action.
      (1) bringing both at same time would also allow you to file lis pendens. Could not do that in
          the 1st action here b/c was action for liability, not action affecting RE. The lis pendens
          would have paused everything while action was pending. Once decided, the judgment
          (which is recorded at the court house) would put the world on notice.
   g) Circumstantial evidence indicates  had K of ’s equitable interest—so can to
      something other than recording (i.e., give actual notice).

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          (1) just have to have knowledge of payment on part of vendee or knowledge of underlying
              suit—have to know something is up—before 3rd party takes deed. Inquiry notice is
          (2) Burden of Proof is on /subsequent grantee to show he lacked knowlege, actual or
E. Forfeiture (get land back) and Foreclosure (get debt paid—if have acceleration clause). When
   you forfeit, only get land back, contract is gone. There is no deficiency, but you also do not have
   to pay overplus, like you do w/foreclosure. In a land sale contract, seller can generally pick either
   remedy. Iowa provides a 30 day right to cure by statute.
   1. 656.1. Conditions prescribed Only way to forfeit land is through compliance w/this Chapter.
   2. 656.2. Notice
          (1) The forfeiture shall be initiated by the vendor by serving on the vendee a written notice which shall:
              (a) Reasonably identify the contract and accurately describe the RE covered.
              (b) Specify the terms of the contract with which the vendee has not complied.
              (c) State that unless, within 30 days after the completed service of the notice, the vendee performs the
                  terms in default and pays the reasonable costs of serving the notice, the contract will be forfeited.
              (d) Specify the amount of attorney fees claimed by the vendor pursuant to 656.7 and state that payment of
                  the attorney fees is not required to comply with the notice and prevent forfeiture.
          (2) The vendor shall also serve a copy of the notice required in (1) on the person in possession of the RE, if
              different than the vendee; on all the vendee's Mes of record; and on a person who asserts a claim against
              the vendee's interest, except a government or governmental subdivision or agency holding a lien for RE
              taxes or assessments, if the person has done both of the following:
              (a) Requested, on a form which substantially complies with the following form, that notice of forfeiture be
                  served on the person at an address specified in the request.
              (b) Filed the request form for record in the office of the county recorder after acquisition of the vendee's
                  interest but prior to the date of recording of the proof and record of service of notice of forfeiture
                  required by 656.5 and paid a fee of five dollars. The request for notice is valid for five years from the
                  date of filing with the county recorder....
          (3) As used in this section, the terms "vendor" and "vendee" include a successor in interest but the term
              "vendee" excludes a vendee who assigned or conveyed of record all of the vendee's interest in the RE.
   3. 656.3. Service Said notice may be served personally or by publication, on the same conditions, and in the same
      manner as is provided for the service of original notices, except that when the notice is served by publication no
      affidavit therefor shall be required before publication. Service by publication shall be deemed complete on the
      day of the last publication.
   4. 656.4. Compliance with notice If the vendee or a Me of the RE performs, within 30 days of completed service
      of notice, the breached terms specified in the notice and pays the vendor the reasonable cost of serving the notice,
      then the right to forfeit for the breach is terminated. The payment of attorney fees pursuant to 656.7 is not
      necessary to comply with the notice and prevent forfeiture.
   5. 656.5. Proof and record of service If the terms and conditions as to which there is default are not performed
      within the 30 days, the party serving said notice or causing the same to be served, may file for record in the office
      of the county recorder a copy of the notice aforesaid with proofs of service attached or endorsed thereon (and, in
      case of service by publication, a personal affidavit that personal service could not be made within this state), and
      when so filed and recorded, the said record shall be constructive notice to all parties of the due forfeiture and
      cancellation of said contract. [forfeiture is complete upon passage of 30 days, this perfects against 3 rd parties]

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      6. 656.6. Scope of chapter This chapter applies to all cases where the intention of the parties, as gathered from the
         contract and surrounding circumstances, is to sell or to agree to sell an interest in RE, any contract or agreement
         of the parties to the contrary notwithstanding.
      7. 656.7. Attorney fees. Have to state in notice that you are seeking attorney’s fees. Limited to $50 and must be for
         services that require a lawyer, cannot be fore clerical services, regardless of who performs them. Not necessary
         for vendee to pay to prevent a forfeiture. Vendor limited to small claims action to recover.
      8. 654.11 Foreclosure of title bond. if seller provides a bond, can foreclose and sell buyer’s interest in land like a
      9. 654.12 Vendee deemed Mr. The vendee shall in such cases, for the purpose of the foreclosure, be treated as a
         Mr of the property purchased, and the vendee’s rights may be foreclosed in a similar manner.
II. Conveyances of Real Property
   A. Surveys, Descriptions and Platting. There is a great deal of variance in methods of platting
      from state to state. The description defines the boundaries on the earth’s surface that represent
      the horizontal limits of the parcel. The ownership is presumed to extend vertically from the
      earth’s center to the sky unless specifically limited.
      1. Metes and Bounds Description individually describes every line that is part of the parcel’s
         boundaries. The lines can refer to natural or artificial monuments. Land may be identified by
         the boundaries of adjoining land. Usually made up of successive calls of courses and
         distances—course is a statement of directions. Have to identify starting and stopping points
         for all descriptions.
      2. Government Survey System. Most land outside the original 13 colonies was surveyed under
         this system. The system is notoriously bad, but they control.
         a) Based on prime meridians that rune north-south and base lines that run east-west.
         b) Additional meridians and base lines divide the land into squares that are (theoretically) 6
            miles on a side, called townships.
         c) The townships are divided into 36 sections that are about 1 mile on each side. Each section,
            then is about 640 acres.
      3. Plat is a map that meets certain standards of format and accuracy and is approved by a local
         government agency. Multiple lots are usually numbered and lettered. Legal descriptions of all
         lot boundaries are also on the plat. Have to have a plat anytime you get away from
         government survey. Need when using land for subdivisions instead of farming, and often a
         way county governments regulate development.
      4. Monuments like streets, railroad tracks and rivers or streams are used. A deed that refers to the
         monument as a boundary will usually be held to convey to its center line or thread.
      5. Accretion and Reliction. If the boundary is a stream, it may shift over time. Accretion is the
         build up of soil and reliction is the loss of soil. If it happens gradually, the stream stays as the
         monument and the respective owners gain and lose property. If it happens radically or rapidly,
         called avulsion, the boundaries do not change.
      6. Priorities in interpretation. Courts look to the parties’ intent when resolving conflicts in
         boundary records. There is a priority, however, as follows: 1) natural monuments; 2) artificial

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     monuments and surveyed lines; 3) adjacent tracts or boundaries; 4) courses or directions; 5)
     distances; 6) area or quantity.
B. Deeds, Delivery and Escrows. Deed and purchase contract both must be in writing, but no
   formal requirement. To have effective conveyance need: signed deed, acknowledge/ witnessed
   (sealed), and delivery (intent).
  1. Deed
     a) Writing Required Today all deeds must be in writing.
     b) Elements Of A Deed Deeds must contain identification of the parties, description of the
        land, some words indicating a present intent to convey, and the grantor's signature.
     c) Grantee's Name in Blank Although normally a deed with no grantee's name is void, many
        courts uphold such deeds once the person to whom the deed is delivered has inserted his or
        her name.
     d) Non-existent Grantee      If the grantee does not exist, the deed is void.
     e) Construction Of Deeds
        (1) Extrinsic Evidence While many old cases state that extrinsic evidence can be
            considered only if ambiguity in the language of a deed is "latent" (discernible only from
            outside facts) rather than "patent," (evident from the face of the deed itself) many
            modern courts now admit extrinsic evidence whether it is latent or patent.
        (2) Easement or Possessory Interest Courts often have difficulty determining whether
            language that describes and conveys a highway or railroad right-of-way is a possessory
            interest or only an easement.
        (3) Reservations and Exceptions A reservation is language that creates in the grantor a
            new interest in the land which did not exist independently before he made the deed. An
            exception is the retention by the grantor of some interest which did exist previously,
            such as a certain physical part of the land. Older cases find cannot make a reservation or
            exception to a 3rd person, but recent cases allow it.
     f) Defects In Deeds
        (1) Reformation If a deed does not accurately reflect the intention of one of the parties,
            equity will reform it if the other party was also under a mistake or was guilty of fraud,
            other inequitable conduct, or silence in the face of knowledge of the error. BFP who
            relied on the deed will prevent reformation.
        (2) The Void-Voidable Distinction A void deed is gone from the beginning, so courts
            will set it aside even as against a subsequent BFP (so recording act is no protection),
            while a merely voidable deed is still good but can be undone, so courts will not set it
            aside against a BFP (recording act is good).
        (3) Defects Rendering Deed Void Forgery, lack of delivery, and fraud in the execution (a
            fraud such that grantor does not know that he is signing a deed) almost always render a
            deed void.

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      (4) Defects Rendering a Deed Voidable include fraud in the inducement, insanity, lack of
          capacity, duress, undue influence, mistake, and breach of fiduciary duty.
2. 558.19 Forms of Conveyance. The following or other equivalent forms of conveyance, varied
   to suit the circumstances, are sufficient for the purposes herein contemplated.
   a) Quitclaim Deed: For the consideration of __ dollars, I hereby quitclaim to ___ all my
      interest in the following tract of RE (describing it).
   b) Deed In Fee Simple W/O Warranty: For the consideration of ___dollars, I hereby convey
      to ___the following tract of RE (describing it).
   c) Deed In Fee W/Warranty: The same as the last preceding form, adding the words: "And
      I warrant the title against all persons whomsoever" (or other words of warranty, as the party
      may desire).
   d) Mortgage The same as deed of conveyance, adding the following: "To be void upon
      condition that I pay," etc.
3. 558.20 Acknowledgment w/in state. The acknowledgment of any deed, conveyance, or other
   instrument in writing by which RE in this state is conveyed or encumbered, if made w/in the
   state, must be before some court having a seal, or some judge or clerk thereof, or some county
   auditor, or judicial magistrate or district associate judge w/in the county, or notary public
   w/in the state. Each of the officers above named is authorized to take and certify
   acknowledgments of all written instruments, authorized or required by law to be
4. 558.39(1) Forms of acknowledgment—foreign acknowledgments. The following forms of
   acknowledgment shall be sufficient in the cases to which they are respectively applicable. In
   each case where one of these forms is used, the name of the state and county where the
   acknowledgment is taken shall precede the body of the certificate, and the signature and
   official of the officer shall follow it as indicated in the first form ... and the seal of the officer
   shall be attached when necessary under the provision of this chapter. No certificate of
   acknowledgment shall be held to be defective on account of the failure to show the official
   title of the officer making the certificate if such title appears either in the body of such
   certificate therewith or with the signature thereto.
   a) In the case of natural persons acting in their own right:
      State of ........... )
      County of .......... ) ss
      On this ...... day of ............, A.D. 19..., before me, .................. (Insert title of
      acknowledging officer), personally appeared ............, to me known to be the person ............
      named in and who executed the foregoing instrument, and acknowledged that ............
      executed the same as ............ voluntary act and deed.
5. 558.40. Liability of officer Any officer, who knowingly misstates a material fact in either of
   the certificates mentioned in this chapter, shall be liable for all damages caused thereby, and
   shall be guilty of a serious misdemeanor.
6. 558.41. Recording—Priority Rules. An instrument affecting RE is of no validity against
   subsequent purchasers for a valuable consideration, without notice, or against the state or any

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   of its political subdivisions during and after condemnation proceedings against the RE, unless
   the instrument is filed and recorded in the county in which the RE is located, as provided in
   this chapter. ***

   A provision contained in a residential RE installment sales contract which prohibits the
   recording of the contract, or the recording of a memorandum of the contract, is unenforceable
   by any party to the contract.
7. 558.42. Acknowledgment as condition precedent If not property acknowledged—not
   properly recorded. It shall not be deemed lawfully recorded, unless it has been previously
   acknowledged or proved in the manner prescribed in this chapter or chapter 77A, except that
   affidavits, and certified copies of petitions in bankruptcy ... and U.C.C. financing statements
   and changes need not be thus acknowledged. [Note: if it is recorded, even if not
   acknowledged, and purchaser saw it, they have actual K, the recording just does not import
   constructive K if not properly acknowledged]
8. Estoppel by deed. If a grantor grants a deed purporting to convey an interest that the grantor
   does not at that time own, and the grantor later acquires that interest, it automatically passes to
   the grantee. Generally do not need court action, but it may be advisable b/c if jurisdiction’s
   recording procedures would not put a BFP on notice, then a subsequent BFP from the grantor
   of the newly acquired right could trump the original grantee’s right.
   a) 557.4 After Acquired Interest—Exception. Where a deed purports to convey a greater
      interest than the grantor was at the time possessed of, any after-acquired interest of such
      grantor, to the extent of that which the deed purports to convey, inures to the benefit of the
      grantee. But if the grantor’s spouse joins in such conveyance for the purpose of
      relinquishing dower or homestead only, and subsequently acquires an interest therein as
      above defined, it shall not be held to inure to the benefit of the grantee.
9. Delivery, Acceptance and Escrow of Deeds. A deed is effective only when it is delivered.
   Once delivery has occurred, however, the deed no longer has any legal significance. A deed
   operates to transfer title only from its original grantor to its grantee. Any future conveyances
   will require a new deed, even if the transfer is back to the original grantor—need a new deed.
   Recording creates a presumption of delivery.
   a) Delivery and intent. Delivery does not require a handing over of the deed. The real
      question is whether the grantor does some act w/the intent to make the deed operative.
      Some cases find an oral statement enough.
      (1) may have a problem w/a land sale contract where the grantor dies during the life of the
          contract (so no delivery). Use escrow to get around—delivery to escrow agent counts as
   b) Deeds as will substitutes. Cannot grant a deed and reserve the right to revoke during your
      lifetime b/c there is no intent to make a present transfer.
   c) Conditional Deliveries. A grantor cannot impose an oral condition on delivery of the
      deed—most courts will find the deed valid and disregard the condition.

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     d) Conveying Future Interests. The rule against conditional delivery is different that
        conveying a future interest. Can convey a future interest that is conditional on the
        occurrence of an event in the future if the condition is spelled out in the deed.
     e) Acceptance. Have to have acceptance, but most courts imply acceptance, even when the
        grantee was unaware of the delivery. Grantee can, however, refuse delivery and court will
        find no acceptance.
     f) Escrows. An escrow is an instrument that is deposited w/a custodian w/instructions that it
        should be delivered upon the occurrence of some future condition.
        (1) Relation back. When conditions of the escrow are fulfilled and deed is delivered,
            delivery relates back to the time when the deed was handed to the custodian. This occurs
            even if the grantor has died or is incapacitated, as long as he was competent to make the
            transfer on the date he deposited the deed in escrow. Grantor must not have reserved any
            power to recall the deed from escrow.
        (2) Unauthorized Delivery By Escrow Agent. Delivery is ineffective and no title passes to
            the grantee. Even if the grantee has resold to a BFP, the majority of cases hold the
            grantor still prevails.
        (3) Death Escrows—can be a will substitute. Where escrow is made conditional upon the
            grantor’s death, delivery is valid despite the intervening death even when there is no
            underlying K. Courts find the delivery to the escrow agent immediately passes title to a
            future interest to the grantee. Grantor retains only a life interest. Upon the occurrence of
            the condition, full title vests. Cannot put any complicated conditions on it, however, or
            will not relate back and will have to have an underlying K.
        (4) Duties of Escrow Agent. Is the agent of both parties until the closing of the escrow, then
            he is the grantor’s agent w/respect to purchase money and grantee’s agent w/respect to
            the deed. Has a duty of reasonable care and skill and is a fiduciary in the sense that he
            must carry out the escrow instructions w/complete fidelity and accuracy. Can be liable
            in damages, which can include consequential and punitive damages. Generally does not
            have a duty, however, to protect parties from risks outside the escrow agreement (such
            as whether deed is good or check will clear).
C. Merger and Title Covenants.
  1. Merger. On matters of title quality, the contract is silent and the deed controls. Will only look
     to contract if deed is ambiguous and the terms do not contradict the terms of the deed. Can
     contract around (ISBA form has anti-merger provision), or can change covenants w/a
     subsequent deed. On matters not usually addressed in deed (e.g., condition of property), the
     contract still lives. Swenson v. Unions Central Life Ins. Co., 280 N.W. 600 (Iowa 1938).
  2. Covenants of Title. Deeds are not presumed to contain covenants about the quality of the title
     they convey—must express the covenants. A quitclaim deed contains no covenants, a WD
     explicitly contains one or more covenants (WD warranties that title is in a particular
     condition, and a special WD warranties that you did not loose part of the sticks on your
     watch). Both deeds will transfer everything the grantor has, a WD just adds a guarantee as to
     what the grantor actually has.

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   a) Distinctions b/n K and deed covenants.
      (1) deed covenants only take effect when the deed is delivered, at that point the K’s
          covenants are merged into the deed and have no further legal effect.
      (2) a party can only violate the deed covenants by an actual defect of title, not a mere risk
          or doubt about the title’s quality.
      (3) the only remedy for a violation of a deed covenant is damages. K covenants can involve
          rescission or specific performance w/partial price abatement.
   b) Present Covenants. Violated, if at all, only at the moment the deed containing them is
      delivered. The statute of limitations starts the moment of delivery whether grantee realizes
      the defect or not. Generally do not run w/the land so as to benefit a remote grantee (IA has
      varied from this)
      (1) covenant of seisin—promise that the grantor owns the estate that he is purporting to
      (2) right to convey—might lack seisin but still have a right to convey under a power of
          appointment or as an attorney in fact.
      (3) covenant against encumbrances—encumbrance is a mortgage, lien, easement, lease, or
          any interest that impairs the grantor’s title to the property. Sometimes does not violate if
          it is openly visible or if grantee knew about it.
   c) Future Covenants—only violated when grantee is evicted or disturbed of his possession by
      the person who claims the outstanding interest. The statute of limitations starts at the time
      of eviction. Run w/the land.
      (1) warranty and quiet enjoyment—promise that title will be as described in the deed, and
          will not be subject to any encumbrances. Also promise that grantor will defend grantee
          if he is evicted.
      (2) further assistance. A promise by grantor to execute any document that might be needed
          in the future to perfect the title that the original deed purported to transfer. Is usually
          part of warranty of quiet enjoyment and can enforce w/ specific performance.
      (3) Eviction is either a physical interference w/possession or a reasonable response to a
          serious threat from a 3rd party claimant (e.g., surrendering title to someone w/paramount
          title or buy the interest from the superior title holder). Other person must actually have
          superior title for grantee to recover.
      (4) Damages—grantor cannot be held liable for more than the price received when he sold
          the land.
         (a) get interest (some from date land acquired some from date of eviction), attorney’s
             fees and court costs in the 3rd party litigation, although sometimes have to notify
             grantor of suit to recover these. No fees are recoverable if 3rd party loses that action.
3. 614.1(5) Statute of Limitations. Have a 10 year statute of limitations to recover on a contract
   for the recovery of real property.

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  4. Covenant of Seizin runs w/the land in Iowa. The covenant that grantor actually has
     possession of interest he seeks to convey runs w/the land to subsequent grantees. Cannot bring
     an action until actually deprived of possession (only nominal damages would be available).
     Statute of limitations begins from the initial grant by the  you are suing. Moreover, his
     damages are capped at what he received (not at what the subsequent grantee paid) and interest
     starts to run from the date the subsequent grantee made payment. Rockafellor v. Gray, 191
     N.W. 107 (Iowa, 1922).
     a) 123. If 1 did not have title, 3 can sue 1, but SOL starts at time of 12 conveyance,
        interest runs from time of 23 conveyance, and damages are capped at what 2 paid 1,
        what 3 paid is irrelevent. Only get restitution damages (which focuses on what  received,
        not what  gave).
     b) If original grantor had no title whatever and no possession at time of execution, warranty
        breached upon his conveyance to grantee. This gave grantee a cause of action at the time of
        conveyance that is impliedly conveyed to subsequent grantee to bring. Statute of
        limitations, however, will begin from initial transfer, b/c can only convey the cause of
        action you had, that includes the time that has run.
  5. Statute of limitations if grantee does not get possession starts on date of conveyance b/c that
     is when cause of action arose. However, if grantee actually gets possession on date of transfer,
     the statute of limitations will start when evicted, whether is a breach of present or future
     covenant. Will never have a cause of action until eviction. Iowa law is in the minority on
     finding that present covenants both run w/the land and that the SOL on present covenants
     starts on date of eviction when grantee actually gets possession. The statute of limitations
     delay applies even as to subsequent grantees. Foshay v. Shafer, 89 N.W. 1106 (Iowa 1902).
D. Boundary Disputes. Owners of adjacent can enter into a relationship that fixes the location of an
   uncertain boundary. Courts will uphold these determinations, and b/c there is no technically
   transfer of property, the SOF does not apply.
  1. Boundary by Agreement. Parties can fix their boundary by an explicit agreement. Some courts
     require a time element and some require the parties to somehow mark the new boundary on
     the ground.
  2. Boundary by Acquiescence. Even w/o an agreement, owners can make a line their boundary
     through long recognition and acceptance of the line as the boundary. Silence by one party in
     the face of the other’s action, like erecting a fence, is enough. The time of acquiescence has to
     be long (most courts adopt the AP period). The parties must mark the new line on the ground
     (e.g., a fence or tree line).
  3. Boundary by Estoppel. If one owner erroneously tells the other that the boundary is in a
     certain place and the other owner relies on that representation to his detriment, the party who
     represented the line’s location is estopped from claiming the new boundary is incorrect. The
     majority of courts require the party to know the statement was in error when he made it, but
     some will apply even to an innocent mistake.
  4. Boundary by a Common Grantor. If a grantor marks a line on the ground and sells parcels on
     both sides by reference to the line (i.e., describes lots by lot numbers instead of meets and

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   bounds), the line is binding on the purchasers, even though he deed describes the boundaries
5. 624.1(5) statute of limitations for recovery of property is ten years in Iowa.
6. Iowa Law on Disputed Boundaries and Corners
   a) 650.1 When Allowed. When one or more owners of land, the corners and boundaries of
      which are lost, destroyed, or in dispute, desire to have the same established, they may bring
      an action in the district court of the county where such lost ... corners or boundaries, or part
      thereof, are situated against the owners of other tracts which will be affected by the
      determination or establishment thereof, to have such corners or boundaries ascertained and
      permanently established.
   b) 650.6 Acquiescence.  or  may, by proper plea, put in issue the fact that certain alleged
      boundaries or corners are the true ones, or that such have been recognized in by the parties
      or their grantors for a period of ten consecutive years, which issue may be tried before
      commission is appointed, in the discretion of the court.
   c) 650.7 Commission. The court ... shall appoint a commission of one or more disinterested
      surveyors, who shall ... proceed to locate the lost, destroyed, or disputed corners and
   d) 650. 10 Finding as to acquiescence. If that issue is presented, the commission shall also
      take testimony as to whether the boundaries and corners alleged to have been recognized
      and acquiesced in for 10 years or more have in fact been recognizes and acquiesced in, and,
      if it finds affirmatively ... shall incorporate the same into the report to the court.
   e) 650.12 Exceptions—hearing in court. A party in interest has 20 days after report is filed
      to object to it. If a party objects, court will hear and determine issue.
   f) 650.13 Decree conclusive. The corners and boundaries finally established by the court in
      such proceeding, or on appeal therefrom, shall be binding upon the parties as the corners or
      boundaries which had been lost, destroyed, or in dispute.
   g) 650.14 Boundaries by acquiescence established. If the court finds that the parties have
      recognized and acquiesced in the boundaries for 10 years, such recognized boundaries and
      corners shall be permanently established.
   h) 650.15 Appeal. There shall be no appeal in such proceeding, except from a final judgment
      of the court, taken in the time and manner that other appeals are....
   i) 650.17 Boundaries by agreement. Any lost or disputed corner or boundary may be
      determined by written agreement of all parties thereby affected, signed and acknowledged
      by each as required for conveyances of RE, clearly designating the same, and accompanied
      by a plat thereof, which shall be recorded as an instrument affecting RE, and shall be
      binding upon their heirs, successors and assigns.
7. Acquiescence is the mutual recognition by 2 or more landowners for 10 years or more that a
   line definitely marked by a fences or in some other manner is the dividing line b/n them.
   Parties must acknowledge and treat the line as the boundary for 10 or more years. Can infer

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      acquiescence through silence or inaction. There is no limit on the amount of land can lose or
      gain. Ollinger v. Bennet, 562 N.W.2d 167 (Iowa 1997).
      a) Factors to find acquiescence: 1) maintaining and improving the property; 2) one party
         asks the other party for permission to use land that the 1st party actually owns; 3) one party
         tells the other that the line is not the true boundary.
      b) cannot repudiate after the 10 years have run. Parties could agree, through proper
         agreement, to reestablish the boundaries, but a party cannot unilaterally revoke his previous
      c) County Zoning. B/c there is a statute on acquiescence, the fact that the new boundary
         renders the lot too small under county zoning regulations does not affect the acquiescence
E. Condition of Premises. There is an implied warranty for a house when you hire someone to
   build it or when you buy it from someone who built it, is in the business of building homes and
   built it for the purpose of selling it. W/a novice builder can have an express, but not an implied,
   1. Implied Warranties on Existing Homes. There is an implied warranty that a home was
      constructed in a reasonably good and workmanlike manner and that it will be fit for its
      intended purpose. The warranty may or may not run w/the land in IA, it is undecided. Does
      not merge w/deed. It is, however, limited to residential property. Kirk v. Ridgway, 373
      N.W.2d 491 (Iowa 1985)
      a) The rule of cavieat emptor generally applies to an existing home b/c it is there for
      b) Elements of warranty: (no negligence or fault required)
         (1) house was constructed to be occupied by the warrantee as a home;
         (2) house was purchased from a builder-vendor, who constructed it for the purpose of sale;
            (a) a builder-vendor is a person in the business of building or assembling homes on land
                that he owns.
               (i) only extends to the general contractor who directs and controls the constructions,
                   does not extend to material men, subcontractors, etc.
         (3) when sold, the house was not reasonably fit for its intended purpose or had not been
             constructed in a good and workmanlike manner;
         (4) at the time of the purchase, the buyer was unaware of the defect (defect was latent) and
             had no reasonable means of discovering it (if knew of it, we presume adjusted price);
         (5) the defective condition caused the buyer damage.
      c) damages: could be cost to correct, market price differential, or restitution, depending on
         what the court thinks will get the best result. See Timm.

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   d) note that the court hints that a buyer’s subjective experience or knowledge may render him
      ineligible for this protection.
2. 614.1(11) Statute of Limitations for Warranty Actions. All actions based on RE die after
   15 years from act (which is purchase for warranties), regardless of when they surface or arise.
   Effectively limits warranty period to 15 years. If tort law applied, would have 5 years form
   date action arose (i.e., injury). Once a produce it installed, however, it becomes a fixture and
   the 15 year limit from date of purchase/installation applies (e.g., gas valves, asbestos, etc.).
3. 558A.1. Disclosure statements: Definitions [must have disclosure statement on all new and
   used housing our can call deal off] As used in this chapter, unless the context otherwise
   requires: ... 4. "Transfer" means the transfer or conveyance by sale, exchange, RE contract, or
   any other method by which RE and improvements are purchased, if the property includes at
   least one but not more than four dwelling units (applies to new and used housing). However, a
   transfer does not include...:
   a) A transfer made pursuant to a court order, including but not limited to ... the execution of a
      judgment, the foreclosure of a RE mortgage ..., the forfeiture of a RE contract ..., a transfer
      by a trustee in bankruptcy, a transfer by eminent domain, or a transfer resulting from a
      decree for specific performance.
   b) A transfer to a Me by a Mr or successor in interest who is in default, ... or a deed in lieu of
   c) ***
   d) A transfer by quitclaim deed.
4. 558A.2. Procedures—if no disclosure, can call the deal off.
   a) A person interested in transferring real property, or a broker or salesperson acting on behalf of the person,
      shall deliver a written disclosure statement to a person interested in being transferred the RE. The disclosure
      statement must be delivered prior to either the transferor making a written offer for the transfer of the real
      property, or accepting a written offer for the transfer of the real property.
   b) The disclosure statement shall be made by personal delivery or by certified or registered mail to the
      transferee. The delivery may be made to the spouse of the transferee, unless otherwise provided by the
      parties. If the disclosure statement is not timely delivered, the transferee may withdraw the offer or revoke
      the acceptance without liability, within three days following personal delivery of the statement or five
      days following delivery by mail.
   c) The disclosure statement may be filed with the county recorder with instruments affecting the transfer of RE.
      However, the failure to file the statement shall not cause a defect in title to the RE.

5. 558A.3. Good faith and amendments
   a) All information required by this section and rules adopted by the commission shall be disclosed in good faith.
      If at the time the disclosure is required to be made, information required to be disclosed is not known or
      available to the transferor, and a reasonable effort has been made to ascertain the information, an
      approximation of the information may be used. The information shall be identified as an approximation. The
      approximation shall be based on the best information available at the time.
   b) A disclosure statement shall be amended, if information disclosed in the statement is or becomes inaccurate or
      misleading, or is supplemented. The amended statement shall be subject to the same procedures as the
      original disclosure statement as provided in this chapter. However, the statement is not required to be
      amended if either of the following applies:

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        (1) The information disclosed in conformance with this chapter is subsequently rendered inaccurate as a result
            of an act, occurrence, or agreement subsequent to the delivery of the disclosure statement.
        (2) The information is based on information of a public agency, including the state, a political subdivision of
            the state, or the U.S.. The information shall be deemed to be accurate and complete, unless the transferor
            or the broker or salesperson has actual knowledge of an error, inaccuracy, or omission, or fails to exercise
            ordinary care in obtaining the information.
6. 558A.4. Required information
     a) The disclosure statement shall include information relating to the condition and important characteristics of
        the property and structures located on the property, including significant defects in the structural integrity of
        the structure, as provided in rules which shall be adopted by the RE commission. The disclosure statement
        shall also include whether the property is located in a RE improvement district and the amount of any special
        assessment against the RE under chapter 358C. The rules may require the disclosure to include information
        relating to the property's zoning classification; the condition of plumbing, heating, or electrical systems; or
        the presence of pests.
     b) The disclosure statement may include a report or written opinion prepared by a person qualified to make
        judgment based on education or experience, ... including but not limited to a land surveyor licensed pursuant
        to chapter 542B, a geologist, a structural pest control operator licensed pursuant to 206.6, or a building
        contractor. The report or opinion on a matter within the scope of the person's practice, profession, or
        expertise shall satisfy the requirements of this section or rules adopted by the commission regarding that
        matter required to be disclosed. If the report or opinion is in response to a request made for purposes of
        satisfying the disclosure statement, the report or opinion shall indicate which part of the disclosure statement
        the report or opinion satisfies.

7. 558A.5. Agency
     a) A person other than a broker or salesperson acting in the capacity of an agent in the transfer of RE shall not
        be deemed to be an agent of the transferor or transferee for purposes of this chapter, unless the person is
        granted powers of attorney or is empowered as an agent, as expressly provided in writing, and is subject to
        any other applicable requirements as provided by law.
     b) A broker or salesperson representing the transferor shall deliver the disclosure statement to the transferee,
        unless the transferor or transferee has instructed the broker or salesperson otherwise in writing.

8.   558A.6. Liability under the chapter [cannot rescind after closing, but can get damages from
     owner] A person who violates this chapter shall be liable to a transferee for the amount of actual damages the
     transferee suffers, but subject to the following limitations:
     a) The transferor, or a broker or salesperson, shall not be liable under this chapter for the error, inaccuracy, or
        omission in information required in a disclosure statement, unless that person has actual knowledge of the
        inaccuracy, or fails to exercise ordinary care in obtaining the information.
     b) The person submitting a report or opinion within the scope of the person's practice, profession, or expertise,
        for purposes of satisfying the disclosure statement, shall not be liable under this chapter for any matter other
        than a matter within the person's practice, profession, or expertise, and which is required by the disclosure
        statement, unless the person failed to use care ordinary in the person's profession, practice, or area of
        expertise in preparing the information.
9. 558A.7. Chapter is not limiting This chapter and the rules the RE commission adopts do not
   limit or abridge any duty, requirement, obligation, or liability for disclosure created by another
   provision of law, or under a contract between parties.
10.558A.8. Validity of a transfer A transfer shall not be invalidated solely because of a failure
   of a person to comply with a provision of this chapter.

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11.193E I.A.C. § 1.39 Property condition disclosure statement required. Specifies the form
   seller has to use.
  a) At the time a licensee obtains a listing, he shall obtain a completed disclosure signed and dated by each seller
     the licensee represents.
     (1) licensee representing a seller shall deliver the executed statement to a potential buyer or his agent, prior to
         seller making a written offer to sell or to the seller’s accepting a written offer to buy.
     (2) licensee representing a seller shall attempt to get the buyer’s signature and shall provide the seller and
         buyer w/fully executed copies of the disclosure [and keep a copy]... if he is unable to get the buyer’s
         signature, the licensee shall obtain other documentation in the transaction file.
     (3) If the transaction closes, the listing broker has to keep a copy of the disclosure statement for 5 years.
  b) A licensee representing a buyer shall notify the buyer of the seller’s obligation to deliver the disclosure
     (1) If disclosure not delivered when required, licensee shall tell buyer that he may revoke or withdraw the
     (2) If buyer wants to revoke or withdraw the offer, licensee shall get a written revocation or withdrawal from
         buyer and deliver it to the seller w/in 3 days of personal delivery of disclosure or 5 days of delivery by
         mail of disclosure.
12. 42 U.S.C. § 4852d Disclosure of information concerning lead
  a) Lead disclosure in purchase and sale or lease of target housing
     (1) Lead-based paint hazards the Secretary and the Administrator of the EPA shall promulgate regulations
         under this section for the disclosure of lead-based paint hazards in target housing which is offered for sale
         or lease. The regulations shall require that, before the purchaser or lessee is obligated under any contract
         to purchase or lease the housing, the seller or lessor shall—
         (a) provide the purchaser or lessee with a lead hazard information pamphlet;
         (b) disclose to the purchaser or lessee the presence of any known lead-based paint, or any known lead-
             based paint hazards, in such housing and provide to the purchaser or lessee any lead hazard evaluation
             report available to the seller or lessor; and
         (c) permit the purchaser a 10-day period (unless the parties mutually agree on a different period of time)
             to conduct a risk assessment or inspection for the presence of lead-based paint hazards.
     (2) Contract for purchase and sale every contract for the purchase and sale of any interest in target housing
         shall contain a Lead Warning Statement and a statement signed by the purchaser that the purchaser has—
         (a) read the Lead Warning Statement and understands its contents;
         (b) received a lead hazard information pamphlet; and
         (c) had a 10-day opportunity (unless the parties mutually agreed upon a different period of time) before
             becoming obligated under the contract to purchase the housing to conduct a risk assessment or
             inspection for the presence of lead-based paint hazards.
     (3) Contents of Lead Warning Statement The Lead Warning Statement shall contain the following text
         printed in large type on a separate sheet of paper attached to the contract:
         Every purchaser of any interest in residential real property on which a residential dwelling was built
         prior to 1978 is notified that such property may present exposure to lead from lead-based paint that may
         place young children at risk of developing lead poisoning. Lead poisoning in young children may
         produce permanent neurological damage, including learning disabilities, reduced intelligence quotient,
         behavioral problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant
         women. The seller of any interest in residential real property is required to provide the buyer with any
         information on lead-based paint hazards from risk assessments or inspections in the seller's possession

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         and notify the buyer of any known lead-based paint hazards. A risk assessment or inspection for possible
         lead-based paint hazards is recommended prior to purchase.
   b) Penalties for violations
      (1) Monetary penalty Any person who knowingly violates any provision of this section
          shall be subject to civil money penalties....
      (2) Secretary can seek injunctive relief.
      (3) Civil liability treble damages for a knowing violation.
      (4) Costs court can award fee shifting to successful plaintiff.
      (5) Up to a $10k fine for violation.
   c) Validity of contracts and liens Nothing in this section shall affect the validity or
      enforceability of any sale or contract for the purchase and sale or lease of any interest in
      residential RE or any loan, loan agreement, mortgage, or lien made or arising in connection
      with a mortgage loan, nor shall anything in this section create a defect in title.
13.Express Warranties. There is no implied warranty when the home is existing and the builder
   is a novice b/c the seller is not a builder-vendor. There can, however, be an express warranty
   that exists b/c of the incorporation of letters from the vendor speaking to the
   condition/quality/construction of the property. Even though the vendor is a novice builder, if
   he uses terms of the trade to describe the method/materials of construction, he will be held to
   the industry terms and standards for such terms. Flom v. Stahly, 569 N.W.2d 135 (Iowa
   a) To have an express warranty, the seller must have made some distinct assertion of quality
      regarding the thing to be sold as distinguished from a mere statement of opinion or praise
      and seller must have intended the buyer to believe and rely on that assertion. Buyer must,
      of course, actually believe and rely on the assertion.
   b) The failure of warranty must proximately cause the harms complained of.
   c) There is no comparative fault defense when the complaint is contractual in nature.
      (1) when an action on breach of warranty is solely to recover for damage to the object of the
          contract, the claim is in contract. Recovery for damage to person or property that was
          not the subject of the K may sound in tort.
   d) Amount of damages—court can award cost of repairs.
14.Warranties and environmental damage—negligence. The seller of property has a duty to
   inform the buyer of potential environmental problems on the land if the problems that the
   seller knows of or should know of, are latent and are located, at least partially, on the land
   sold or located on off-site land that the seller owns. There is no duty if the problem is obvious
   or if the problem is located on land the seller does not own. May also have negligence per se
   if failure to disclose was a violation of a statute or regulation. In addition, inaccuracy of a
   disclosure statement may be grounds for a breach of contract action if the seller knew about
   the statement’s inaccuracy (does not deal w/quality of title so no merger). Timm v. Clement,
   574 N.W.2d 368 (Iowa Ct. App. 1997).

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         a) damages—court awards diminution in FMV. In this case, b/c owners of RE are liable for
            clean up costs, costs of clean up would be better remedy.
III. Title Assurance Systems
    A. Recording Acts are a codification of the common law shoes principle.
      1. Black Letter. The government does not make any affirmative statements about the quality of
         title, or the quality of the land, they simply provide the mechanisms by which people can be
         put on notice. Some states do, however, operate a Torrens system, whereby the government
         does make an affirmative statement about the quality of the land.
         a) Limitations on the recording system. It may sometimes produce a wrong result.
            (1) There is no assurance that the recorded documents are valid and enforceable. They may
                be forged or undelivered, for example.
            (2) Many events can affect title to land but do not have to be recorded (like AP).
            (3) Searchers commonly do not trace title back to the original grantor.
         b) Basic operation. Do not have to record any document, the instrument is always valid b/n
            the parties. Recording just gives you protection against 3rd parties.

            AB; then AC w/o Notice; C Records; then B Records
            Race: C wins; Notice (Iowa): C wins; Race/Notice: C wins
            AB; then AC w/Notice; C records; then B records
            Race: C; Notice: B; Race/Notice: B.
            AB; then AC w/o notice; then B records; then C records
            Race: B; Notice: C (wins even if never records b/c only need no notice at time of transfer); R/N: B wins (C
            has to record 1st and not have notice).
         c) Interests and Conveyances Outside the Recording Acts. If the recording act does not cover
            a particular conveyance, failure to record the conveyance cannot affect the transfer. Usually
            short-term leases (b/n 1-3 years), mechanics liens, and dower or curtsey claims are outside
            the acts. Other transfers are recorded in another office, like wills, condemnation, transfers
            to bankruptcy trustee, and local tax liens. Still have things like AP that do not have to be
            recorded at all b/c there is no written evidence of the ―transaction.‖
         d) Payment of value—only a BFP if you gave value. Most cases require an amount that is
            substantial in relation to the value of the property. Payment must be actual, not a mere
            promise to pay, but a negotiable instrument that is in fact negotiated counts as value.
            (1) judgment creditor—has not paid value (can only get interest debtor had at time lien
                attached, even if unrecorded, debtor still had no interest).
            (2) securing antecedent debt—no value unless creditor gave further concessions, like an
                extension of time, lower interest rate, etc. Extending a new loan, however, is payment of
            (3) conveyance in satisfaction of preexisting debt—counts as value in most cases, although
                there is a split.
         e) Taking w/o notice. A BFP must take w/o notice of the prior conveyance.

                                                    Real Estate
     (1) Actual notice
     (2) Inspection Notice—Rights of parties in possession—every purchaser is held to notice of
         the facts that he would have discovered by inspecting the property and making an
         inquiry of anyone in possession, but no inquiry is necessary if the seller personally is in
         possession, or if possession is otherwise consistent w/ the record title. About ½ the
         states, including IA, hold that for a short period of time since conveyance, a former
         grantor in possession is the same as the seller himself.
        (a) If there are several parties in possession and 1 is the record owner, the purchaser has
            no duty to make inquiry of the other possessors.
        (b) If the party in possession is a tenant, the courts hold the purchaser to have notice of
            any rights of extension, renewal, options, or other similar rights even if they are
            unrecorded and negotiated after the recorded lease.
     (3) Constructive Notice: public record Any recorded document, even those recorded at the
         court house instead of the recorder’s office, give constructive notice.
     (4) Inquiry notice—if any of the above provide purchaser w/notice that would lead
         reasonable man to make a further inquiry, purchaser is held to have the knowledge he
         would have acquired through such further inquiry.
  f) Quitclaim deed—older cases hold that a person who takes by quitclaim deed cannot be a
     BFP (IA follows this rule), but a majority of modern cases reject this rule.
  g) Unrecorded documents in chain of title. A purchaser is held to knowledge of documents in
     his own chain of title even if they are not recorded. Some cases also hold that if there is an
     unrecorded link in your chain of title, you cannot be a BFP.
  h) Shelter—once you become a BFP, you can pass that BFP status on to future grantees, even
     if they are not BFPs. XY (BFP)Z (not BFP as to X-Y). Z is a BFP as to X-Y. Z will
     still have to qualify as a BFP as to the Y-Z transfer.
  i) Installment Land Contracts. If get notice in middle of payments, only get BFP protection to
     the extent of payments already made (Note: need actual notice, constructive notice will not
     apply if the transfer is recorded after payments have begun—makes sense b/c have no duty
     to check the recorder’s office every month before you make your payment).
        (a) Most give land to prior grantee and give the installment purchaser a lien on the land
            in the amount of his payments w/interest.
        (b) A few give installment purchaser a fractional interest as a tenant in common w/prior
            grantee proportionate to portion of payments completed.
        (c) A few payments just require installment purchaser to continue making payments to
            prior grantee and everything else stays the same.
  j) Indexes to the record. Two type of indexes: 1) name (these suck); 2) tract (describe all the
     transactions involving a certain piece of land).
2. 558.1 Instruments Affecting Real Estate Defined—Revocation. All instruments containing
   a power to convey, or in any manner relating to RE, including certified copies of petitions in

                                        Real Estate
   bankruptcy ... of decrees of adjudication in bankruptcy ... shall be held to be instruments
   affecting the same; and no such instrument, when acknowledged or certified and recorded as
   provided in this Chapter, can be revoked as to 3rd parties by any act of the parties by whom it
   was executed, until the instrument containing the revocation is also recorded in the same
   office where the original instrument is recorded, except that U.C.C. financing statement
   changes do not have to be acknowledged.
3. 558.8 Affidavits explanatory of title—presumption. Affidavits explaining any defect in the
   chain of title to any RE may be recorded as instruments affecting the same, but no one except
   the owner in possession of such RE shall have the right to file such affidavit. Such affidavit
   or the record thereof ... shall raise a presumption from the date of recording that the purported
   facts stated therein are true; after the lapse of 3 years from the date of such recording, the
   presumption shall be conclusive.
4. Recording statute—See 558.40&.41 supra (Iowa is a notice state). Note that recording
   statutes give title to someone who does not really have title simply b/c of BFP status.
5. 558.49 Index Book. The recorder must keep index books, w/pages divided into columns as
   follows: 1) each grantor; 2) each grantee; 3) time instrument filed; 4) date of instrument; 5)
   nature of instrument; 6) book and page where record can be found; 7) description of the RE
6. 558.50 affidavits also have an index.
7. 558.51 separate indexes required. separate index books shall be kept for mortgages and
   satisfactions or releases of same, one for those containing descriptions of lots, and one for
   those containing land; and separate books for other conveyances of RE, one for lots, and one
   for lands; and an index book shall be kept for powers of attorney, affidavits, and certified
   copies of bankruptcy petitions; all of the above shall be arranged alphabetically as provided in
8. 558.52 Alphabetical arrangement. The entries in such book shall show the names of the
   respective grantors and grantees, arranged in alphabetical order.
9. 558.53 City lot deeds and mortgages. The recorder shall index and record all deeds,
   mortgages, and other instruments affecting lots in cities or villages, the plats whereof are
   recorded, in separate books from those in which other conveyances of RE are recorded.
10.558.54 Deeds covering land and lots. Record instrument in one (does not matter which one),
   charge only one fee, but index in both.
11.558.55 Filing and indexing—constructive notice. Recorder must endorse on every
   instrument properly filed, the day, hour and minute of the filing, ―forthwith‖ index the record
   and the filing and indexing shall constitute constructive notice to all persons of the rights of
   the grantees conferred by such instruments.
12.Payment required for BFP. Kitteridge v. Chapman, 36 Iowa 348 (1873). The big deal here
   is that have to either have parted w/money or be liable to a 3rd party b/c if only liable to vendor
   (seller), then you have no equities b/c if title failed to pass, you are not on the hook.

                                          Real Estate
   a) In order to have BFP status, must have paid purchase money before notice of prior equity
      (i.e., the 6/9/69 transfer). Need actual payment to get BFP protection, a security interest or
      bond or other obligation to seller is not enough.
      (1) when execute a negotiable instrument that has been negotiated, then you have
      (2) when transfer as it stands at point of notice is just transfer of title, w/no transfer of $, all
          equities passed from original grantor to first grantee. Only payment gives subsequent
          transferee any equities that justify undoing the prior conveyance. Consideration must
          be paid in full before notice.
         (a) This arises mostly in the context of ILKs where a prior conveyance is not on the
             record, the ILK is on the record and vendee has made partial payments. The vendee
             will not acquire BFP status b/c: 1) no transfer of title, and 2) no full payment (and not
             on hook to any 3rd party for debt).
      (3) When there is a significant amount paid, court will enforce ―he who seeks equity must
          do equity‖ and require reimubrsement (from former purchaserh, not seller, but would
          still have action for expectation damages against seller) of price paid. If only a small
          amout unpaid, the court may treat vendee as BFP anyway.
13.Quitclaim title. The original grantee of a quitclaim deed cannot be a BFP. His subsequent
   grantees, however, can be BFPs if they take by WD (note that other cases in Iowa strictly limit
   this to a quitclaim deed). In a quitclaim transfer, the grantee is assuming risks of bad title, and
   pays lower price b/c of such risk. The subsequent WD, however, does not purport to lower the
   price for any risk that grantee assumes. Winkler v. Miller, 6 N.W. 698 (Iowa 1880).
14.Lis Penden—See 617.10-12. Acts as a recording act but not filed in recorder’s office, so have
   to check w/courthouse in county where land is located before can be sure.
15.Defenses on original contract are not valid against a BFP. Raub v. General Income
   Sponsers of Iowa, 176 N.W.2d 216 (Iowa 1970).  was clearly defrauded out of her home by
   GIS. GIS, however, once it got title, and recorded it, mortgaged the home.  can get her
   home back but it is still subject to the mortgage.
   a) Burden of Proof is on person asserting BFP status to prove his good faith.
   b) This is not a recording act case b/c it is not an action based on an instrument affecting RE.
      This is a common-law BFP case, but it applies the same standards as the recording act.
   c) Notice.
      (1) Inquiry notice—if circumstances would lead a reasonably prudent person to
          investigate, then are held to all knowledge such investigation would have imparted.
         (a) Possession is usually inquiry notice of rights of possessor, but not where previous
             grantor is in possession.
16. 428A.1.  Amount of tax on transfers--declaration of value There is a tax of $.08 per $500
   (or fraction thereof) for any RE transferred (does not include gifts, mortgages, or instruments
   recorded to correct title). The important part, however, is that there must be a declaration of

                                           Real Estate
   value signed by at least one of the sellers or one of the buyers or their agents submitted to the
   county recorder. However, if the deed, instrument, or writing contains multiple parcels some
   of which are located in more than one county, separate declarations of value shall be
   submitted on the parcels located in each county and submitted to the county recorder of that
   county when paying the tax as provided in § 428A.5. A declaration of value is not required
   for those instruments described in § 428A.2(2)-(5), (7)-(13), and (16)-(21), or described in §
   428A.2(6), except in the case of a federal agency or instrumentality, or if a transfer is the
   result of acquisition of lands, whether by contract or condemnation, for public purposes
   through an exercise of the power of eminent domain. The declaration of value shall state the
   full consideration paid for the real property transferred. If agricultural land ... is purchased by
   a corporation, limited partnership, trust, alien or nonresident alien, the declaration of value
   shall include the name and address of the buyer, the name and address of the seller, a legal
   description of the agricultural land, and identify the buyer as a corporation, limited
   partnership, trust, alien, or nonresident alien. The county recorder shall not record the
   declaration of value....
17.428A.2. Exceptions The tax imposed by this chapter shall not apply to:
      (1) ILKs
      (2) Any instrument of mortgage.
      (3) Any will.
      (4) Any plat.
      (5) Any lease.
      (6) Any deed, involving the government.
      (7) Deeds for cemetery lots.
      (8) Deeds which secure a debt or other obligation, except those included in the sale of real property.
      (9) Deeds for release of a security interest in property excepting those pertaining to the sale of RE.
      (10)Corrective deeds made w/o any additional consideration.
      (11)Deeds between husband and wife, or parent and child, without actual consideration. A cancellation of
          indebtedness alone which is secured by the property being transferred and which is not greater than the
          FMV of the property being transferred is not actual consideration within the meaning of this subsection.
      (12)Tax deeds.
      (13)Deeds of partition where the interest conveyed is w/o consideration. However, if any of the parties take
          shares greater in value than their undivided interest a tax is due on the greater values, computed at the rate
          set out in 428A.1.
      (14)The making or delivering of instruments of transfer resulting from a corporate merger....
      (15)Transfers pursuant to dissolution of corporation or partnership.
      (16)Transfers under a divorce decree.
      (17)Deeds transferring easements.
      (18)Forfeitures or deeds in lieu of foreclosure.
      (19)Deeds executed by public officials in the performance of their official duties.
      (20)Deeds transferring distributions of assets to heirs at law or devisees under a will.
      (21)Deeds in which the consideration is five hundred dollars or less.
18.428A.3. Who liable for tax Seller/grantor liable for tax but not a public official who executes
   an instrument in connection w/his official duties.
19.428A.4. Recording refused The county recorder shall refuse to record any deed, instrument,
   or writing, taxable under 428A.1 for which payment of the tax determined on the full amount
   of the consideration in the transaction has not been paid, unless exempt under 428A.2 if there
   is filed with or endorsed on it a statement signed by either the grantor or grantee or an
   authorized agent, that the instrument or writing is excepted from the tax under 428A.2. The

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   validity of an instrument as between the parties, and as to any person who would otherwise be
   bound by the instrument, is not affected by the failure to comply with this section. If an
   instrument is accepted for recording or filing contrary to this section the failure to comply
   does not destroy or impair the record as notice.

   The county recorder shall refuse to record any deed, instrument, or writing ... except those
   transfers exempt from tax under 428A.2, subsections 2 to 5, and 7 to 13, or under 428A.2(6),
   except in the case of a federal agency or instrumentality, until the declaration of value has
   been submitted to the county recorder. A declaration of value shall not be required with a
   deed given in fulfillment of a recorded RE contract provided the deed has a notation that it is
   given in fulfillment of a contract.
20.558.69. Reporting of wells, disposal sites, underground storage tanks, and hazardous
   waste—liability Along w/declaration of value, also have to disclose existence and location
   of: wells, solid waste, storage tanks, hazardous waste, and burial sites. The statement shall be
   signed by at least one of the sellers or their agents. The county recorder shall refuse to record
   any deed, instrument, or writing for which a declaration of value is required under chapter
   428A unless the statement required by this section has been submitted to the county recorder.
   A buyer of property shall be provided with a copy of the statement submitted, and, following
   the fulfillment of this provision, if the statement submitted reveals no well, disposal site,
   underground storage tank, or hazardous waste on the property, the county recorder may
   destroy the statement. The land application of sludges or soils resulting from the remediation
   of underground storage tank releases accomplished in compliance with DNR rules without a
   permit is not required to be reported as the disposal of solid waste or hazardous waste.

   If a declaration of value is not required, the above information shall be submitted on a
   separate form.....

   The owner of the property is responsible for the accuracy of the information submitted on the
   form. The owner's agent shall not be liable for the accuracy of information the owner of the
   property provided. The provisions of this paragraph do not limit liability which may be
   imposed under a contract or under any other law.
21. 558.46. Mandatory recording of certain residential RE ILKs
      (1) Every RE ILK transferring an interest in residential property shall be recorded by the contract seller with
          the county recorder in the county in which the RE is situated not later than 180 days from the date the
          contract was signed by the contract seller and contract purchaser.
      (2) Failure to record a RE contract ... is punishable by a fine not to exceed $100 per day for each day of
          violation. The county recorder shall record a late ILK, but then must forward it to the county attorney so
          he can impose the fine....
      (3) Failure to timely record shall not invalidate an otherwise valid RE contract. However, a contract seller is
          prohibited from initiating forfeiture proceedings on the basis of a failure to comply with the terms of a RE
          contract, if the contract has not been recorded [so has to decide whether to record and pay the fine or
          waive the default].
      (4) can satisfy the recording requirement by recording either the entire ILK or a memorandum of the contract
          containing at least the names and addresses of all parties named in the contract, a description of all real
          property and interests in the real property subject to the contract, the length of the contract, and a

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             statement as to whether the seller is entitled to the remedy of forfeiture and as to the dates upon which
             payments are due.
          (5) ... "residential property" includes commercial property consisting of three or more separate living quarters
              with at least seventy-five percent of the space used for residential purposes....
B. Title Searches and Abstracts
  1. Search Methods In a tract index system, the searcher simply runs his eye down the
     appropriate column on the relevant page in the index book, makes note of all documents
     which affect the land being searched, and then reads those documents. In a name index
     system, the search consists of three steps: (1) use the grantee index to identify the "chain of
     title"; (2) use the grantor index to identify any "adverse" conveyances; and (3) read all
     documents thus identified. Whether a name or tract index system is used, the searcher must
     also check various sources outside the recorder's office such as the bankruptcy court, local
     trial court dockets, tax and assessment lien records, and perhaps various local government
  2. Improper Indexing If a document is improperly indexed, the majority of cases treat the
     document as recorded despite the mis-indexing. Some recent cases reject his rule.
  3. Chain Of Title Problems Certain adverse conveyances are difficult or impossible to find in a
     name index recording system, even though they are in fact copied into the deed books and are
     accurately indexed.
     a) The Wild Deed—if a party in chain of title made a conveyance that was unrecorded and one
        that was recorded, could have two chains of title and would only know to search the one
        that leads to your current grantee. Cases uniformly treat the chain with the unrecorded deed
        as if all subsequent deeds were unrecorded.
     b)   The Late-Recorded Deed—An adverse conveyance that was recorded late. Would only find
          it if searched grantor index for grants after date of first grant (real pain in the butt). Most
          cases, however, treat the late recorded deed as recorded, which means you have to go
          through the additional time after grantor granted first deed to make sure there are no
          subsequent grants.
     c)   The Early-Recorded Deed—record deed before you actually have it and grantor
          subsequently grants to someone else. Most courts treat as recorded, so have to search back.
     d) The Deed Which Conveys One Parcel and Encumbers Another. This problem will arise
        w/tract or name index.
C. Title Opinions and Standards. These do not have the force of law, but they do set the standard
   for the profession, which will protect you from liability.
  1. 1.1 Standard For Objections. The purpose of title examination is to secure title for the client
     that is in fact marketable and is shown by the record to be marketable, subject to no
     encumbrances other than those expressly provided for by the client’s contract. Object only
     when the irregularities or defects can reasonably be expected to expose the purchaser or
     lender to adverse claims or litigation. Must be a reasonable probability of litigation.
     a) Intended to eliminate technical objections that do not impair marketability and common
        objections that result from a misunderstanding of the law. To test the problem, the attorney

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         should try to figure out who, if anyone, could take advantage of the defect against his
   2. 4.2 Quit Claim in chain of title. When the present owner holds by quit claim and will convey
      by WD, the examiner does not need to get an affidavit from the grantor in the quit claim deed
      stating that there are no unrecorded deeds, contracts, etc.
      a) the quit claim grantee is not a BFP, but the subsequent grantee by WD [or specicial WD] is
         a BFP and does not take subject to other equities. , a quit claim deed does not cloud the
         future chain of title.
   3. 4.8 Severance of Joint Tenants. If the property is not the homestead, a transfer of property
      held by H &W as joint tenants w/right of survivorship by H to a 3rd party and a reconveyance
      by the 3rd party back to H is sufficient to terminate the joint tenancy. If the property is the
      homestead, however, the initial conveyance is ineffective unless H & W sign off on the deal,
      so in the case of homestead property, such a transfer is not sufficient to kill the joint tenancy.
   4. 4.10 Lapse of time and presumption of delivery. Recording creates a presumption of
      delivery, even if recorded after grantor’s death. A lapse of time b/n execution and recording
      does not affect that presumption, and therefore does not affect title. Should only object if other
      factors raise concern that presmption could be rebutted.
   5. 5.3 No recitation of marital status in the deed. There is no problem if the deed was recorded
      prior to 7/1/81 unless there is a suit filed or a notice of claim recorded. If the deed is recorded
      after 7/1/81, must get either: 1) affidavit that grantor was unmarried at the time of the
      execution and delivery of the deed; or 2) if the grantor was married at the time of execution
      and delivery of the deed, either an affidavit that the spouse predeceased the grantor or a
      further conveyance from the spouse. Standard 5.7, rather than this standard, governs deeds
      given in satisfaction of ILK.
   6. 5.5 Release of dower but not homestead. If a deed by H & W is not cured by 614.15 but
      contains a release of dower w/o a release of homestead and the other spouse did not join in the
      conveyance, it is necessary to get proof by affidavit that the property was not occupied by H &
      W as the HS on date of execution and delivery of the deed.
   7. 5.7 Land Contracts and Marital Status. When an owner and spouse enter into ILK and the
      ILK is recorded, it is not necessary for the owner’s spouse to join in the execution of the deed
      given to fulfill the contract. As long as get spouse in contract, do not need again in deed.
D. Title Clearing Statutes. Limit how far back searcher has to go. Iowa has a series of specific
   (rifle) statutes and then one general (shotgun) provision. Root of title—where the ―safe‖ chain
   starts. Have to find a grant some point beyond the statutory period. In Iowa, the period is 40
   years, so if you have not been in possession as record owner for 40 years, have to go back to 1st
   grant before 40 years. E.g., searching in 1999, grant recorded in 1960 will not do the trick, if the
   last grant was in 1950, even though it is more than 40 years ago, that grant is the root of the title.
   1. Defective Acknowledgments—10 year SOL.
      a) 589.1. No seal on acknowledgement: cannot challege after 10 years from date instrument
         was made and executed.

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   b) 589.3 No acknowledgement or defective acknowledgment: cannoat challenge after 10
   c) 589.6 All instruments in writing executed by a corporation before July 1, 1996, which are
      more than one year old, conveying ... RE... where the corporate seal of the corporation has
      not been affixed or attached, and which are otherwise legally and properly executed, are
      legal, valid and binding as though the corporate seal had been attached or affixed.
   d) 589.11. If an executor, administrator, trustee, guardian, assignee, receiver, referee, or
      commissioner ... has conveyed in his trust capacity RE in this state and the conveyance has
      been of record for more than 10 years, ... the conveyance is not void or insufficient because
      due and legal notice of all proceedings w/reference to the making of the conveyance was
      not served upon all interested parties ... and all conveyances are valid, legal and binding.
   e) 589.12 Sheriffs’ Deeds. A sheriffs’ deed executed more than 10 years earlier that purports
      to sustain the record title is not ineffectual b/c of the failure of the record to show that any
      of the steps in obtaining the judgment or in the sale of the property were complied w/. The
      proceedings are legalized as if the record showed that the law has been complied with.
   f) 589.13 Sheriff’s deed executed by deputy. If more than 10 years old, does not matter.
   g) 589.14 Defective Tax Deeds. After 10 years frome execution of deed, cannot challenge
      deed b/c of failure to comply w/proper procedures for a tax sale.
   h) 589.17 Conveyances by spouse under power. A conveyance of RE executed more than
      10 years earlier, in which the H or W conveyed or contracted to convey the inchoate right
      of dower through the other spouse, acting as attorney in fact ... the power of attorney not
      having been executed as a part of the contract of separation are not invalid.
   i) 558.8 Affidavits explanatory of title. Owner in possession can file affidavit explaining
      any title defect title and after 3 years, there is a conclusive presumption it is true.
2. Reservation or Use Restrictions on Land—Rights of Reversion, etc. Have to file every 21
   years or the are unenforceable against a record titleholder in possession. Once they die, cannot
   go back and file to bring back.
   a) 614.24 Reversion or use restrictions on land—preservation. Reversion, reverter and use
      restrictions [but not easements] die if they are not recorded every 21 years. Does not matter
      if it is a present, contingent or future interest.
   b) 614.25 Effect of filing claim—extends period another 21 years
   c) 614.26 Indexing—record and index under 614.18
   d) 614.27 Persons under disability—do not get a break from these provisions.
   e) 614.28 Barred claims—does not extend any other SOL [like all of these, the provisions
      only allow you to extend the period when there is some contingency that prevents you from
      acting now, if the contingency has happened such that you now have a cause of action, the
      regular SOL for actions, including adverse possession periods would apply]
   f) Time starts from date of conveyance of interest you are now trying to raise, not from date
      contingency happened (at that point, the regular SOL would apply). These statutes do not

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     abolish any rights, they just limit time to enforce. They are constitutional b/c they allow a
     party a reasonable time to enforce their rights. Even if the contingency has not yet
     occurred, you can file to extend period—that passes constitutional muster. Presbytery of
     Southeast Iowa v. Harris, 226 N.W.2d 232 (Iowa 1975), cert. Denied, 423 U.S. 830
     (1) Even though it applies to a contingent interest, which  could not have sued on, the
         effective SOL is constitutional b/c it allows holders of those interests to file to preserve
         their contingency. Could not constitutionally require the commencement of an action b/c
         while right is contingent, cannot bring an action.
        (a) only have to have a reasonable time to preserve your rights
  g) Title Standard 10.6 the restrictions above on reversion, reverted interests or use
     restrictions applies to possibilities of reverter, rights of reentry (powers of termination) and
     restrictive covenants whether the limitation, condition or restriction has been breached and
     whether the purpose is obsolete or still beneficial. The limitation applies against municipal
     corporations. The limitation applies to minors, the mentally ill and persons entitled to relief
     under the Solders and Sailors’ Civil Relief Act. It does not apply to a reversionary interest
     in railroad property if the reversion is caused by the abandonment of the property for
     railroad purposes after July 1, 1980. These sections do not apply, however, if the interest
     owned is an easement rather than a possessory estate subject to a reversion or use
3. Mineral Interests.
  a) 557C.1 Lapse of Mineral interest in coal—Prevention. A mineral interest in coal shall
     be extinguished 20 years after its creation, transfer, or preservation, unless a renewed, and
     the ownership shall revert to the person who was then owner of the interest from which the
     mineral interest in coal was created, transferred, or preserved. Upon the filing of a
     statement of claim w/in the specified period, the mineral interest shall be deemed to have
     been preserved for an addition 20 years.
  b) 557C.2 Mineral interest—definition. A mineral interest in coal means an interest created
     by an instrument that creates or transfers either by grant, assignment, reservation, or
     otherwise, an interest of any kind of coal, as described in Chapter 207, w/o limitation on
     the manner of mining the coal.
  c) 557C.3 Statement of claim—filing requirement. The statement of claim ... shall be filed
     by the owner of the mineral interest prior to the end of the 21 year period ... or by July 1,
     1994 whichever is later. The statement of claim shall contain the name and address of the
     owner of the mineral interest in coal, and a description of the RE on, or under, which the
     mineral interest in coal is located. The statement of claim shall be filed in the office of the
     recorder in the county in which the RE is located.
  d) 557C.5 Reservation in other conveyance. A reservation of a mineral interest in coal or an
     exception of a mineral interest in coal, contained in a conveyance of the interest out of
     which it is carved, by a nonowner of the mineral interest in coal shall not be deemed to
     satisfy the requirements of this chapter or as a revival of a mineral interest in coal
     otherwise extinguished under this Chapter.

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   e) 557C.6 Exemption—the filing of the statement of claim ... shall not be required of an
      owner if the mineral interest was separately taxed for RE tax purposes at any time after
      July 1, 1971.
4. Land Contracts—558.5 Contract for deed—presumption of abandonment. When the
   record shows that a contract or bond for a deed has been executed more than 10 years earlier,
   and the recorded discloses no performance of the same and more than 10 years have elapsed
   since the contract by its terms was to be performed, the contract shall be deemed abandoned
   and of no effect and the land shall be freed from any lien or defect on account of the contract.

   On and after July 1, 1992, this section shall apply to a contract or bond described in this
   section, if the contract or bond is not filed of record but referred to in another instrument
   which is filed of record. The contract or bond shall be deemed abandoned 10 years from the
   date that the contract or bond is to be performed according to the recorded instrument.
   However, if the recorded instrument does not refer to a performance date for the contract or
   bond, the contract or bond shall be deemed abandoned 10 years after the date that the
   instrument containing the reference is recorded.
5. Various Defects in Transfer or Title
   a) 614.14. RE interest transferred by trustee
      (1) If an interest in RE is held of record by a trustee, a BFP acquires all rights in the RE which the trustee and
          the beneficiary of the trust had and any rights of persons claiming by, through or under them, free of any
          adverse claim.
      (2) A BFP is a purchaser for value in good faith and without notice of any adverse claim, who has relied on a
          current, recorded affidavit in substantially the following form delivered to the purchaser: [indicating the
          trustee is the properly appointed trustee of the estate]
      (3) As used in this section, "adverse claim" includes a claim that a transfer was or would be wrongful, a claim
          that a particular adverse person is the owner of or has an interest in the RE, and a claim that would be
          disclosed by the examination of any document not of record.
      (4) Unless clearly provided to the contrary by the instrument of transfer to a purchaser, a trustee transferring
          an interest in RE warrants to the transferee all of the following:
         (a) the trust pursuant to which the transfer is made is duly executed and in existence.
         (b) person creating the trust was under no disability or infirmity at the time the trust was created.
         (c) the transfer by the trustee to the purchaser is effective and rightful.
         (d) the trustee knows of no facts or legal claims which might impair the validity of the trust or the validity
             of the transfer.
      (5) a. A person holding an adverse claim arising or existing prior to January 1, 1992, by reason of a transfer
          of an interest in RE by a trustee, or a purported trustee, shall not file an action to enforce such claim after
          December 31, 1993, to recover or establish any interest in or claim to such RE against the holder of the
          record title to the RE.
         (a) (b) An action based upon an adverse claim arising on or after January 1, 1992, by reason of a
             transfer of an interest in RE by a trustee, or a purported trustee, shall not be maintained either at law or
             in equity, in any court to recover or establish any interest in or claim to such RE, legal or equitable,
             against the holder of the record title to the RE, legal or equitable, more than one year after the date of
             recording of the instrument from which such claim may arise.
      (6) This section shall not be construed to limit any personal action against the trustee or purported trustee.

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b) 614.15. Spouse failing to join in conveyance
   (1) In all cases where the holder of the legal or equitable title or estate to RE situated within this state, prior
       to July 1, 1981, conveyed the RE or any interest in the RE by deed, mortgage, or other instrument, and
       the spouse failed to join in the conveyance, the spouse or the heirs at law, personal representatives,
       devisees, grantees, or assignees of the spouse are barred from recovery unless suit is brought for recovery
       within one year after July 1, 1991. But in case the right to the distributive share has not accrued by the
       death of the spouse executing the instrument, then the one not joining is authorized to file in the recorder's
       office of the county where the land is situated, a notice with affidavit setting forth affiant's claim, together
       with the facts upon which the claim rests, and the residence of the claimants. If the notice is not filed
       within two years from July 1, 1991, the claim is barred forever.
   (2) In all cases where the holder of the legal or equitable title or estate to RE situated within this state, after
       July 1, 1981, conveyed the RE or any interest in the RE by deed, mortgage, or other instrument, and the
       spouse failed to join in the conveyance, the spouse or the heirs at law ... are barred from recovery unless
       suit is brought for recovery within ten years from the date of the conveyance. However, in the case where
       the right to the distributive share has not accrued by the death of the spouse executing the instrument, then
       the party not joining is authorized to file in the recorder's office in the county where the land is situated, a
       notice with affidavit setting forth the affiant's claim, together with the facts upon which the claim is based,
       and the residence of the claimants. If the notice is not filed within ten years from the date of the execution
       of the instrument the claim is barred forever.... Filing the notice with affidavit shall extend the time within
       which the action may be brought for 10 years. Successive notices may be filed extending this period.

c) 614.16. Interpretative clause 614.14 and 614.15 do not affect litigation pending on July 1,
   1991, nor do they operate to revive rights or claims barred previous to that date, nor permit
   an action to be brought or maintained upon any claim or cause of action which is barred by
   a statute in force prior to July 1, 1991.
d) 614.21. Foreclosure of ancient mortgages [this statute can get the Me when he grants an
   extension w/o changing the maturity date in the record] No action shall be maintained to
   foreclose or enforce any RE mortgage, bond for deed, trust deed, or ILK, after twenty
   years from the date thereof, as shown by the record of such instrument, unless the record
   of such instrument shows that less than ten years have elapsed since the date of maturity of
   the indebtedness or part thereof ... or unless the record shows an extension of the maturity
   of the instrument or of the debt or a part thereof, and that ten years from the expiration of
   the time of such extension have not yet expired. If extend the agreement, can (have to) file
   an                                    extension                                   agreement.

   From and after July 4, 1946, this section shall also apply to any instrument of the kind
   described in this section which is not of record but which is described or referred to in any
   other instrument which is filed of record and the limitation shall be ten years from the due
   date of the instrument referred to if disclosed in the record and if not so disclosed then
   within ten years from the date of the record of the instrument containing such reference.
e) 614.22. Action affecting ancient sheriff’s and tax deeds
   (1) Tax, guardian, executor’s, referee’s, and sheriff’s deeds have a 10 year SOL to
       challenge proceedings or bring action for redemption (basically, after 10 years, the deed
       cannot be challenged b/c of the nature of the sale—chain of title challenges would still
       be good). If recorded before 1/1/80, cannot challenge proceedings after 1/1/92. No
       exception for infancy, mental illness, absence from the state, or other disability or cause;
       provided that this section and 614.23 do not apply to RE described in a deed which is

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          not on July 1, 1991, in the possession of those claiming title under the deed. However,
          this subsection and 614.23 do not apply to real property described in any deed which is
          for more than ten years in the possession of a person claiming title under the deed.
  f) 614.23. How "possession" established The possession of the persons claiming title as
     provided for in section 614.22 may be established by affidavit recorded in the office of the
     recorder of the county or counties in this state in which the deed to the land referred to in
     said affidavit is recorded.
6. Claims Against Record Titleholder In Possession—10 years [likely does not cut off non-
   possessory interests]
  a)   614.17. Claims to RE antedating 1980 An action based upon a claim arising or existing prior to
       January 1, 1980, shall not be maintained, either at law or in equity, in any court to recover RE in this state or
       to recover or establish any interest in or claim to RE, legal or equitable, against the holder of the record title
       to the RE in possession, when the holder of the record title and the holder's immediate or remote grantors are
       shown by the record to have held chain of title to the RE, since January 1, 1980, unless the claimant in
       person, or by the claimant's attorney or agent ... within one year from and after July 1, 1991, files in the office
       of the recorder of deeds of the county in which the RE is situated, a statement in writing, which is duly
       acknowledged, definitely describing the RE involved, the nature and extent of the right or interest claimed,
       and stating the facts upon which the claim is based.

       For the purposes of this section, 614.17A, and 614.18 to 614.20, a person who holds title to RE by will or
       descent from a person who held the title of record to the RE at the date of that person's death or who holds
       title by decree or order of a court, or under a tax deed, ... or sheriff's deed, holds chain of title the same as
       though holding by direct conveyance.

       For the purposes of this section and 614.17A, possession of RE may be shown of record by affidavits
       showing the possession, and when the affidavits have been filed and recorded, it is the duty of the recorder to
       enter upon the margin of the record, a certificate to the effect that the affidavits were filed by the owner in
       possession, as named in the affidavits, or by the owner's attorney in fact, as shown by the records and in like
       manner, the affidavits may be filed and recorded where any action was barred on any claim by this section as
       in force prior to July 1, 1991.

  b) 614.17A. Claims to RE after 1992
       (1) After July 1, 1992, an action shall not be maintained ... to recover or establish an
           interest in or claim to RE if all the following conditions are satisfied:
          (a) The action is based upon a claim arising more than ten years earlier or existing for
              more than ten years.
          (b) The action is against the holder of the record title to the RE in possession.
          (c) The holder of the record title to the RE in possession and the holder's immediate or
              remote grantors are shown by the record to have held chain of title to the RE for
              more than ten years.
       (2) The claimant within ten years of the date on which the claim arose or first existed must
           file with the county recorder in the county where the RE is located a written statement
           which is duly acknowledged and definitely describes the RE involved, the nature and
           extent of the right of interest claimed, and the facts upon which the claim is based. The
           claimant must file the statement in person or by the claimant's attorney or agent....

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        The filing of a claim shall extend the period for another 10 years. The person may file
        extensions for successive claims.
     (3) Nothing in this section shall be construed to revive any cause of action barred by
        section 614.17.
  c) 614.18. Claim indexed Any such claim so filed, shall be indexed under the description of
     the RE involved in a book set apart and specially designed for that purpose.... shall be
     recorded as other instruments affecting RE.
  d) 614.19. Inapplicability of provision regarding minors and persons with mental illness.
     The provisions of 614.8 [rights of minors and persons with mental illness] shall not be
     applicable against the provisions of 614.17, 614.18, and 614.20.
  e) 614.20. Limitation on act 614.17 to .19 do not limit or extend the time within which
     actions by a spouse to recover dower or distributive share in RE within this state may be
     brought or maintained under the provisions of 614.15, nor do they limit or extend the time
     within which actions may be brought or maintained to foreclose or enforce any RE
     mortgage, bond for deed, trust deed, or contract for the sale or conveyance of RE under the
     provisions of section 614.21, nor do they revive or permit an action to be brought or
     maintained upon any claim or cause of action which is barred by a statute which is in force
     prior to July 1, 1991; nor do they affect litigation pending on July 1, 1991.
  f) Title Standard 10.1—614.17 & 17A apply when grantor is: 1) holder of record title, 2) in
     possession, 3) has unbroken chain of title for the necessary period (10 years generally), and
     4) adverse claim arose prior to cutoff date (January 1, 1980 or 10 years, whichever is later).
7. General 40 year Title Clearing Statute (shotgun)
  a) 614.29. Definitions As used in this division:
     (1) Marketable record title means a title of record, as indicated in 614.31, which operates to extinguish such
         interests and claims, existing prior to the effective date of the root of title, as are stated in 614.33.
     (2) Records includes probate and other official public records, as well as records in the office of the county
     (3) Recording, when applied to the official public records of a probate or other court, includes filing.
     (4) Person dealing with the land includes a purchaser of any estate or interest therein, a Me, a levying or
         attaching creditor, a land contract vendee, or any other person, corporation, or entity seeking to acquire
         an estate or interest therein, or impose a lien thereon.
     (5) Root of title means that conveyance or other title transaction or other link in the chain of title of a person,
         purporting to create the interest claimed by such person, upon which the person relies as a basis for the
         marketability of the person's title, and which was the most recent to be recorded or established as of a date
         40 years prior to the time when marketability is being determined. The effective date of the "root of title"
         is the date on which it is recorded.
     (6) Title transaction means any transaction affecting title to any interest in land, including title by will or
        descent, title by tax deed, or deed by trustee, referee, guardian, executor, administrator, master in
        chancery, sheriff, or any other form of deed or decree of any court, as well as WD, quitclaim deed,
        mortgage, or transfer or conveyance of any kind.
  b) 614.30. Construction liberal This division shall be liberally construed to effect the
     legislative purpose of simplifying and facilitating land title transactions by allowing

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   persons to rely on a record chain of title as described in 614.31, subject only to limitations
   in 614.32.
c) 614.31. Forty-year chain of title Any person who has an unbroken chain of title of record
   to any interest in land for forty years or more, shall be deemed to have a marketable record
   title to such interest as defined in 614.29, subject only to the matters stated in 614.32. A
   person shall be deemed to have such an unbroken chain of title when the official public
   records disclose a conveyance or other title transaction, of record not less than forty years
   at the time the marketability is to be determined, which said conveyance or other title
   transaction purports to create such interest, either in: 1) The person claiming such interest,
   or 2) his chain of title.
d) 614.32. What interests and rights subject Such marketable record title shall be subject
   (1) All interests and defects which are inherent in the muniments [documents of title] of
       which such chain of record title is formed; but a general reference in such muniments,
       or any of them, to easements, use restrictions or other interests created prior to the root
       of title shall not be sufficient to preserve them, unless specific identification be made
       therein of a recorded title transaction which creates such easement, use restriction, or
       other interest.
   (2) All interest preserved by the filing of proper notice or by possession by the same owner
       continuously for a period of forty years or more, in accordance w/ 614.34.
   (3) The rights of any person arising from a period of adverse possession or user, which was
       in whole or in part subsequent to the effective date of the root of title.
   (4) Any interest arising out of a title transaction which has been recorded subsequent to the
       effective date of the root of title ... but cannot revive a dead right by subsequent
   (5) The exceptions as stated and set forth in 614.36.
e) 614.33. Free and clear of other interests not stated Subject to 614.32, such marketable
   record title shall be held by its owner and shall be taken by any person dealing with the
   land free and clear of all interests, claims or charges whatsoever, the existence of which
   depends upon any act, transaction, event or omission that occurred prior to the effective
   date of the root of title. All such interests, claims or charges ... are hereby declared to be
   null and void.
f) 614.34. Preserving interest during forty-year period
   (1) Filing. Can preserve your right by filing notice of your right during the 40 year period
       following root of title (i.e., while interest still alive). No disability or lack of knowledge
       exception whatsoever. Notice may be filed for record by the claimant or by any other
       person acting on behalf of any claimant who is:
       (a) Under a disability,
       (b) Unable to assert a claim on the claimant's own behalf, or
       (c) One of a class, but whose identity cannot be established or is uncertain at the time of
           filing such notice of claim for record.

                                       Real Estate
   (2) Possession. If the same record owner of any possessory interest in land has been in
       possession of such land continuously for a period of forty years or more, during which
       period no title transaction with respect to such interest appears of record in the chain of
       title, and no notice has been filed by the record owner or on the record owner's behalf as
       provided in (1), and such possession continues to the time when marketability is being
       determined, such period of possession shall be deemed equivalent to the filing of the
       notice ... described in (1).
g) 614.35. Recording interest The notice shall contain an accurate and full description of all
   land affected by such notice which description shall be set forth in particular terms and not
   by general inclusions; but if said claim is founded upon a recorded instrument, then the
   description in such notice may be the same as that contained in such recorded instrument....
   [filed w/regular records] Such notices shall also be indexed under the description of the RE
   involved in a book set apart for that purpose to be known as the "claimant's book."
h) 614.36. Lessors, reversioners and easements This division shall not be applied to bar any
   lessor or lessor's successor as a reversioner of the lessor's right to possession on the
   expiration of any lease; or to bar or extinguish any easement or interest in the nature of an
   easement, the existence of which is apparent from or can be proved by physical evidence
   of its use; or to bar any right, title or interest of the U.S., by reason of failure to file the
   notice herein required.
   (1) Even if interest is in a plat and not a deed, would normally have to file to preserve, but
       there is an exception (stated above) that you cannot use this act to extinguish an
       easement when the right is apparent or can be proved by evidence of its use. Maddox
       v. Katzman, 332 N.W.2d 347 (Iowa Ct. App. 1982).
i) 614.37. Limitation statutes not extended Nothing contained in this division shall be
   construed to extend any other SOL It is intended that nothing contained in this division be
   interpreted to revive or extend the period of filling a claim or bringing an action that may
   be limited or barred by any other statute.
j) 614.38. Period extension in certain cases If the 40 year period expires prior to one year
   after July 1, 1969, such period shall be extended one year after July 1, 1969.
k) Title Standard 11.1. The 40 year provision deems any interest in land marketable where
   the holder of the interest of record can show an unbroken chain of record title to the
   interest extending back at least 40 years to the root of title and where none of the excepted
   matters of 614.32 appear.
l) 11.2. The time period for determining 40 years goes on date of recording, not date of
m) 11.3 The marketable title record is still subject to all interests and defects created or
   specifically identified in the instrument that constitutes the root of title, which means, you
   may have to go back further if the title indicates such a problem may exist.
n) 11.6 Apparent easements. Ancient easements that are apparent or that can be proved by
   physical evidence of their use, such as water, sewer lines, electric, telephone, and pipelines,

                                       Real Estate
        are excepted from the operation of the Act and purchasers should inspect the property and
        check for the existence of such easements.
     o) 11.7 except as to matters excepted and to those a deed w/in the period puts you on inquiry
        notice of, abstract only needs to go back 40 years.
     p) 11.8 Mortgage releases cannot be the root of title—root of title must purport to create the
        interest claimed by the present owner. The Act does not create a marketable title if there is
        no document creating color of title in the claimant.
E. Title Insurance and Title Guaranty. Most states have title insurance that covers you for the
   period you own the property, and any liability you may later incur b/c of a WD (so even though
   the policy does not run w/the land, you can effectively make it run w/the land by giving a WD).
   Iowa does not have title insurance but has a title guaranty program which does essentially the
   same thing—we did that for the secondary mortgage market.
  1. Generally Exclude zoning, police power/regulations, rights of eminent domain, things a
     survey would disclose, rights of parties in possession, and unfiled mechanics’ liens. Also
     excludes 547/548 liability under bankruptcy, known defects, defects that do not cause damage.
  2. Coverage—covers pre-conveyance defects, including lots of stuff a title search would not get,
     like forged deeds, undelivered instruments, rights of undisclosed spouses, etc.
  3. Effective date—runs as long as you own the property but does not run w/the land.
  4. Tort Liability—some cases have held title insurers liable in tort (for failing to catch the
     defect in their search). This means: 1) can file outside of time limits in policy; 2)
     consequential damages; 3) mental distress, etc.
  5. 515.48(10)-NO TITLE INSURANCE IN IOWA—ILLEGAL TO SELL IT (lots of people in
     IA still buy title insurance (66%), just have to buy it out of state).
  6. 535.8(2)(b)(10)—the lender can collect the cost of Iowa’s title guaranty on Residential
     deals(but cannot pass on the costs of title insurance).
  7. 16.91—Iowa Title Guaranty—Iowa did this so banks could sell mortgages on the secondary
     market. Is really socialized title insurance.
     a) The authority through the title guaranty division shall initiate and operate a program in which the division
        shall offer guaranties of real property titles in this state. The terms, conditions and form of the guaranty
        contract shall be forms approved by the division board. The division shall fix a charge for the guaranty in an
        amount sufficient to permit the program to operate on a self-sustaining basis, including payment of
        administrative costs and the maintenance of an adequate reserve against claims under the title guaranty
        program... Funds collected under this program shall be placed in the title guaranty fund and are available to
        pay all claims, necessary reserves and all administrative costs of the title guaranty program. Moneys in the
        fund shall not revert to the general fund and interest on the moneys in the fund shall be transferred to the
        department of economic development for deposit in the local housing assistance program fund ... and shall
        not accrue to the general fund. Surplus funds in the title guaranty fund after providing for adequate reserves
        and operating expenses of the division shall be transferred to the housing program fund.
     b) A title guaranty issued under this program is an obligation of the division only and claims are payable solely
        and only out of the moneys, assets and revenues of the title guaranty fund and are not an indebtedness or
        liability of the state.

                                                 Real Estate
         c) ...consult with the insurance division of the department of commerce in developing a guaranty contract
            acceptable to the secondary market and developing any other feature of the program with which the
            insurance division may have special expertise. The insurance division shall establish the amount for a loss
            reserve fund. Except as provided in this subsection, the title guaranty program is not subject to the
            jurisdiction of or regulation by the insurance division or the commissioner of insurance.
         d) Each participating attorney and abstractor may be required to pay an annual participation fee to be eligible to
            participate in the title guaranty program.
         e) The participation of abstractors and attorneys shall be in accordance with rules established by the division and
            adopted by the authority.... Each participant shall at all times maintain liability coverage in amounts approved
            by the division. Upon payment of a claim by the division, the division shall be subrogated to the rights of the
            claimant against all persons relating to the claim.
            Additionally, each participating abstractor is required to own or lease, and maintain and use in the preparation
            of abstracts, an up-to-date abstract title plant including tract indices for RE for each county in which
            abstracts are prepared for real property titles guaranteed by the division. The tract indices shall ... go back at
            least 40 years. However, a participating attorney providing abstract services continuously from November
            12, 1986, to the date of application, either personally or through persons under the attorney's supervision and
            control is exempt from the requirements of this paragraph (grandfather clause, not Ltd. to county where
            practiced in for the period, person has the exception regardless of location of practice)....
         f) Prior to the issuance of a title guaranty, have to get abstract updated, and a title opinion from a participating
         g) The attorney rendering a title opinion shall be authorized to issue a title guaranty certificate....

    F. Torrens System. The state issues a title, like a car, and the state guarantees the title is good.
       Shows the names of people who hold fee title and also encumbrances, lienholders, etc.
      1. Initial registration—it is generally a voluntary system and have to get title registered initially.
         It is very expensive, can be in the thousands of dollars.
      2. Transfers—transfer or encumbrance is not binding until registered on the certificate, when so
         registered, a new certificate is issued.
      3. Indemnity fund—state has a fund to compensate people whose interests are cutoff by
         negligence of state registrar.
      4. Problems—funds are often inadequate, California’s was wiped out w/a single claim.
                                         PART II: REAL ESTATE FINANCE
IV. Basic Dimensions of Mortgage Credit. There are two components: the note (in personam) and the
    mortgage (in rem). The mortgage is a conveyance of an interest in RE (not ownership, just an
    interest), but the note is just a personal obligation (need note for mortgage, thought).
    A. Overview of Mortgage Mechanisms and Common Sources of Mortgage Credit.
      1. Government Agency Involvement in Mortgage Finance. Government agencies provide 3
         main roles in mortgage finance: 1) as regulators of privately-owned mortgage lenders; 2) as
         providers of finds to the mortgage market, mainly through secondary market purchases; and 3)
         as spreaders of risk through insurance and guaranty programs.
         a) Regulators of Mortgage Lenders.

                                                        Real Estate
      (1) Savings and Loan Associations. Tend to concentrate heavily on mortgage lending. Can
          be chartered either by federal or state government. Most, both federal and state, have
          deposits insured w/SAIF, which is directly administered by FDIC.
         (a) Federally chartered ones are regulated under the Office of Thrift Supervision, and
             state chartered ones are regulated by similar state-run agencies. However, if a state-
             run bank carries SAIF, many of the federal regulations apply to them.
      (2) Savings Banks. Federal law now allows the OTS to charter federal savings banks that
          can insure their deposits under either the SAIF or the BIF. Big trend toward federally
          chartered stock structure.
      (3) Commercial Banks. Banks have much broader lending powers than S & Ls and do not
          concentrate nearly as heavily on mortgage lending, but many do make large numbers of
          mortgage loans. Can be either federally or state chartered. National ones are chartered
          under the Office of Comptroller of Currency, a division of the U.S. Treasury Dept.
          All national banks and most state banks have deposit insurance w/BIF, which is
          managed under the FDIC. A large number of big state and federal banks are also
          members of the Federal Reserve Board, which provides them w/a supply of credit.
      (4) Credit Union is usually sponsored by a group of people organized for some other
          purpose. Traditionally concentrate on consumer lending and make few mortgage loans,
          although they have recently begun to expand their lending. Can be either federal or state
          chartered. National Credit Union Administration regulates the federally chartered
2. Providers of Mortgage Funds. Government will typically raise these funds through the sale
   of bonds, notes, and debentures on the general capital markets. The funds are funneled into the
   mortgage market through the secondary market.
   a) Loans to Lenders. A system of 12 regional Federal Home Loan Banks. Main role is to
      borrow funds on the capital markets and relend them to S&Ls in the form of advances.
      Most advances have a fairly short maturity (few months to a few years) and are secured by
      the pledging of loans from the borrowing S&L’s mortgage portfolio. FHLBs are supervised
      by the Federal Housing Finance Board.
   b) Secondary Market Purchasers. 3 main federal or quasi-federal agencies buy loans on the
      secondary market:
      (1) Federal National Mortgage Association. Created in the 1930’s to buy home mortgages
          from local lenders to give them cash liquidity. In 1968, converted from a government
          agency to a quasi-private corporation, with stock privately held and traded. 5 of the 18
          board members are presidentialy appointed.
         (a) recently has employed a new financing technique—sells mortgage backed
             securities that are based on the mortgages themselves.
            (i) participation certificate is one type of MBS that sells virtually all of the
                ownership rights in a pool of mortgages. Payment on the underlying loans the
                certificates represent is guaranteed by FNMA.

                                        Real Estate
           (ii)Collateralized Mortgage Obligation is another type of MBS. Is not a participation
               or ownership share in the underlying mortgage but is instead an issuance of an
               FNMA obligation itself that is secured by the mtg pool.
     (2) Federal Home Loan Mortgage Corporation. Ownership structure is now virtually
         identical to FNMA’s. Raises most of its funds by selling MBS. Office of Federal
         Housing Enterprise and Oversight regulates both the FHLMC and the FNMA
     (3) Government National Mortgage Association. A government agency under HUD.
         Principal activity is to guarantee payment on bond-like MBS sold to investors by private
         lenders and collateralized by pools of FHA and VA mortgages. Collects fees for its
         guarantees of these securities and has experienced very low losses.
     (4) State Housing Finance Agencies. Attempt to support the housing market by borrowing
         money through sales of notes and bonds in the capital markets, and then diverting that
         money to housing. The notes and bonds are tax free (b/c they are state bonds), and 
         carry attractively low interest rates compared to taxable instruments.
  c) Private Issuers of Mortgage Securities. Success of the other secondary market purchasers
     has led many private lenders to issue securities backed by their mortgage portfolios w/o the
     further security of a GNMA or other government guarantee. Some are ―pass-through‖
     where the security holder receives a pro-rata share of all payments of principal and interest
     on the underlying mortgages. There are also stripped mortgage backed securities, which
     separate the interest and principal on the underlying pool of mortgages and applies them to
     two independent securities.
  d) Real Estate Investment Trusts. Analogous to a mutual fund, except that it invests in RE
     instead of stocks. Sell their own shares to investors and in turn use the funds to buy other
     ownership positions or mortgage loans on RE.
3. Agencies that spread mortgage risk. Losses arise on mortgages b/c the Mr defaults and the
   Me is undersecured.
  a) Federal Housing Administration. Organized during depression to encourage investment
     in residential mortgages. Federally operated insurance company that promises Mes that
     they will not sustain losses in the event of mortgage default or foreclosure. Collects
     insurance premiums, creates reserves, and pays losses from those reserves.
     (1) when a default occurs and is not cured, the lender can either assign the loan to FHA and
         get 99% of the outstanding balance or proceed to foreclose and acquire title to the
         property, then transfer title to FHA for 100% of the outstanding balance (basically
         charges a 1% foreclosure fee).
     (2) FHA has limits on loan to value ratios for loans under its programs. For owner-occupied
         single-family homes, is 98.75% for 1st 50k, if home is worth more than 50K, is
         97.75%, but borrower can add the one-time front-end insurance premium (2.25% of the
         loan) into the loan amount, so loan amount could exceed 100% of the home’s value.
     (3) Also charges an annual Mortgage Insurance Premium of .5% per year, paid monthly for
         first 11 years if original loan to value ratio was under 90%. If LTV above 90%, pay
         .55% for 30 years.

                                       Real Estate
     b) VA Pays only a guaranteed amount and leaves the lender to absorb the rest of the risk.
        Lender is assured of getting at least this minimum amount in addition to the proceeds of
        any foreclosure, but losses on VA guaranteed loans are fairly rare.
        (1) guaranteed amount is 50% for loans up to 45k, 35% for 45-144k, and the lesser of 25%
            or $50,750 for loans over 144k.
        (2) no LTV limits. No legal ceiling, except that loan may not exceed the appraised value of
            the home plus the ―funding fee,‖ but most lenders will not loan amounts over the
            maximum guarantee of $50,750, so total loans very rarely over $203,000.
        (3) have to pay a one-time funding fee. If LTV=100%, pay 2%; if 90-95%, is 1.5% (of loan
            amount); if 90% or less, is 1.25%. Can add the fee to mortgage balance.
B. Evaluation of Character, Capacity, and Collateral
  1. Real Estate Settlement Procedures Act. Enacted to curb abuses in residential RE closings.
     Many of the abuses related to marketing ancillary ―settlement services‖ like title insurance,
     RE brokerage, and credit reports. RESPA applies to all settlements of federally related
     mortgage loans—essentially all transactions in which any federal agency or federally-insured
     or regulated financial institution is involved.
     a) Disclosure and informational requirements. Requires the following information be
        provided w/o a fee:
        (1) Uniform Settlement Statement (HUD-1 form) must be used for all RESPA covered
            loans and home sales.
        (2) Lenders must send an informational booklet HUD prepared to each loan applicant w/in
            3 days of the loan application.
        (3) Lenders must give loan applicants a good faith estimate of the probable settlement costs
            w/the booklet.
        (4) Lenders must inform borrowers, at the time of the loan application, about the probability
            that they will transfer the servicing of their loan to another entity. If an actual transfer
            occurs, the original and new servicer must notify the borrower in writing.
        (5) Sellers of RE may not require the buyer to purchase title insurance from any particular
     b) Escrow accounts for taxes, insurance, and other items. Mortgage lenders usually require
        borrowers to create escrow accounts and pay a portion of the taxes, insurance, and
        maintenance or membership fees (for condos) each month. Under RESPA, the monthly
        payment cannot exceed 1/12 of the estimated annual charges for the items, and the lender
        cannot require an initial deposit of more than 1/6 of the annual charges (as a cushion).
     c) Kickbacks and unearned fees. No one may give or receive a fee or anything of value in
        return for a referral of settlement service business. The following payments are allowed:
        (1) payments to lawyers, title companies and lenders for services actually rendered.
        (2) salaries or fees to employees and other people for services rendered or goods or
            facilities provided.

                                           Real Estate
     (3) RE agents can split commissions.
     (4) ―Controlled business‖ (arrangements in which someone who has the ability to refer
         settlement service business makes referrals to an entity in which he owns at least a 1%
         interest) are only permitted if: 1) referrer discloses interest to customer; 2) referrer
         provides customer w/an estimate of the range of charges the provider usually makes; 3)
         customer not required to use that particular provider; and 4) referrer receives nothing of
         value for the referral except a return on his ownership interest.
2. 535.8 Loan Charges Limited.
  a) 1. As used in this section, the term loan means a loan of money which is wholly or in part to be used for the
     purpose of purchasing real property which is a single-family or two-family dwelling occupied by the
     borrower. Loan includes the refinancing of a contract of sale, and the refinancing of a prior loan, whether or
     not the borrower also was the borrower under the prior loan, and the assumption of a prior loan.
  b) 2. a. A lender may collect, in connection with a loan made pursuant to a written agreement ... or in connection
     with a loan made pursuant to a written commitment by the lender ..., a loan processing fee which does not
     exceed 2% of the loan principal; except that to the extent of an assumption by a new borrower of the
     obligation to make payments under a prior loan, or to the extent that the loan principal is used to refinance a
     prior loan between the same borrower and the same lender, the lender may collect a loan processing fee which
     does not exceed an amount which is a reasonable estimate of the expenses of processing the loan assumption
     or refinancing but which does not exceed 1% of the unpaid balance of the loan that is assumed or refinanced.
     In addition, a lender may collect from a borrower, a seller of property, another lender, or any other person, or
     from any combination of these persons, in contemplation of or in connection w/a loan, a commitment fee,
     closing fee, or both, that is agreed to in writing by the lender and the persons from whom the charges are to be
     collected. A loan fee collected under this paragraph is compensation to the lender solely for the use of money,
     notwithstanding any provision of the agreement to the contrary. However, a loan fee collected under this
     paragraph shall be disregarded for purposes of determining the maximum charge permitted by [usuary laws].
     The collection in connection with a loan of a loan origination fee, closing fee, commitment fee, or similar
     charge is prohibited other than expressly authorized by this paragraph or a payment reduction fee authorized
     by subsection 3.
     (1) b. A lender may collect ... any of the following costs which are incurred by the lender in connection with
         the loan and which are disclosed to the borrower:
         (a) Credit reports.
         (b) Appraisal fees paid to a third party, or when the appraisal is performed by the lender, a fee which is a
             reasonable estimate of the expense the lender incurred.
         (c) Attorney's opinions.
         (d) Abstracting fees paid to a third party, or when the abstracting is performed by the lender, a fee which
             is a reasonable estimate of the expense the lender incurred
         (e) County recorder's fees.
         (f) Inspection fees.
         (g) Mortgage guarantee insurance charge.
         (h) Surveying of property.
         (i) Termite inspection.
         (j) The cost of a title guaranty issued by the Iowa finance authority pursuant to chapter 16.

            The lender shall not charge the borrower for the cost of revenue stamps or RE commissions which are
            paid by the seller. Collection of any cost other than as expressly permitted by this lettered paragraph is
     (2) d. If a lender collects a fee or charge which is prohibited by (a) or (b) or which exceeds the amount
         permitted by (a) or (b), the person from whom the fee was collected has the right to recover the unlawful
         fee or charge or the unlawful portion of the fee or charge, plus attorney fees and costs incurred in any
         action necessary to effect recovery.

                                               Real Estate
     c) 3. Bank can allow borrower to buy down the interest rate. Can collect a fee for lower interest rate, but all
        the other terms have to be the same. Have to give borrower a written disclosure describing the specific terms
        of the loan w/and w/o the buy down. Also has to give a good faith estimate of payments w/ and w/o the buy
     d) 6. this section shall not apply to any loan which is subject to the provisions of § 636.46 [FDIC banks, I think],
        nor shall it apply to origination fees, administrative fees, commitment fees or similar charges paid by one
        lender to another lender if these fees are not ultimately paid either directly or indirectly by the borrower who
        occupies      or     will    occupy      the   dwelling      or     by    the    seller    of     the    dwelling.

        A lender shall not use an appraisal for any purpose in connection with making a loan under this section if the
        appraisal is performed by a person who is employed by or affiliated with any person receiving a commission
        or fee from the seller of the property. If a lender violates this paragraph the borrower can recover any actual
        damages plus the costs paid by the borrower & attorney fees....

C. Common Terms and Conditions of Mortgage Credit
  1. Alternative Mortgage Instruments. Principal purpose of the new types of financing is to
     lower payments and to shift the risk of changing interest rates to the borrower.
     a) Affordability.
        (1) Graduated Payment Mortgage—monthly payments that increase annually by a specified
            % during the early years of the loan
        (2) Mortgage buy-downs—a substantial front-end payment to lower the interest rate.
            Sometimes, a seller (or builder) will buy-down the interest rate to sell the home.
        (3) Growing Equity Mortgage—the average life of a loan is much less than the term (e.g.,
            average life of a 30 year loan is 9 years) but the shorter the term, the shorter the average
            life, so lenders will reduce interest rate if shorten term. Under this alternative, have
            regular 30 year payments amortized, but then increase them each year by a set %, which
            greatly shortens the life of the loan.
            (a) Bi-Weekly Loan Payment—Get the equivalent of 13 monthly payments (instead of
                12) each year. Reduces a 30 year note to 19 years.
        (4) Shared-Equity Mortgage—two owners of the property, the owner and someone else
            who co-signs on the loan. Co-owner makes a % of payments and receives an identical %
            interest in the equity of the home.
        (5) Reverse-Annuity Mortgage—Basically sell the home to the bank, keep living there and
            get monthly checks each month. When you die, the bank forecloses the home to pay off
            the loan (w/accrued interest)
     b) Interest Rate
        (1) Adjustable Rate Mortgage—shifts the risk of interest changes to borrower. Adjust the
            interest rate at set periods of time based on some external index
            (a) frequency of rate change—must determine how often rate will be adjusted.
            (b) How will increases be paid—can either increase monthly payments, lengthen the
                term, or add the increased interest back into the principal

                                                   Real Estate
        (c) Index—have to peg the interest rate to something (for national banks, has to be
            readily verifiable and out of the bank’s control).
        (d) Relationship to Mortgage Rate—have to say how the mortgage rate will rise or fall in
            relation to the index (how much)
        (e) Caps—could have a high or low interest rate, or a maximum lifetime change.
        (f) Prepayment—most allow prepayment w/o penalty
        (g) Due on sale clause—usually not in the ARM b/c do not have the lock-in interest rate.
            They usually just require credit approval of the buyer.
     (2) Shared Appreciation Mortgage—gives the lender the right to recover as ―contingent
         interest‖ some agreed percentage of the property’s appreciation, as measured either
         when the property is sold or at some fixed date in the future.
     (3) Price-Level Adjusted Mortgage—adjusts the loan balance each year according to
         inflation. The actual interest rates is low b/c the inflation component is figured into the
         principal adjustment, so interest only has to account for risk of default.
2. Home Equity Lending
  a) 535.10. Home equity line of credit
     (1) home equity line of credit means an arrangement pursuant to which all of the following are applicable:
         (a) amounts borrowed and interest and other charges are debited to an account.
         (b) interest is computed on the account periodically.
         (c) borrower has the right to pay in full at any time without penalty or to pay in the installments which are
             established by the loan agreement.
         (d) The lender agrees to permit the borrower to borrow money from time to time with the maximum
             amount of each borrowing established by the loan agreement.
         (e) The account is secured by an interest in RE. The priority of the secured interest in the RE shall be
             determined by 654.12A.
     (2) Except as provided in this section, a home equity line of credit is subject to [the consumer credit code]....
     (3) A lender may collect in connection with establishing or renewing a home equity line of credit the costs
         listed in 535.8(2)(b), charges for insurance as described in 537.2501(2), and a loan processing fee as
         agreed between the borrower and the lender, and annually may collect an account maintenance fee of not
         more than fifteen dollars. Fees collected under this subsection shall be disregarded for purposes of
         determining the maximum charge permitted by (4).
     (4) The interest rate on a home equity line of credit shall not exceed one and three-quarters percent per
     (5) RE which is the consumer's principal dwelling shall not be subject to foreclosure when the balance
         secured is $2000 or less.

3. Insurance and Taxes. Mes require the Mr to carry casualty insurance on the mortgage
   premises. The insurance proceeds serve as substitute security for the RE.
  a) Loss Payable Policy—rarely used today. Issued to Mr and Me is mere appointee, so his
     right to recover is limited to the Mr’s right to recover.
  b) Standard Mortgage Policy—Me has a separate interest that is not limited by the Mr’s right
     to recover.

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   c) Restoration of the Premises—Most loan forms provide that proceeds are to be applied to
      restoration or repair of the property if ―economically feasible.‖ If it is not feasible or if the
      lender’s secured position would be worsened, then the lender is entitled to the proceeds. If
      there is no language, the default rule is that the Mr has no right to insist that the proceeds
      be used to restore the property, so the lender can require the Mr (really only matters in
      times of rising interest b/c would assume homeowner could just get new loan).
      (1) California has a judicially created presumption that the proceeds will be used to rebuild,
          even when there is specific language to the contrary
      (2) Restatement—minority position in a number of states that if the contract is silent and
          restoration of the loss or damage is reasonably feasible w/in the remaining term of the
          mortgage, and if after restoration the lender’s security position is not harmed, then Mr
          can use proceeds to restore premises.
   d) Me purchase at foreclosure sale—what happens when the Me credit bids the amount of the
      debt at the foreclosure sale?
      (1) Loss payable policy—Me cannot collect. Me is mere appointee who can only collect if
          there is a debt. When he bids in the debt, it is extinguished.
      (2) Standard Mortgage Policy—results depend on when the loss occurs. If the loss occurs
          after the sale, then lender can recover (b/c have independent interest not dependent on
          the debt, and Me has suffered a loss). Where the purchase is after the damage, however,
          cannot recover (b/c have suffered no loss, assume the home sold for the fair market
          value, even w/the damage. If that is enough to cover the debt, then the Me has not been
   e) Interest on Escrow or Reserve Accounts for Insurance and Taxes. Banks make borrowers
      pay taxes and insurance monthly into escrow, so it does not lapse. Taxes are important b/c
      a tax lien wipes out all other liens, regardless of when they came into existence. Absent a
      statutory or regulatory mandate, most courts do not require the lender to account to the
      borrower for the interest on these accounts [Iowa has a statute].
   f) Escrow accounting under RESPA. Lender can collect, on a monthly basis, no more than
      1/12 of the estimated annual costs for taxes, insurance, etc. Lenders can maintain a cushion
      of no more than 1/6 of those annual costs. Done on an aggregate basis, so regardless of
      when payments for charges are taken out, if the total annual charge is X, cannot charge
      more than 1/12(X) and cannot keep at any one time more than 1/6(X) in the account.
4. Iowa Code § 535.8(4). A lender shall not, as a condition of making a loan as defined in this
   section, require the borrower to place money, or to place property other than that which is
   given as security for the loan, on deposit with or in the possession or control of the lender or
   some other person if the effect is to increase the yield to the lender with respect to that loan;
   provided that this subsection shall not prohibit a lender from requiring the borrower to deposit
   money without interest with the lender in an escrow account for the payment of insurance
   premiums, property taxes and special assessments payable by the borrower to third persons.
   Any lender who requires an escrow account shall not violate the provisions of section

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5. § 535.8(5) If any lender receives interest either in a manner or in an amount which is
   prohibited by (4), the borrower shall have the right to recover all amounts collected or earned
   by the lender, whether or not from the borrower, in violation of this section, plus attorney fees
   and court costs....
6. Late Payment Charges and Default Interest.
   a) Judicial Approaches to Late Payment Charges and Default Interest.
      (1) Some courts analyze them under liquidated damages/penalty analysis. Under this
          approach, court will strike it down if the rate is not a reasonable effort to estimate the
          Me’s actual damages resulting from the late payment. Late fee is most at risk when
          figured as a % of the principal balance.
      (2) Late fees as usury. Some courts will invalidate the late fee if it makes the total interest
          more than the legal rate.
      (3) Late fees as default interest in bankruptcy. 506(b) allows fees and additional interest if
          it is ―reasonable.‖ Bankruptcy courts generally find large late fees or interest increases
          ―unreasonable.‖ This renders the fee unsecured, even though the fees may be valid and
   b) Federal Regulation
      (1) FHA and VA Loans—late payments ltd. to 4% of each installment that is more than 15
          days late. VA regulations prohibit increased interest rate for defaults.
      (2) Federally regulated lenders—may not charge a late fee when the borrower’s only
          delinquency is the failure to pay a previously assessed late fee.
      (3) Federal Savings Associations—OTS regulations authorize federally charted S&Ls to
          include late charge provisions in their lending agreements, and they have no limit on
          terms. These regulations preempt state-law, so even if the state has a restriction, a
          federally chartered bank located therein may charge a higher rate. They do have
          procedural limits—must grant a 15 day grace period.
      (4) Federal Secondary Market—FNMA requires a late charge of 4% on non-federally
          insured or guaranteed mortgages after a 15 day grace period.
   c) Payment and Redemption.
      (1) payment by person primarily responsible for the mortgage. Mortgage is automatically
          extinguished. A partial payment does not do it unless Me accepts it as equivalent of full
          payment. Can only make payment when it is due unless Me agrees to accept early
         (a) payor has a right to a written discharge in recordable form showing the mortgage has
             been extinguished. See § 655.1
      (2) payment by someone who is not primarily responsible for the obligation. Mortgage is
          deemed assigned to the person who paid it. Allows person who paid the debt to collect
          the money from the person who is primarily responsible therefor. Prepayment is not

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               allowed, even if the Me is willing to accept prepayment. Me has a duty to give the payor
               a written assignment in recordable form.
            (3) tender as equivalent of payment. If the Me improperly refuses to accept payment, the
                tender has the same effect if the tender was unconditional and the tenderor remains
                willing and able to pay.
      7. § 655.3 Penalty for failure to discharge. If the Me ... fails to discharge the mortgage w/in 30
         days after a request for discharge, the Me is liable to the Mr ... for all actual damages caused
         by such failure, including reasonable attorney fees. If the  is not a resident of this state, such
         action may be maintained upon the expiration of 30 days after conditions of the mortgage
         have been performed w/o previous request or tender.
V. Mortgages: Default and Foreclosure
   A. Default, Acceleration, and Right to Cure
      1. Determining the Foreclosure Amount—Acceleration. Must have a clause to accelerate, but
         most mortgages have them. Acceleration is permitted for defaults in payments or in any
         covenants. A due on sale clause is also frequently an acceleration clause. Unless there is
         statutory authority to the contrary (which there is in IA for farms and homes), debtor cannot
         prevent foreclosure merely by curing his default but must instead pay the entire amount of the
         a) Notice as a condition precedent. The traditional view is that the Me does not have to give
            notice of default or foreclosure to the Mr. The Me only has to perform an affirmative, overt
            act evidencing an intention to take advantage of the acceleration clause. Cure of default
            prior to that affirmative act destroys the right to accelerate for that particular default. What
            constitutes an affirmative act varies. Under judicial foreclosure, the mere commencement
            of the action is generally enough.
            (1) Some courts require written notice of acceleration to accelerate. Restatement requires
                written notice.
         b) Judicial Limits on Acceleration
            (1) Waiver The holder of an instrument who has engaged in a course of dealing of
                accepting late payments waives the right to accelerate the obligation upon a subsequent
                late payment unless the holder has notified the obligor that future late payments will not
                be accepted. Dunn v. General Equities of Iowa, Ltd., 319 N.W.2d 515 (Iowa 1982).
               (a) acceleration clauses are subject to normal contract interpretation principles.
                   Acceleration clauses are not penalties, however, they are just an agreement to bring a
                   note to legal maturity.
               (b) The creditor must take some positive action to exercise the option to accelerate.
                   Failure to exercise the option in the past may operate as a waiver in the future.
               (c) Whether the prior actions constitute a waiver is an issue of fact—when reasonable
                   minds could differ, it goes to the jury. In this case, accepting 3 of the last 4 payments
                   late and not accelerating is enough to support the lower court’s finding of fact that 
                   waived the acceleration clause.

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     (2) Hardship. Generally, a Mr is not relieved of his obligations or of the effect of an
         acceleration clause for a default b/c of negligence, inadvertence, mistake or accident
         unless the Me is guilty of fraud, bad faith, or other conduct that would render
         enforcement of the acceleration clause unconscionable.
  c) Statutory and Regulatory Limitations.
     (1) State Statutes. A number of states, including Iowa, have enacted legislation permitting
         the Mr to cure w/o acceleration.
     (2) Federal Agency Guidelines. FHA and VA grant right to cure w/o acceleration.
     (3) Fannie Mae/Freddie Mac Standard Form Provisions—Requires detailed mailed
         notice and a 30 day grace period as a condition precedent to acceleration (does not undo
         acceleration, just says that none occurs until the 30 days have passed), and gives Me the
         right to defeat acceleration until 5 days before the foreclosure by curing current default.
         These provision can be omitted from the form only when state law is more protective of
         the Mr.
  d) Absence of an acceleration clause. Only owe the default, so when you foreclose (which
     wipes out your lien), you can only collect that amount, leaving you with the future
     obligations unsecured. What courts generally do is sell the land subject to the remaining
     balance of the debt, however.
2. Right to Cure—Statutory (can expand these rights w/course of dealing, see Dunn, or
   w/express K terms, but the more generous right always governs)
  a) 654.2A. Agricultural land--notice, 45 day right to cure (only applies when action on
     mortgage, not when just action on note)
     (1) A creditor shall not initiate an action pursuant to this chapter to foreclose on a deed of trust or mortgage
         on agricultural land ... until the creditor has complied with this section.
     (2) A creditor who believes in good faith that a borrower on a deed of trust or mortgage on agricultural land is
         in default may give the borrower notice of the alleged default, and, if the borrower has a right to cure the
         default, shall give the borrower the notice of right to cure provided in 654.2B. The notice is deemed
         received if sent by certified mail to the borrower.
     (3) The borrower has a right to cure the default unless the creditor has given the borrower a proper notice of
         right to cure with respect to two prior defaults on the obligation secured by the deed of trust or mortgage,
         or the borrower has voluntarily surrendered possession of the agricultural land and the creditor has
         accepted it in full satisfaction of any debt owing on the obligation in default. Borrower does not have a
         right to cure the default if Creditor has given Borrower a proper notice of right to cure with respect to a
         prior default w/in 12 months prior to the alleged default.
     (4) If the borrower has a right to cure a default:
        (a) *A creditor shall not accelerate the maturity of the unpaid balance of the obligation, demand or
            otherwise take possession of the land, other than by accepting a voluntary surrender of it, or otherwise
            attempt to enforce the obligation until 45 days after a proper notice of right to cure is given. The 45
            day right to cure runs concurrently w/mediation period.
        (b) Until the expiration of 45 days after notice is given, the borrower may cure the default by tendering
            either the amount of all unpaid installments due at the time of tender, w/o acceleration, plus a
            delinquency charge of the scheduled annual interest rate plus five percent per annum for the period b/n
            the giving of the notice of right to cure and the tender, or the amount stated in the notice of right to

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          cure, whichever is less, or by tendering any performance necessary to cure a default other than
          nonpayment of amounts due, which is described in the notice of right to cure.
   (5) The act of curing a default restores to the borrower the borrower's rights under the obligation and the deed
       of trust or mortgage, except as provided in (3).
   (6) This section does not prohibit a borrower from voluntarily surrendering possession of the agricultural
      land, and does not prohibit the creditor from enforcing the creditor's interest in the land at any time after
      compliance with this section.
b) 654.2B. Requirements of notice of right to cure The notice of right to cure shall be in
   writing and shall conspicuously state the name, address, and telephone number of the
   creditor or other person to which payment is to be made, a brief identification of the
   obligation secured by the deed of trust or mortgage and of the borrower's right to cure the
   default, a statement of the nature of the right to cure the default, a statement of the nature
   of the alleged default, a statement of the total payment, including an itemization of any
   delinquency or deferral charges, or other performance necessary to cure the alleged default,
   and the exact date by which the amount must be paid or performance tendered and a
   statement that if the borrower does not cure the alleged default the creditor or a person
   acting on behalf of the creditor is entitled to proceed with initiating a foreclosure action or
   procedure. The failure of the notice of right to cure to comply with one or more provisions
   of this section is not a defense or claim in any action pursuant to this chapter and does not
   invalidate any procedure pursuant to chapter 655A, unless the person asserting the defense
   ... proves that he was substantially prejudiced by such failure.
c) 654.2D. Residential 30 day right to cure
   (1) Except as provided in 654.2A, a creditor shall comply with this section before initiating
       an action pursuant to this chapter or foreclosing nonjudicially (655A) on a mortgage or
       deed of trust.
   (2) A creditor who believes in good faith that a borrower on a deed of trust or mortgage on
       a homestead is in default shall give the borrower a notice of right to cure as provided in
       654.2B. A creditor gives the notice when he delivers the notice to the consumer or mails
       the notice to the borrower's residence.
   (3) The borrower has a right to cure the default w/in 30 days from the date the creditor
       gives the notice.
   (4) a. The creditor shall not accelerate the maturity of the unpaid balance of the obligation,
       demand or otherwise take possession of the land, otherwise than by accepting a
       voluntary surrender of it, or otherwise attempt to enforce the obligation until 30 days
       after a proper notice of right to cure is given.
      (a) b. Borrower may cure in the 30 days by tendering either the amount of all unpaid
          installments due at the time of tender, w/o acceleration, or the amount stated in the
          notice of right to cure, whichever is less, or by tendering any other performance
          necessary to cure a default which is described in the notice
   (5) Curing restores to the borrower his rights under the obligation and the deed of trust or
   (6) Creditor has full remedies if comply w/this § and borrower does not cure.

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        (7) A borrower has a right to cure the default unless the creditor has given the borrower a
            proper notice of right to cure with respect to a prior default which occurred within 365
            days of the present default.
        (8) This section does not apply if the creditor is an individual or individuals, or if the
            mortgaged property is property other than a one-family or two-family dwelling which is
            the residence of the Mr.
        (9) An affidavit signed by an officer of the creditor that the creditor has complied with this
            section is deemed to be conclusive evidence of compliance by all persons other than the
            creditor and the Mr.
B. Mediation and Moratoria
  1. 654.2C. Mediation notice--foreclosure on agricultural property A person shall not initiate
     a proceeding under this chapter to foreclose a deed of trust or mortgage on agricultural
     property ... subject to chapter 654A and which is subject to a debt of $20,000 or more under
     the deed of trust or mortgage unless the person receives a mediation release under 654A.11, or
     unless the court determines after notice and hearing that the time delay required for the
     mediation would cause the person to suffer irreparable harm. Title to land that is agricultural
     property is not affected by the failure of any creditor to receive a mediation release, regardless
     of its validity (but still valid affirmative defense to a foreclosure action).
  2. Farm Mediation
     a) 654A.1. Definitions As used in this chapter, unless the context otherwise requires:
        (1) Agricultural property means agricultural land that is principally used for farming ... and
            personal property that is used as security to finance a farm operation or used as part of a
            farm operation including equipment, crops, livestock, and proceeds of the security.
        (2) ***
        (3) Creditor means the holder of a mortgage on agricultural property, a vendor of a RE
            contract for agricultural property, a person with a lien or security interest in agricultural
            property, or a judgment creditor with a judgment against a debtor with agricultural
        (4) ***
        (5) File means to deliver by the required date by certified mail or another method
            acknowledging receipt.
        (6) ***
        (7) Participate or participation means attending a mediation meeting, and discussing
            issues, stating a position regarding restructuring, and exchanging information, relating
            to any of the following: a debt against agricultural property which is RE ...; a forfeiture
            of an ILK ...; a secured interest in ag. property; or garnishment, levy, execution, seizure,
            or attachment of ag. property....
     b) 654A.4. Applicability of chapter

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   (1) This chapter applies to all creditors of a borrower described under (2) with a secured
       debt against the borrower of $20,000 or more.
   (2) This chapter applies to a borrower who is a natural person operating a farm (may have
       argument over what a ―farm‖ is—err on side of caution)or any corporation, trust, or
       limited partnership as defined in section 9H.1.
c) 654A.5. Voluntary mediation proceedings A borrower who owns ag. property or a
   creditor of that borrower may request mediation ... by applying to the farm mediation
   service.... The farm mediation service shall evaluate each request and may direct a mediator
   to meet with the borrower and creditor to assist in mediation.
d) 654A.6. Mandatory mediation proceedings
   (1) A creditor subject to this chapter desiring to initiate a proceeding to enforce a debt
       against ag. property which is RE ... to forfeit an ILK for ag. property, to enforce a
       security interest in ag. Property... or to otherwise garnish, levy on, execute on, seize, or
       attach agricultural property, (1)shall file a request for mediation with the farm
       mediation service. The creditor shall not begin the proceeding subject to this chapter
       until the creditor receives a mediation release, or until the court determines after notice
       and hearing that the time delay required for the mediation would cause the creditor to
       suffer irreparable harm. Title to land that is agricultural property is not affected by the
       failure of any creditor to receive a mediation release regardless of its validity. The time
       period for the notice of right to cure runs concurrently with the period for the mediation.
   (2) Upon the receipt of a request for mediation, the farm mediation service shall (2) conduct
       an initial consultation w/the borrower w/o charge. The borrower may waive mediation
       after the initial consultation.
   (3) Unless Borrower waives mediation, (3) the borrower shall file a list containing at least
       the name and place of business for each creditor as defined in 654A.1 or apply for an
       extension ... w/the farm mediation service w/in 21 days of the service's receipt of a
       request for mediation.
e) 654A.7. Financial analyst and legal assistance
   (1) After receiving a mediation request, the farm mediation service shall refer the borrower
       to a financial analyst associated with the ISU extension service ASSIST program. The
       financial analyst assists Borrower in preparation of information relative to his finances
       for the initial mediation meeting.
   (2) After receiving the mediation request, the farm mediation service shall notify the
       borrower that legal assistance may be available w/o charge through the legal assistance
       for farmers program provided in chapter 13.
f) 654A.8. Initial mediation meeting
   (1) Unless the borrower waives mediation, farm mediation service sends mediation notice
       to creditors w/in 21 days, then have another 21 days to have the first meeting (Dr, Crs,
       and mediator all meet)

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  (2) automatic stay If a creditor subject to this chapter receives a mediation meeting notice
      under (1), the creditor and the creditor's successors in interest may not continue
      proceedings to enforce a debt against ag. property of the borrower under chapter 654, to
      forfeit an ILK for ag. property, to enforce a secured interest in ag. property, or to
      otherwise garnish, levy on, execute on, seize, or attach agricultural property. Time
      periods under and affecting those procedures stop running until the farm mediation
      service issues a mediation release....
g) 654A.9. Duties of mediator At the initial mediation meeting and subsequent meetings, the
   mediator shall:
   (1) Listen to the borrower and the creditors desiring to be heard.
   (2) Attempt to mediate between the borrower and the creditors.
   (3) Advise the borrower and the creditors as to the existence of available assistance
   (4) Encourage the parties to adjust, refinance, or provide for payment of the debts.
   (5) Advise, counsel, and assist the borrower and creditors in attempting to arrive at an
       agreement for the future conduct of financial relations among them.
h) 654A.10. Mediation period The mediator may call mediation meetings during the
   mediation period, which is up to 42 days after the farm mediation service received the
   mediation request. However, if all parties consent, mediation may continue after the end of
   the mediation period.
i) 654A.11. Mediation release
  (1) If an agreement is reached b/n the borrower and the creditors, the mediator shall draft a written mediation
      agreement, have creditors sign it signed, and submit the agreement to the farm mediation service.
  (2) The borrower and the creditors who are parties to the mediation agreement may enforce the mediation
      agreement as a legal contract. The agreement constitutes a mediation release.
  (3) a. If the borrower waives mediation, or if a mediation agreement is not reached, the borrower and the
      creditors may sign a statement prepared by the mediator that mediation was waived or that the parties did
      not reach an agreement. If any party does not sign the statement, the mediator shall sign it. The statement
      constitutes a mediation release.
     (a) b. The mediator shall issue a mediation release unless the creditor fails to personally attend and
         participate in all mediation meetings. The mediator shall issue a mediation release if the borrower
         waives or fails to personally attend and participate in all mediation meetings, regardless of
         participation by the creditor.... This section does not require the creditor or borrower to reach an
         agreement ... to receive a mediation release.
  (4) The mediator shall promptly notify a creditor by certified mail of a denial to issue a mediation release and
      the reasons for the denial. The notice shall state that the creditor has seven days from the date that the
      notice is delivered to appeal the mediator's decision.... The notice shall state that the creditor may also
      request another mediation meeting. The action for judicial review shall be brought in equity, and the
      action shall be limited to whether, based on clear and convincing evidence, the decision of the
      administrative head is an abuse of discretion. .... Upon reversing the decision by the service, the court
      shall order that the service issue the mediation release.
j) 654A.12. Extension of deadlines Upon petition by the borrower and all known creditors,
   the farm mediation service may, for good cause, extend a deadline imposed by 654A.8 or
   654A.10 for up to 30 days.

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  k) 654A.13. Confidentiality. The confidentiality of all mediation communications and
     mediation documents is protected....
  l) 654A.16. Wetland designation The farm mediation service shall provide for mediation
     between the DNR and a landowner affected by the preliminary wetland designation
     provided in 456B.12. DNR shall cease actions relating to inventorying or designating
     affected land until a mediation release is issued by the farm mediation service.
3. Moratorium for rain and bugs. No specific ag. Limitation, but clearly ag. focused
  a) 654.15. Continuance—moratorium
     (1) In all actions for the foreclosure of RE mortgages, deeds of trust of real property, and ILKs, when the
         owner enters an appearance and files an answer admitting some indebtedness and breach of the terms of
         the designated instrument, which admissions cannot be withdrawn or denied after a continuance is
         granted, the owner may apply for a continuance of the foreclosure action if the default or inability of the
         owner to pay or perform is mainly due or brought about by reason of drought, flood, heat, hail, storm, or
         other climatic conditions or by reason of the infestation of pests which affect the land in controversy. The
         application must be in writing and filed at or before final decree. Upon the filing of the application the
         court shall set a day for hearing ... If the court finds that the application is made in good faith and is
         supported by competent evidence showing that default in payment or inability to pay is due to [might
         include lay-off due to one of the listed conditions if means cannot make payments] drought, flood, heat,
         hail, storm, or other climatic conditions or due to infestation of pests, the court may continue the
         foreclosure proceeding as follows:
        (a) [basically get one more growing season] If the default or breach of terms of the written instrument on
            which the action is based occurs on or before March 1 of any year by reason of any of the above
            causes, causing the loss and failure of crops on the land involved in the previous year, the continuance
            shall end on March 1 of the succeeding year.
        (b) If the default or breach of terms of the written instrument occurs after March 1, but during that crop
            year and that year's crop fails by reason of any of the causes set out in this subsection, the continuance
            shall end on March 1 of the second succeeding year.
        (c) Only 1 continuance shall be granted, except upon a showing of extraordinary circumstances in which
            event the court may grant a 2nd continuance for a further period as the court deems just and equitable,
            not to exceed 1 year.
        (d) The order shall provide for the appointment of a receiver to take charge of the property and to rent the
            property. The owner or person in possession shall be given preference in the occupancy of the
            property. The receiver, who may be the owner or person in possession, shall collect the rents and
            income and distribute the proceeds as follows:
            (i) For the payment of the costs of receivership.
            (ii) For the payment of taxes due or becoming due during the period of receivership.
            (iii)insurance on the buildings on the premises.
            (iv)owner of the written instrument upon which the foreclosure is based, to be credited on the

                An owner of a small business may apply for a continuance as provided in this subsection if the RE
                subject to foreclosure is used for the small business. The court may continue the foreclosure
                proceeding if the court finds that the application is made in good faith and is supported by
                competent evidence showing that the default in payment or inability to pay is due to the economic
                condition of the customers of the small business, because the customers of the small business have
                been significantly economically distressed as a result of the required causes. Court determines
                length of the continuance but cannot exceed 2 years.

                                              Real Estate
        (2) In all actions for the foreclosure of RE mortgages, deeds of trust of RE, and ILKs, an owner of RE may
            apply for a moratorium as provided in this subsection if the governor declares a state of economic
            emergency. The governor shall state in the declaration the types of RE eligible for a moratorium
            continuance, which may include all RE. Only property of a type specified in the declaration which is
            subject to a mortgage, deed of trust, or ILK entered into before the date of the declaration is eligible for a
            moratorium. In an action for the foreclosure of a mortgage, deed of trust, or ILK eligible for a
            moratorium, the owner may apply for a continuation of the foreclosure if the owner has entered an
            appearance and filed an answer admitting some indebtedness and breach of the terms of the designated
            instrument. The admissions cannot be withdrawn or denied after a continuance is granted. Applications
            for continuance made pursuant to this subsection must be filed w/in 1 year of the governor's declaration of
            economic emergency. Upon the filing of an application ... the court shall set a date for hearing ... If the
            court finds that the application is made in good faith and the owner is unable to pay or perform, the court
            may continue the foreclosure proceeding as follows:
           (a) If the application is made in regard to RE used for farming, the continuance shall terminate 2 years
               from the date of the order. If the application is made in regard to RE not used for farming, the
               continuance shall terminate 1 year from the date of the order.
           (b) Only 1 continuance shall be granted the applicant for each written instrument or contract under each
           (c) The court shall appoint a receiver to rent the property. The applicant shall be given preference in the
               occupancy of the property. The receiver, who may be the applicant, shall collect the rents and income
               and distribute the as follows:
               (i) For the payment of the costs of receivership, including the required interest on the written
                   instrument and the costs of operation.
               (ii) For the payment of taxes...
               (iii)insurance deemed necessary by the court including but not limited to insurance on the buildings on
                    the premises and liability insurance.
               (iv)the owner of the written instrument upon which the foreclosure was based, to be credited against
                   the principal due on the written instrument.
           (d) A continuance granted under this subsection may be terminated if the court finds, after notice and
               hearing, all of the following:
               (i) The party seeking foreclosure has made reasonable efforts in good faith to work with the applicant
                   to restructure the debt obligations of the applicant.
               (ii) The party seeking foreclosure has made reasonable efforts in good faith to work with the applicant
                    to utilize state and federal programs designed and implemented to provide debtor relief options.
                    For purposes of (i) and this subparagraph, the determination of reasonableness shall take into
                    account the financial condition of the party seeking foreclosure, and the financial strength and the
                    long-term financial survivorship potential of the applicant.
               (iii)The applicant has failed to pay interest due on the written instrument.

C. Foreclosure by Court Action (foreclosure classic). There are four main areas of foreclosure
   law: 1) Judicial foreclosure v. nonjudicial foreclosure; 2) deficiency judgments allowed or
   constrained; 3) Statutory redemption; 4) right of possession during foreclosure proceedings or
  1. Judicial Foreclosure. Costs time and money but get better title b/c have finality of a court
     determination of ownership and priority of liens. Debtor’s primary advantage is the right to be
     heard and delay.

                                                  Real Estate
2. Power of sale foreclosure. After varying degrees of notice, the RE is sold at a public sale,
   conducted either by a public official or by some private party (perhaps even the Me himself).
   The mortgage instrument must have a power of sale clause (usually use a deed of trust)
3. Judicial strict foreclosure. Is a judicial proceeding, but instead of selling the property, the
   court orders the Mr to pay the mortgage debt w/in a set period of time or the property will vest
   in the Me. Me can get a deficiency but Mr is not entitled to any surplus. Very rare, really only
   still used in Vermont and Connecticut.
4. Scire Facias. Legal judicial foreclosure. After default, the Me gets an order of writ of scire
   facias, which directs the debtor to show cause why the mortgaged property should not be sold
   to satisfy the mortgage debt. If Me prevails, he gets a judgment for amount owing and writ of
   levari facias issues for execution sale to satisfy judgment.
5. § 654.1 Equitable Proceedings. [general rule in IA is no non-judicial foreclsore] Except as
   provided in 654.18, a deed of trust or mortgage of RE shall not be foreclosed in any other
   manner than by action in court by equitable proceeding.
6. 654.2 Deed of Trust Deeds of trust of RE may be executed as securities for the performance
   of contracts, and shall be considered as, and foreclosed like mortgages.
7. 654.3 Venue. An action for the foreclosure of a mortgage of RE, or for the sale thereof under
   an encumbrance or charge thereon, shall be brought in the county in which the property to be
   affected, or some part thereof, is situated.
8. 654.4 Separate suits on note and mortgage. If separate suits are brought in the same county
   on the bond or note, and on the mortgage given to secure it, the  must elect which to
   prosecute. The other will be discontinued at ’s cost.
9. 611.5 Action on note and mortgage. An action on a note, together with a mortgage or deed
   of trust for the foreclosure of the same, shall be by equitable proceedings. An action on the
   bond or note alone, w/o regard to the mortgage or deed of trust, shall be by ordinary
   proceedings. [could sue on one but not the other, but usually sue on both]
10.Lien Foreclosures
   a) equitable foreclosure proceedings are the exclusive way to foreclose mortgages, deeds of
      trust, and mechanics liens in Iowa.
   b) limitations—lien created by a mortgage can generally be enforced any time prior to the
      expiration of the limitations period applicable to the underlying debt. The general
      limitations period for enforcement of written contracts in Iowa is 10 years. Where the
      underlying debt has been reduced to judgment in a proceeding in which the mortgage or
      deed of trust securing the same has not been foreclosed, a special imitations period
      extinguishes the effectiveness of the judgment as an affirmative right after two years from
      the date of its rendition.
   c) receiverships—can appoint a receiver to take possession of the property if: 1) the Mr is
      insolvent, 2) the mortgage contains a pledge of rents and profits, and 3) the mortgaged
      property is shown to be worth less than the debt. Receiver can then rent the place and apply
      rents and profits toward debt obligation.

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     d) Foreclosure decree and special execution. The foreclosure proceeding culminates in the
        entry of a decree directing the sale of the RE subject to the lien. The sale procedure is
        initiated by the issuance of a writ of special execution. Special executions are commonly
        levied by making an entry in the recording book. In the case of a decree foreclosing a lien
        created by a mortgage or deed of trust, the writ of special execution may not issue more
        than 2 years after the date of the decree.
D. Equitable Redemption and Omitted Parties
  1. Judicial foreclosure—who you have to add
     a) Necessary-Proper Party Distinction. All parties junior to the foreclosing lien are
        necessary parties b/c those are the people whose interests you are cutting off (have
        equitable redemption until Sr. forecloses it). B/c all Sr. parties are unaffected by a junior’s
        foreclosure, they are not necessary parties. Always have to include owner of equity of
        redemption (i.e., the owner of the property) b/c he is last at pay window
        (1) only have to add people whom the foreclosure will affect.
        (2) the most common ―proper party‖ is a senior lienholder.
           (a) general rule is that you cannot make them a party w/o their consent except where
               there is a dispute w/regard to priority of liens. If the senior lien is due and payable at
               the time of foreclosure, some courts allow the junior to sell it free and clear of all
               interests and just distribute money in order of priority. In this case, the senior would
               be a necessary party b/c you are messing w/his interest.
     b) Lessee as a party. If the lease is senior to the mortgage being foreclosed, the foreclosure
        does not affect the lease, so the lessee is not a necessary party. The foreclosure-purchaser
        just gets the lessor’s interest and becomes the lessee’s landlord. If the lease is junior to the
        foreclosing party’s interest, the lessee’s interest will be wiped-out, and all his future
        obligations under the lease also terminate, so he is then a necessary party.
        (1) If the lease is pro-landlord, the foreclosing party may intentionally not join the lessee so
            that the lessee’s interest is not wiped-out (and his obligations  continue). Essentially
            gives the foreclosing party the option of selling w/ or w/o the lease.
        (2) Some states give the lessee the complete option of deciding whether to join the
            proceedings (and get out of the lease) or stay out (and continue w/rights and obligations
            under the lease).
     c) Omitted Parties. A necessary party may be deemed bound by a foreclosure proceeding
        even though he was never formally made a party to it.
        (1) A few exceptions
           (a) If the state has a pure race recording statute and a necessary party acquires his
               interest before foreclosure but does not record it until after the foreclosure
               proceedings begin (regardless of purchaser’s notice), foreclosure proceedings will
               bind him.
           (b) In a notice or race-notice state, the necessary party is bound by the foreclosure
               proceedings, even though he acquired his interest before the proceedings, if he does

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     not record his interest prior to the foreclosure sale and the foreclosure sale purchaser
     buys w/o notice of his unrecorded interest.
  (c) Lis Pendens will bind a necessary part who acquires his interest in the RE after the
      commencement of the foreclosure proceedings if notice filed
(2) The General Rules
  (a) Omitted Owner—if owner of the equity of redemption is omitted from a judicial
      foreclosure proceeding, the proceeding as to that person is void and his equity of
      redemption continues.
     (i) The owner of the equity of redemption, has the right to redeem the land by
         payment of the debt to the purchaser. The purchaser does not acquired the
         foreclosing Me’s interest, so the owner can redeem by paying the debt, but he has
         to pay it to the purchaser.
  (b) Omitted Junior Lienor. Omitted junior lienor has two remedies: 1) he can foreclose
      his mortgage subject to the 1st (which, for these purposes, was not wiped-out by the
      foreclosure sale) b/c it was not wiped-out by the defective proceedings; or 2) can
      redeem by paying the foreclosure purchaser the amount of the mortgage debt (then all
      foreclosed liens and equity interest are resurrected and the purchaser can redeem
      from Jr. by paying his out of pocket plus his debt).
  (c) Foreclosure Sale Purchaser’s Remedies. He has 3 remedies: 1) he can reforeclose
      the senior mortgage (as assignee of that mortgage); 2) can redeem the junior lien by
      paying the amount of the lien; or 3) in limited circumstances, he can obtain strict
      foreclosure against the junior lienor.
     (i) If both the junior lienor and the foreclosure sale purchaser want to redeem, the
         sale purchaser prevails.
     (ii)can generally only use strict foreclosure in this case if can show: 1) omitted as the
         result of inadvertence or mistake, and 2) the FMV of the mortgage RE does not
         exceed the amount of encumbrances senior to the junior lien (i.e., not taking
         anything away from junior).
(3) Omitted Parties: Statutory v. Equitable Redemption.
  (a) Nature of Statutory Redemption. Permits the Mr, subsequent grantees, and
      sometimes junior lienholders to redeem after the foreclosure sale for a period (in
      Iowa) of 1 year. The redemption amount is the foreclosure sale price, not the debt.
  (b) The Omitted Owner and Statutory Redemption. He does not have the option of
      choosing b/n equitable redemption and statutory redemption b/c the equitable right of
      redemption accrues at mortgage maturity and ends when there is a valid foreclosure.
      Statutory redemption begins only when a valid foreclosure has taken place (in Iowa,
      statutory starts on day of sale regardless)
  (c) When exercise equitable right of redemption, will only get the senior mortgage, but
      when exercises statutory right of redemption, will get the land.

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  2. 654.8 Junior Lieholder’s Equitable Redemption. At any time prior to the sale, a person
     having a lien on the property which is junior to the mortgage [being foreclosed] will be
     entitled to an assignment of all the interest of the holder of the mortgage, by paying the holder
     the amount secured, with interest and costs, together w/the amount of any other liens of the
     same holder that are paramount to the person’s. The person may then proceed w/the
     foreclosure, or discontinue it, at the his option.
  3. 628.3 Redemption by debtor. The debtor may redeem RE at any time w/in one year from the
     date of the sale, and will, in the meantime, be entitled to the possession thereof, and for the 1st
     6 months thereafter such right of redemption is exclusive. Any RE the debtor redeems shall
     thereafter be free and clear from any liability for any unpaid portion of the judgment under
     which said RE was sold.
  4. 628.5 Redemption by creditors.
     Sale----------------------------------6   Months-----------------9   Months------------------1   Year
             Debtor Exclusive             /     Cr & Dr            /          Dr exclusive
  5. Lis Pendens—617.11—foreclosure is an action affecting RE, so could file a lis pendens and
     no one could get an interest superior to that being foreclosed b/c would be charged w/notice
     under 558.41 (recording statute).
  6. Purchaser at sale entitled to recording act (558.41) protection against interests not recorded at
     time of sale.
  7. Statutory redemption runs from day of sale. If you are an omitted party, have to rely solely on
     equitable redemption (if statutory has run) but court will pattern equitable redemption closely
     after statutory redemption. Nelson v. 1st Bank of Jewell, 202 N.W. 759 (Iowa 1925).
     a) Are in equitable redemption, so redeem the debt, not the land (and pay debt, not purchase
  8. An omitted owner is also in equitable redemption when statutory time from sale has run. Time
     will usually track statutory redemption (although no guarantee), but are technically in
     equitable redemption. The difference, when there is no deficiency judgment, is academic
     when the party is an omitted owner. Note: the foreclosure proceedings are still valid generally,
     they just do not apply to wipe out the interest of the omitted parties. White v. Melchert, 227
     N.W. 347 (Iowa 1929).
  9. How you should do judicial foreclosure: 1) bring abstract up-to-date and do visual inspection
     of property; 2) join all parties who have an interest of record; 3) file lis pendens; and 4) file
E. Interest and Attorneys Fees
  1. 668.13(2) Interest on a judgment founded on a contract is at the rate expressed in the contract,
     as long as it is not usurious. The interest runs until the debt is satisfied (could be sale if no
     deficiency, if there is a deficiency, interest will continue to run on that at K rate). If the K rate
     is variable, the variable nature will pass through to the judgment (figure interest in the exact
     same way you do in the K).

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  2. 625.22 Attorney’s fees—costs. When judgment is recovered upon a written contract
     containing an agreement to pay attorney’s fees, the court shall allow ... a reasonable attorney’s
     fee to be determined by the court....
  3. 625.24 Affidavit required. Attorney’s fees shall not be taxed ... unless it appears by affidavit
     of the attorney that there has not been an agreement b/n the attorney and the attorney’s client
     or other person, express or implied, for any division or sharing of the fees to be taxed. Does
     not apply to a practicing attorney engaged w/the attorney as an attorney in the same cause.
     When fees are taxed, they shall only be in favor of a regular attorney and as compensation for
     services actually rendered in the action.
  4. 625.25 Opportunity to pay. Cannot get attorney’s fees unless you  has had reasonable
     opportunity to pay debt before you sued him (have to ask for full accelerated amount and
     monthly payment that is late, not just payment when it is late and then never ask for full
     amount when you accelerate). This provision, however, shall not apply to Ks made payable by
     their terms at a particular place, the maker of which has not tendered the sum due at the place
     named in the K.
F. Sale Procedures and Bidding.
  1. Disposition of surplus. Iowa law: surplus goes in order of priority. If a junior is not yet
     mature, he has to give up future interest not yet matured.
     a) 654.4 Judgment—sale and redemption. When a mortgage or deed of trust is foreclosed,
        the court shall render judgment for the entire amount found to be due, and must direct the
        mortgage property, or so must thereof as is necessary, to be sold to satisfy the judgment,
        w/interest and costs. A special execution shall issue accordingly, and the sale under the
        special execution is subject to redemption ... unless the  has elected foreclosure w/o
        redemption under 654.20.
     b) 654.7 Surplus. Mr gets overplus from sale if no other lien on property.
     c) 654.9 Payment of other liens—rebate of interest. If there are any other liens on the
        property sold, or other payments secured by the same mortgage, they shall be paid off in
        their order. If the money secured by any such lien is not yet due, have to discount interest
        or hold off on paying them.
     d) 654.10 Amount sold—as far as practicable, the property sold must be only that which is
        sufficient to satisfy the mortgage foreclosed.
  2. Execution—Procedures
     a) 626.74 Notice of sale—the officer must give 4 week’s notice for RE (3 for personal
        property) of the time and place of sale.
     b) 626.75 Posting and publication. Notice shall be posted in at least 3 public places of the
        county, one of which shall be at the county courthouse. In addition to which, in the case of
        RE ... there shall be two weekly publications of such notice in some newspaper printed in
        the county ... the first at least 4 weeks in the case of RE (3 weeks for personal property)
        before the dated of the sale, and the second at a later time before the date of the sale

                                           Real Estate
c) 626.77 Penalty for selling w/o notice. Sheriff has to pay actual damages plus a $100 fine
   to the execution .
d) 626.78 Notice to . If the debtor is in actual occupation and possession of any part of the
   land levied on, the officer having the execution shall at least 20 days prior to the sale, serve
   the debtor with written notice stating that the execution is levied on said land, and
   mentioning the time and place of the sale, which notice shall be served in the manner
   provided by rule 56.1(a) of the rules of civil procedure.
e) 626.79 Setting aside sale. Sales made w/o the notice required in .78 may be set aside on
   motion made w/in 90 days after the sale.
f) 626.80 Time and manner. The sale must be at public auction, b/n 9 a.m. and 4 p.m., and
   the hour of the commencement of the sale must be fixed in the notice. The sheriff shall
   receive and give a receipt for a sealed written bid submitted prior to the public auction....
g) 626.81 sale postponed. When there are no bidders, or when the amount offered is grossly
   inadequate or when from any cause the sale is prevented from taking place ... or the parties
   so agree, the officer may postpone the sale for not more than 3 days w/o being required to
   give any further notice thereof, which postponement shall be publicly announced at the
   time the sale was to have been made, but not more than two such adjournments shall be
   made, except by agreement of the parties in writing and made a part of the return upon the
h) 626.82 Overplus. When the property sells for more than the amount required to be
   collected, the overplus must be paid to the debtor, unless the officer has another execution
   in his hands on which said overplus may be rightfully applied, or unless there are liens
   upon the property, which ought to be paid therefrom, and the holders thereof make claim to
   such surplus and demand application thereon....
i) 626.83 Deficiency—additional execution. If there is a deficiency, the judgment holder
   may order out another execution, which shall be credited w/the amount of the previous
j) 626.84 Plan of division of land. At any time before 9 a.m. on the day of the sale, the
   debtor may deliver to the officer a plan of division of the land levied on, ...and the officer
   shall sell, according to said plan, so much of the land as may be necessary to satisfy the
   debt and costs, and no more. If no such plan is furnished, the officer may sell w/o any
   division. [the seller has a case law duty to sell land in a commercially reasonable manner.
   If there are lots, have to sell in individual lots if that will satisfy judgment, before he sells
   en masse. If there is some logical division, seller has a duty to offer separately 1st]
k) 626.85 Failure of purchaser to pay—optional procedure. The executing creditor can
   either go after the purchaser for the sale price (and let the execution debtor off the hook for
   the amount of the sale price) or he can just sell it over again.
l) 626.86 Sales vacated for lack of lien. When any person present shall purchase at a
   sheriff’s sale any RE on which the judgment upon the execution issued was not a lien at the
   time of levy, and which fact was unknown to the purchaser, the court shall set aside such
   sale on motion, notice having been given to the debtor ... and a new execution may be

                                       Real Estate
     issued to enforce the judgment, and when the sale set aside, the sheriff or judgment creditor
     must give the purchaser his money back....
  m) 626.95 Deed or Certificate. If the property sold is not subject to redemption, the sheriff
     must execute a deed to the purchaser, but if subject to redemption, a certificate ....
  n) 626.96 Duplicate issued in case of loss. If certificate is lost or destroyed, have a hearing
     and issue a new one. The new one is same as the old—dates run from original.
  o) 626.97 Cancellation after 8 years. After 8 years have elapsed from the date of issuance of
     any sheriff’s certificate of sale, and no action has been taken by the holder to obtain a deed,
     the sheriff and clerk of the district court must cancel the sale and certificate of record and
     all rights thereunder shall be barred.
  p) 626.98 Deed if the debtor or his assignee fails to redeem, the sheriff ... must, at the end of
     the period for redemption, execute a deed to the person who is entitled to the certificate ...
     or to that person’s assignee. If the person entitled is dead, the deed shall be made to the
     person’s heirs. [the deed is basically a quit claim deed for the debtor’s interest, if any,
     when the foreclosing lien attached]
  q) 626.99 Constructive notice—recording. The purchaser has 60 days from the expiration of
     the full time of redemption to record. Until that point, the publicity of the proceedings is
     constructive notice of the rights of the purchaser.
  r) 626.100 Presumption. Sheriff’s deeds are presumptive evidence of the regularity of all
     previous proceedings ...
  s) 626.101 Waste Purchaser can recover from owner for waste during redemption period.
  t) 648.1(4) Grounds for forcible entry and detainer. A summary remedy for forcible entry
     or detention of RE is allowable ... where the continues in possession after a sale by
     foreclosure ... unless the  claims by a title paramount to the lien by virtue of which the
     sale was made, or by title derived from the purchaser at the sale; ... such title shall be
     clearly and concisely set forth in the ’s pleading.
  u) 655.4 Entry of foreclosure. when a judgment of foreclosure is entered in any court, the
     clerk shall record with the recorder an instrument in writing referring to the mortgage and
     duly acknowledging that the mortgage was foreclosed and giving the date of the decree.
  v) 655.5 Instrument of satisfaction. When the judgment is fully paid and satisfied upon the
     judgment docket of the court, the clerk shall record w/the recorder an instrument in writing,
     referring to the mortgage and duly acknowledging a satisfaction of the mortgage.
3. Overview
  a) Execution. General execution is an execution on whatever the sheriff sees. In Iowa, use
     general execution for money judgments in nonattachment cases. Special execution is
     execution on a specific thing, and is used in Iowa for lien foreclosures.
  b) Judicially directed transfers. A court order or decree may direct an officer to transfer
     property w/o going through a sale.
  c) Tax sales—do not involve court, department of revenue sells it itself.

                                        Real Estate
  4. Westfall. Procedure to sell. 1) offer non-homestead in 40 acre tracts, if not enough; 2) offer
     all non-homestead together, if not enough; 3) offer homestead and non-homestead separately,
     if not enough; 4) offer whole parcel and only sell together if can get more for it and separate
     sales will not bring enough (note the FMV redemption rights for homestead also). The whole
     purpose of this, together w/FMV of homestead redemption is to allow the owner to redeem
     homestead w/o paying whole debt.
G. Deficiency Judgments. Have to remember here that there are two separate issues: the lien,
   which is in rem and the note, which is in personam.
  1. One Action Rule—is the minority rule that states that the Me must first bring a foreclosure
     action and then seek a deficiency judgment. If the Me first sues on the note, the Mr may have
     that action dismissed. If the Mr does not raise the defense, and the Me obtains an in personam
     judgment, the Me cannot use foreclosure to collect any of his judgment.
  2. Fair value legislation. Usually states that deficiency judgment is the difference b/n the debt
     and the FMV of the property, regardless of what the sale price was.
  3. Power of sale foreclosure. Many states prohibit a deficiency judgment after a power of sale
  4. Purchase money mortgages. Many states (e.g., CA) prohibit deficiency judgments on a
     purchase money mortgage.
  5. Deficiency judgments on installment land contracts. The election of remedies doctrine always
     bars a vendor from first foreclosing and then seeking to recover the difference b/n the contract
     price and the FMV of the land. However, vendor can treat it like a mortgage and foreclose,
     sell and then collect the deficiency.
  6. 654.6 Deficiency—General Execution If the mortgaged property does not sell for sufficient
     to satisfy the execution, a general execution may be issued against the Mr, unless the parties
     have stipulated otherwise.
  7. Statute of limitations on in personam judgments 614.1(6). Have 20 years to renew a
     judgment (no issues in new action except is the debt paid and have more than 20 years
     a) 626.2 Can issue execution on a judgment at anytime w/in that 20 years.
     b) 626.12 Form of execution. The execution must intelligibly refer to the judgment stating
        the time when and place at which it was rendered, the names of parties to the action as well
        as to the judgment, its amount, and the amount still to be collected thereon, if for money; if
        not, it must state what specific act is required to be performed. If it is against the property
        of the judgment debtor, it shall require the sheriff to satisfy the judgment and interest out of
        property of the debtor subject to execution.
     c) 624.23—judgment lien—lasts 10 years and only applies to RE.
  8. Limitations on Judgments. On farms and homes, deficiency judgment only lasts for 2 years
     after date of foreclosure. Keeps Me from foreclosing when times are bad and then sticking the
     Mr w/this huge deficiency judgment. Requires you to at least start (levy) sale on deficiency

                                            Real Estate
      judgment w/in 2 years (should sell w/in 2 years b/c if do not, then will lose priority b/c only
      relying on execution lien not the J.Lien).
      a) 615.1 Execution on certain judgments prohibited. No judgment in an action for the
         foreclosure of a RE mortgage, deed of trust, or RE ILK which at the time of the judgment is
         either used for an agricultural purpose ... or a one or two family dwelling which is the
         residence of the Mr... shall be enforced and no execution shall issue thereon and no force
         or validity given thereto for any purpose other than as a setoff or counterclaim after the
         expiration of a period of 2 years from the entry thereof. (2 year executability, lienability
         and no actionability on deficiency)
         (1) If the mortgage is not properly recorded, likely still applies, but if it is invalid as b/n the
             parties (forgery, fraud, etc.) likely does not apply.
      b) 615.2 revival. Cannot renew or revive judgment—two years is all you get.
      c) 615.3 Future Judgments w/o foreclosure—A judgment [even if never foreclosed or had
         no vale on security] hereafter rendered on a promissory obligation secured by a mortgage,
         deed of trust, or RE K upon property that at the time of judgment is either a farm or a one
         or two family home occupied by the Mr but w/o foreclosure against the security, shall not
         be subject to renewal by action thereon, after the lapse of 2 years from the date of rendition,
         shall be w/o force and effect for any purpose except as a setoff or counterclaim.
      d) This applies to any note that is secured by the property specified (a farm or home). Limit
         applies whether creditor forecloses or not, or whether he has any value in the security or
         not. Look at what the security for the note is in, not at the value of that security. If you took
         security in property that qualifies—you are screwed. Cannot get around limit by proceeding
         as an unsecured creditor. Hell v. Schult, 28 N.W.2d 1 (Iowa 1947)
         (1) If Sr. forecloses and Jr. does not redeem, Jr. can get judgment, but limited to 2 years
             (even though foreclosure wiped out lien) b/c was once secured in land. If the Jr. was a
             judgment lien, however, his interest is not wiped out b/c 2 year limit only applies to
   9. Either get in personam and then foreclose [shaky ground] or get both at the same time [best
      way to do it], but cannot foreclose and then get in personam judgment. Can only follow
      special execution (foreclosure sale) w/general execution on deficiency judgment when got in
      personam judgment before or at same time got foreclosure decree. Foreclosure proceeding
      kills the debt, so their is nothing left to get an in personam judgment on. Federal Land Bank
      v. Faught Bros. 468 N.W.2d 793 (Iowa 1991).
H. Statutory Redemption. Once a valid foreclosure has occurred, the equity of redemption ends. In
   about ½ of the states, including Iowa, the statutory right to redeem then begins. The redemption
   amount is the sale price (not the debt), plus interest, costs, etc. The redeeming party redeems the
   land, not the debt.
   1. Generally
      a) Purpose is to assure adequate price and to allow junior interests (including the owner) to
         protect their interests.

                                              Real Estate
   b) Criticisms—really drives the price down.
2. Approaches/Operation
      (1) Strict Priority Approach—Minnesota. Each party has five days in which to redeem.
          These periods are exclusive and run in order of priority of their interest.
      (2) Scramble Method—Iowa. No exclusive redemption period (except that Iowa gives 1st,
          2nd, and 4th quarter exclusively to the owner/debtor). All creditors can redeem from each
          other by paying the redemption price (purchase price) plus, if the interest is senior to the
          redeeming creditor, the amount of the creditor’s debt (if the interest is junior to the
          redeeming creditor, do not have to pay amount of that party’s debt).
3. Redemption by Mr: Revival of Liens. When a Mr redeems, many courts hold that all liens
   existing prior to the foreclosure sale are revived, including the lien under which the property
   was sold. Iowa does not adhere to this rule. The foreclosing creditor’s mortgage does not
   attach, but can get a judgment lien on the deficiency which may attach (but order of priority
   will be lost) (Iowa also does not adhere to this rule).
4. 654.5—Judgment—Sale and redemption. When a mortgage or deed of trust is foreclosed,
   the court shall render judgment on the entire amount found to be due, and must direct the
   mortgaged property, or so much thereof as is necessary, to be sold to satisfy the judgment,
   w/interest and costs. A special execution shall issue accordingly, and the sale under the special
   execution is subject to redemption as in cases of sale under general execution unless the  has
   elected to foreclose w/o redemption under 654.20.
5. Iowa Redemption Statutes
   a) 628.1 All redemptions made under the provisions of this chapter shall be made in the county where the sale is
   b) 628.1A This chapter does not apply in an action to foreclose a RE mortgage if  has elected foreclosure
      w/o redemption under 654.20.
   c) 628.2 When sale absolute RE evied upon must be at least a leashold having two years of an unexpired term
      for redemption.
   d) 628.3 The debtor may redeem RE at any time within 1 year from the day of sale, and will, in the meantime,
      be entitled to the possession thereof; and for the 1st 6 months thereafter such right of redemption is
      exclusive. Any RE the debtor redeemes shall thereafter be free and clear from any liability for any unpaid
      portion of the judgment under which said real property was sold.
      (1) a redeeming Jr. creditor who still had a deficiency could probably go after the land if debtor (not his
          assignee) redeems. In addition, all liens other than the foreclosing lien will re-attach, and foreclosing
          lienholder, if he has a deficiency, can go after other assets of the debtor.
   e) 628.4 A party who has stayed execution on the judgment is not entitled to redeem.
   f) 628.5 Redemption by creditors. B/n 6 and 9 months, creditors can redeem from each other [note, if debtor
      redeems during 1st 6 months, redemption is over]. Redemption may be made by a Me before or after the debt
      secured by the mortgage falls due, or by any creditor whose claim becomes a lien prior to the expiration
      of the time allowed for such redemption.
   g) 628.6 mechanic’s lienholder cannot redeem before judgment thereon.
   h) 628.8 Redemption by creditors from each other. Creditors having the right of redemption may redeem
      from each other...

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i) 628.9 When a senior redeems from a junior, the senior is required to pay off only the amount of those liens
   which are paramount to the senior’s own, with the interest and costs appertaining to those liens. Senior
   does not have redemption rights against junior claims when junior foreclosed b/c his lien stays on property, so
   he can still sell it to collect on his debt. 1 2 3 4. If 1 sells (and buys), he extinguishes all junior liens, so 3 can
   redeem, but has to pay cash to amount of 1’s credit bid. 2 no longer has a lien b/c 1 wiped it out when he sold,
   but he can redeem by paying 3 the actual money he paid to 1, (no credit bidding) but does not have to pay the
   amount of 3’s debt b/c 3 is Jr.
j) 628.10 Junior may prevent. Junior can prevent a redemption by Senior by paying off the lien, and a junior
   judgment creditor may redeem from a senior judgment creditor.
k) 628.11 The terms of redemption, when made by a creditor ... shall be the reimbursement of the amount
   bid or paid by the holder of the certificate, including all costs, w/interest the same as the lien redeemed
   from bears on the amount of such bid or payment, from the time thereof.
l) 628.12 Mortgage not matured—Interest. Where a Me whose claim is not yet due is the person from whom
   the redemption is thus to be made, the Me shall receive on such mortgage only the amount of the principal
   thereby secured, w/ unpaid interest thereon to the time of such redemption.
m) 628.13 The terms of redemption, when made by the titleholder, shall be the payment into the clerk’s office
   of the amount of the certificate, and all sums paid by the holder thereof in effecting redemptions, added to the
   amount of the holder’s own lien, or the amount the holder has credited thereon, if less than the whole, w/
   interest at K rate on the certificate of sale from its date, and upon sums so paid by way of redemption from
   date of payment, and upon the amount credited on the holder’s own judgment from the time of said credit, in
   each case including costs. The titleholder may also redeem by presenting to the clerk of the district court the
   sheriff’s certificate of sale properly assigned to the titleholder, whereupon the clerk of the district court shall
   cancel the certificate.
n) 628.14 When a senior redeems from a junior, the latter may, in return, redeem from the former, and so on, as
   often as the land is taken from the creditor by virtue of a paramount lien.
o) 628.15 After the expiration of 9 months from the day of sale, the creditors can no longer redeem from each
   other, except as hereinafter provided.
p) 628.16 Unless the  redeems, the purchaser, or the creditor who has last redeemed prior to the expiration of
   the 9 months aforesaid, will hold the property absolutely.
q) 628.17 Claim extinguished. In case it is thus held by a redeeming creditor, the redeeming creditor’s lien, and
   the claim out of which it arose, will be held to be extinguished, unless the redeeming creditor filed an
   affidavit crediting less than whole judgment.
r) 628.18 The mode of redemption by a lienholder shall be by paying into the clerk’s office the amount
   necessary to effect the same, computed as above provided, and filing therein the lienholder’s affidavit, ...
   stating as nearly as practicable the nature of the lien and the amount still due and unpaid thereon.
s) 628.19 If the lienholder is unwilling to hold the property and credit the debtor thereon the full amount of the
   lienholder’s lien, the lienholder must state the utmost amount the lienholder is willing to credit the debtor with
   (if credit-bid less than whole debt likely the rest will re-attach when debtor redeems).
t) 628.21 Contest determined. In case any question arises as to the right to redeem, or the amount of any lien,
   the person claiming such right may deposit the necessary amount therefor with the clerk, accompanied with
   the affidavit above required, and also stating therein the nature of such question or objection, which question
   or objection shall be submitted to the court ***
u) 628.22 A creditor who redeems is entitled to an assignment of the sheriff’s certificate.
v) 628.23 When property has been sold in parcels, any distinct portion may be redeemed by itself.
w) 628.24 When the interests of several tenants in common have been sold on execution, the undivided portion
   of any or either of them may be redeemed separately.
x) 628.25 Debtor can transfer his right to redeem, and assignee has same rights as debtor.

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   (1) McFarland, 374 N.W.2d 654 (Iowa 1985). When a debtor transfers the right of
       redemption, and the transferee redeems, judgment liens and mortgages generally cannot
       attach b/c they are not enforceable against property the debtor does not hold. When the
       transferee redeems during the 1st exclusive period, however, the junior creditors do not
       have a chance to redeem and have no chance protect their interests. , if the transferee
       redeems during the exclusive period, the junior creditors do not have a right to redeem,
       but the liens remain attached (in same priority) and enforceable against the property in
       the hands of the transferee. The same result would obtain if the owner.
       (a) The foreclosure sale transfers only equitable title, and legal title does not pass from
           Mr to purchaser until the end of the redemption period.
       (b) Unclear whether result would be the same if transferee redeemed b/n 6 and 9 months.
           Is clear that if he redeemed b/n 9 and 12 months that liens would not attach.
       (c) judgment liens will reattach in equal priority in the hands of the debtor b/c it is
           after-acquired RE. Junior mortgage holders, who were included in the foreclosure
           proceedings and did not redeem, however, (assuming had a chance under the
           reasoning of this case) do not re-attach, have to get a judgment lien and get at end of
       (d) homestead exemption: foreclosure and redemption does not kill homestead (is
           technically pre-acquisition debt) b/c courts do not view the redemption as a real
       (e) fraudulent conveyance—even if gave the redemption right away, the only way it
           could have value (in excess to the 0 purchaser price) is if creditors were playing
           games and underbid, so court won’t let them now complain
y) 628.26 Agreement to reduce period of redemption. The Mr and the Me of [1] RE consisting of less than
   ten acres in size may [2] agree and provide [3] in the mortgage instrument to reduce redemption period to 6
   months provided [4] the Me waives in the foreclosure action any rights to a deficiency judgment against the
   Mr. In such event the debtor will, in the meantime, be entitled to the possession of said real property; and if
   such redemption period is so reduced, 1-3 month exclusive, 3-4 creditors, 4-6 month exclusive (can also
   waive possessory right during redemption period)
z) 628.26A Agreement to extend period of redemption—agricultural land. The debtor and the Me of
   agricultural land [1] after the filing of the foreclosure petition, may enter into a [2] written agreement to
   extend the debtor’s period of redemption up to 5 years, and may set forth other terms and conditions of the
   extended redemption as agreed upon by the parties, including allowing the debtor to lease the property.
   However, the rights of the debtor and other parties who have a secured interest in the agricultural land shall
   not be reduced beyond those set forth in this chapter. The agreement entered into by the debtor and the Me
   pursuant to this section must be approved by the court and shall be filed in the foreclosure proceedings. The
   agreement is not an equitable mortgage.
aa) 628.27 The Mr and the Me of any tract of [1] RE consisting of less than ten acres may also agree and provide
    [2] in the mortgage instrument that the court in a decree of foreclosure may find affirmatively that owners and
    persons liable under the mortgage have abandoned the tract at the time of such foreclosure, and that [3]
    should the court so find, and if [4] the Me waives any right to a deficiency judgment ... in the foreclosure
    action, then the period of redemption after foreclosure shall be reduced to 60 days. 0-30 exclusive, 30-40
    creditors, and 40-60 exclusive. Entry of appearance by pleading or docket entry by or on behalf of the Mr
    shall be a presumption that the property is not abandoned.

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  bb) 628.28 If RE is [1] not used for ag. purposes, ... and [2] is not a single family or two family dwelling that is
      the residence of the debtor ... then redemption after foreclosure is 180 days. 0-90 exclusive, 90-135 creditors,
      135-180 exclusive. If a deficiency judgment has been waived the period of redemption is reduced to 90 days.
      0-30 exclusive, 30-60 creditors, 60-90 exclusive.

     If RE is not used for ag. purposes, ... and is a single-family or two-family dwelling which is the residence of
     the debtor at the time of foreclosure but the court finds that after foreclosure the dwelling has ceased to be the
     residence of the debtor and if there are no junior creditors, the court shall order redemption reduced to 30
     days from the date of the court order. If there is a junior creditor, the court shall order the redemption period
     reduced to 60 days. 0-30 exclusive, 30-45 creditor, 45-90 exclusive.
  cc)628.29 A lienholder of record may redeem RE which has been foreclosed by a Me pursuant to the alternative
     voluntary foreclosure procedure provided in 654.18. The junior lienholders’ redemption period shall be 30
     days from the day the notice required by 654.18(1)(e) is sent. Redemption shall be made by payment to the
     Me of the amount of the debt secured by the mortgage including any protective advances made pursuant to
     chapter 629. Upon payment, the Me shall convey the property by special WD to the redeeming junior

6. Protective Advancements—can get money paid to preserve interest in the RE back.
  a) 629.1 Lienholder’s advancements protected—affidavit filed. The holder of a sheriff’s sale certificate or
     junior or senior lien on RE after the payment of any delinquency of taxes or special assessment, insurance or
     money for necessary repairs, maintenance or preservation of the property, interest on a senior lien, or any sum
     to cure a breach of a condition of a senior encumbrance, may file w/the clerk of the district court in the county
     in which the land is situated, a verified statement of the expenditures and their dates, together w/a description
     of the RE, the name of the record owner, and a reference to the interest of the record owner.
  b) 629.2 Redemption. When holder of sheriff’s certificate makes those payments, they are part of the amount
     required to redeem.
  c) 629.3 Record of lien. It shall be the duty of the clerk of the district court to record the statements so filed in
     the encumbrance book and to enter the same in the lien index. Payments advanced after execution has been
     issued upon the junior lien, shall be added to the execution upon receipt by the sheriff of a verified statement
     of such advancements and when the redemption period has expired the clerk shall release them on the clerk’s
  d) 629.4 Lienholder’s advancements—enforcement. Add the amount of payment to the amount of the
     lienholder’s original lien and has the same priority as the original lien. The lienholder may recover the
     increased amount in any action brought for the foreclosure of the junior or senior lien referred to in the
     verified statement.

     (1) question—if a junior redeems and pays the taxes on the property, to preserver it from
         sale, and a senior creditor then redeems, the senior is not obligated to pay the junior’s
         lien, only his purchase price. Is the junior then screwed on the payments?.
7. Statutory Redemption—Overview
  a) Equitable redemption distinguished. Equitable redemption exists b/n default and foreclosure (decree). The
     foreclosure decree ends equitable redemption and starts statutory redemption.
     (1) equitable redemption is the right to redeem the debt by paying the full price of the debt. If a party is not
         properly added, his equitable right of redemption is not extinguished and he can exercise that right until
         the expiration of the SOL on the underlying debt (e.g., expiration of 20 year execution period).
     (2) statutory redemption is the right to redeem the land by paying the purchase price at the sale.
  b) Statutory redemption
     (1) RE subject to statutory redemption—all interests in RE greater than a leasehold of two years.

                                                Real Estate
        (2) Persons entitled to redeem. The execution debtor, his transferee, or any person obtaining a lien in the RE
            prior to the expiration of the applicable creditor redemption period. This does not include, however, a
            mechanics lien that has attached but that has not been reduced to judgment. A party who obtains a stay of
            execution abandons his rights of redemption.
        (3) Redemption periods. General period is 1 year, w/creditors only able to redeem b/n 6-9 months. Is
            shortened in two instances (on land < 10 acres and mortgage so provides, can limit to 6 months if Me
            waives deficiency, can also limit to 60 days if court finds debtor has abandoned the premises), and
            lengthened in one (can extend for up to 5 years on ag. Land, by agreement).
        (4) Possession during redemption period. Debtor or his transferee has right to possession during
            redemption period. Cannot reach the possessory right through execution, but creditors may be able to
            reach crop or cash rents during the possessory period.
        (5) Redemption procedure. Redeem by paying the clerk of court of the county where the subject land is
            located a sum equal to the amount the execution sale purchaser had to pay to get the land (either at sale or
            through redemption) plus the amount of the holder’s lien (unless he credited less than full amount through
            affidavit) plus interest @ K rate and costs, etc. Persons having liens must redeem by paying the current
            holder’s out-of-pockets, plus interest, plus the amount of the holder’s lien (or amount thereof that he
            credited) if the holder is senior to redeemer.
           (a) Although land sold in parcels may be redeemed in parcels, a person who has a lien in a group of
               parcels who redeems them as a whole may require that a junior satisfy his entire lien (or the amount he
               credited to get the land) before the junior can redeem the land from him.
     c) Effect of statutory redemption
        (1) No redemption—buyer at sale gets deed
        (2) Creditor redemption—creditor last redeeming at end of 9 months gets deed if debtor has not redeemed
            b/n 9 months and 1 year mark. All other interests subject to redemption (i.e., all interests junior to
            foreclosing lienholder, including owner’s) are extinguished at end of redemption period.
        (3) Debtor or transferee redemption during last exclusive period. The lien of the judgment under which
            the property was sold is extinguished and the RE is thereafter free and clear of that interest. The liens of
            all other parties entitled to redeem who did not redeem are also extinguished. A judgment lien will
            reattach (all judgment liens will have equal priority b/c are attaching at the same time to after-acquired
            property); any lien senior to foreclosing lien will remain b/c never extinguished; the mortgage interests
            extinguished can reduce their claim to judgment and get a judgment lien, but they will lose their priority.
           (a) If a transferee redeems, no judgment liens can reattach b/c judgment liens only attach to property of
               the debtor, although mortgages (and any other lien entitled to redemption) are not extinguished if the
               grantee redeems during the first exclusive period.
I. Rent Assignments and Receiverships.
  1. Theories of title and the right of possession.
     a) Title Theory. Legal title, under this theory, is in the Me until the mortgage is either
        satisfied or foreclosed. Possession always follows title so Me entitled to possession and the
        rents and fruits of the land during mortgage period. These states find that when the
        mortgage is executed, the Me obtains legal title (although equitable title remains w/Mr).
        The Me, , has the right to collect rents and profits until the mortgage debt is paid or
        foreclosure has occurred. Mortgage instruments generally grant the Mr the right of
        possession until default has occurred, but upon default legal title automatically vests in the
        Me. This means that the Me is entitled to rents and profits, under the common mortgage
        instrument, upon default.

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  b) Lien Theory. By far the majority approach. Me acquires only a lien on the mortgaged RE
     when the mortgage is executed, but Mr retains both legal and equitable title. Mr retains the
     right to possession and rents and profits until foreclosure. Some states will enforce a
     mortgage provision that grants the Me the right to possession on default, making the state a
     de facto title theory state.
  c) Intermediate. Achieves the same practical result as the title theory states under most
     mortgage instruments. Applies lien theory until default, then applies title theory from
     default on. Distinct minority approach.
  d) Me in possession. In all states, if the Mr gives possession to the Me, or the Me takes
     possession after the Mr has abandoned the property, the Me becomes the ―Me in
     possession‖ and can retain possession until foreclosure or until the mortgage is satisfied.
     (1) Duties of Me in possession. Me is entitled to rents and profits from the land while in
         possession, but has strict duties of management (b/c rents and profits will be applied to
         mortgage debt). Must use the property for income (rent or occupy self and pay market
         rent) and must make all repairs reasonably necessary (and add to mortgage debt). Some
         states do not allow the Me to compensate himself for his services, but he can hire a 3rd
         party to manage the property.
2. Assignment of rents clause. Rents are governed by the law of RE, not Article 9. Virtually all
   states find them valid and enforceable, but to different degrees.
  a) absolute assignment—when the mortgage instrument purports to grant Me a present right
     to rents on execution of the mortgage (then delayed until default), some states enforce and
     do not require any affirmative action by the Me to take the rents.
  b) perfection—some states find the assignment valid when made but require some affirmative
     act (and default) to perfect the interest.
  c) middle ground. Majority rule that finds an assignment of rents effective against Mr upon
     execution of the mortgage instrument, perfected as against 3rd parties upon recording of the
     interest, but enforceable only upon some affirmative step by the Me. Some states find
     mailing a notice to the Mr to be an ―affirmative step.‖
3. Appointment of a receiver. Equitable receivership entails court appointment of a 3rd person
   to take possession of the mortgaged property to preserve it and to collect rents.
  a) Reasons For Use Mes often prefer not to take on the relatively strict accounting
     responsibilities and other obligations incident to being a Me in possession. Plus,
     assignment of rents is meaningless if Mr has not rented the place out.
     (1) Standard For Appointment In most states, whether title or lien, the Me must, at a bare
         minimum, establish that the mortgage is in default, the security is inadequate, and the
         Mr has committed waste. In addition most courts require the establishment of some
         "distinct equitable ground, such as danger of loss, waste, destruction or serious
         impairment of the property to warrant the appointment of a receiver."
     (2) Receivership and Assignment of Rents Clauses In many states, neither the presence
         of a mortgage clause authorizing the appointment of a receiver on default nor an

                                       Real Estate
         assignment of rents clause enhance the chances of appointment. In other states, one or
         both of the clauses may be considered a relevant factor and may favorably influence a
         court to appoint a receiver.
      (3) Ex Parte Receiverships Several jurisdictions appoint receivers ex parte. Receiver is
          appointed, usually pending judicial foreclosure, w/o giving Mr or other interested
          parties notice or opportunity for a hearing. Constitutional attacks thus far failed b/c the
          Mr's right to a hearing after appointment suffices for constitutional purposes or Mr has
          waived his due process rights by previously agreeing in the mortgage to ex parte
          appointment of a receiver.
4. Iowa is a lien theory state. 557.14 Title and possession of Mr. In absence of stipulations to
   the contrary, the Mr of RE retains the legal title and right of possession thereto.
5. Debtor is entitled to possession during period of redemption. 628.3.
   a) purchaser can recover for waste to property during period of redemption. 626.101.
   b) Contract Receiver—can get receiver outside of statute if have clause and a deficiency.
      Moad v. Neill, 451 N.W.2d 4 (Iowa App. 1989).
      (1) W/o stipulation to contrary, Mr is entitled to possession during redemption period, and
           to rents and profits from land during same period.
      (2) When mortgage instrument grants the Me the right to possession on default (i.e., prior to
          end of redemption period) and purports to transfer the right to rents and profits of the
          land, the rent becomes primary security for the debt. The lien in the rents and profits,
          then is effective on date of execution of mortgage instrument. The rents during
          redemption period, , go to Me.
      (3) Bankruptcy. The lien in land is separate from lien in rents and profits (so likely could
          not avoid lien under 522(f)). Deficiency judgment (in personam) is discharged, but the
          Me’s in rem interest in the rent already collected at time of bankruptcy is not
6. Statutory receiver 680.1. Don’t need K term, but need danger (active waste). On the petition
   of either party to a civil action or proceeding [have to have a petition on file], wherein the
   party shows that the party [1] has a probable right to, or interest in, any property which is the
   subject of the controversy, and [2] that such property, or its rents and profits, are in danger of
   being lost or materially injured or impaired, and [3] on such notice to the adverse party as the
   court shall prescribe, the court, if satisfied that [4] the interests of one or both parties will be
   thereby promoted, and [5] the substantial rights of neither unduly infringed, may appoint a
   a) Note: the receivership begins on date of appointment and ends at earlier of end of
      statutory redemption or satisfaction of deficiency regardless of whether debtor redeems
      before end of redemption period.
   b) Under statutory receivership, rents go to MR, even if there is a deficiency, the receiver is
      just to prevent active waste. Under K receivership, rents will go to ME if there is a
      deficiency b/c they are security on the debt.

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7. Powers of receiver 680.4. Subject to the control of the court, a receiver has power to bring
   and defend actions, take and keep possession of property, collect debts, receive rents and
   profits of RE, and, generally to do such acts in respect to the property committed to the
   receiver as may be authorized by law or ordered by the court.
8. Perfection/Priority of Pledge of Rents 654.13 (same as liens). Must have a lien in the RE
   along w/the right to the rents, profits, avails and/or income from the RE granted as security for
   the payment of the debt secured by such mortgage, then the priority of the Mes shall, as b/n
   such Mes, be in the same order as the priority of their respective mortgages on the RE.
9. 654.14. Preference in receivership--application of rents. ... if a receiver is appointed ...
   preference shall be given to the owner or person in actual possession, subject to approval of
   the court, in leasing the mortgaged premises. If the RE is ag. land used for farming ... the
   owner or person in actual possession shall be appointed as receiver without bond, provided
   that all parties agree to the appointment. The rents, profits, avails, and income derived from
   the RE shall be applied as follows:
   a) To the cost of receivership.
   b) To the payment of taxes due or becoming due during receivership.
   c) To pay the insurance
   d) The balance shall be paid and distributed as determined by the court.

      If the owner or person in actual possession of ag. land ... is not afforded a right of first
      refusal in leasing the mortgaged premises by the receiver, the owner or person in actual
      possession has a cause of action against the receiver to recover either actual damages or a
      $1k penalty, and costs, including reasonable attorney's fees. The receiver shall deliver
      notice to the owner or person in actual possession or the attorney of the owner or person in
      actual possession, of an offer made to the receiver, the terms of the offer, and the name and
      address of the person making the offer.... An offer shall be deemed refused if the owner or
      person in actual possession or his attorney does not respond w/in 10 days after the notice is
10.Insolvency. Only have to show insolvency of debtor to get a receiver appointed if there is no
   pledge of rents and there is no provision in instrument providing for the appointment of a
   receiver. Tritsh 438 N.W.2d 863 (Iowa App. 1989). Insolvency is now irrelevant in Iowa b/c
   of statutory provision.
11.Requirement of Preference. Federal Land Bank v. Heeren, 398 N.W.2d 839 (Iowa 1987).
   [note this was decided before last paragraph of 654.14 adopted]
   a) requirement of a preference means must give owners right of first refusal on same terms,
      which includes same finance or payment options as the people you lease to.
      (1) remedy—have action against receiver, but will not set aside the lease if inequitable (i.e.,
          if lessees relied on lease and worked the land).
   b) the preference requirement is independent of the redemption rights—redemption rights do
      not trigger preference rights and violation of preference rights does not automatically
      extend the period of redemption.

                                         Real Estate
        c) Me’s rights to rents and profits during the redemption period, if it exists, is limited to
           satisfaction of the debt. Even if Mrs consent to receiver, if there is no deficiency judgment,
           the Mrs are entitled to the rents and profits during period of redemption.
           (1) Generally only entitled to receiver if have deficiency (and K term) or there is active
               waste, but Mr can consent to a receiver. The rent from the receiver, however, goes to the
               Mrs b/c the judgment is satisfied and the Mrs have a statutory right to possession and
               use of land during that period, which is what the rent represents.
     12.Must get court approval of contracts or may not be able to pay them (I assume that if
        receiver cannot pay them out of rents, the receiver may end up personally liable on the
        contract). Can get later ratification of contract, but risk court striking it down as a bad deal.
        Firstar Bank v. Poston, 551 N.W.2d 340 (Iowa App. 1996).
        a) Party in interest. Once a Me’s debt is satisfied, he no longer has an interest in the rents
           and can, , not challenge the receiver’s actions. The Mr, however, is entitled to the rents
           after the judgment is satisfied. , although the judgment at issue is satisfied, the Mr is a
           party in interest b/c any moneys not paid on contracts w/the receiver will go to the Mr.
        b) Contracts. Receiver only has such power as the court gives him. Receiver should get court
           approval before entering into contracts, but court can later ratify the contract if it approves
           of it as a fair deal. Three issues that cause a problem here: 1) Relationship b/n receiver and
           other party to contract (was husband); 2)were cheaper ways to get a lot of the work done;
           and 3) total fee was too high given the size and complexity of the business receiver was
           (1) if court does not like contract, it will set compensation for receiver (including the
               contracts) that it finds reasonable.
     13.Accounting. When does Mr have to account for rents and profits given as security.
        a) Are not under Article 9. 554.9104(j)
        b) Federal Land Bank v. Lower, 421 N.W.2d 126 (Iowa 1988). If the rent is a pledge, it is
           effective on date of appointment of receiver (so no accounting until receiver), if it is a
           conveyance, it is effective on date of execution (technically have to account from time of
           conveyance, but usually kick in on default as a practical matter, so usually only have to
           account b/n default and receiver).
           (1) Note the importance of the issue: would transform action for deficiency from one on
               contract to one in tort. Then outside 615’s 2 year limit and likely non dischargeable in
               bankruptcy for willful/malicious damage to property.
J.   Equitable Mortgages, Deeds in Lieu of Foreclosure and Merger
     1. The rule against clogging the equity of redemption Any agreement by the Mr that is part of
        the original mortgage transaction and that purports to cut off or modify that equity of
        redemption is unenforceable and void. As a result, lenders utilize a variety of mortgage
        substitutes they hope will avoid mortgage law consequences. Equity, however, is up to the
        task and if it looks like a mortgage, will call it an equitable mortgage regardless of how the
        parties wrap it up.

                                              Real Estate
2. The Absolute Deed Lenders commonly use an absolute deed from the borrower to the lender
   that does not contain defeasance language as security.
3. The absolute deed unaccompanied by a collateral writing: extrinsic evidence Parol
   evidence is admissible to establish that an absolute deed was intended to be a security device,
   and hence that the borrower has an equity of redemption.
   a) Burden of Proof clear and convincing evidence.
   b) Parol Evidence Rule Inapplicable The parol evidence rule is inapplicable to the absolute
      deed situation, on the theory that the absolute deed was not intended to embody the
      complete agreement of the parties and that the oral agreement simply supplements the deed
      concerning a matter about which the deed does not deal.
   c) Statute of Frauds Not a Bar The Statute of Frauds is not violated b/c a judicial
      determination that an absolute deed is a mortgage is not deemed to create in or transfer to
      the grantor an interest in land.
   d) Factors That Establish an Absolute Deed as a Mortgage: 1. Presence of debt; 2. Actual
      statements of the parties; 3. Disparity between the amount received by the grantor and the
      fair market value of the land conveyed; 4. Possession; 5. Payment of RE taxes; 6.
      Improvements by grantor; 7. Nature of the parties (i.e., their business).
4. The Absolute Deed With Collateral Written Instrument If the collateral writing contains
   language of defeasance or a promise to reconvey upon payment of money acknowledged to be
   a debt and the two instruments were executed as part of a single transaction, the transaction
   will be treated as a mortgage.
   a) Parol Evidence Rule inapplicable b/c evidence is not utilized to diminish or vary the
      writings, but rather to establish that the documents were part of a single mortgage
   b) Writings need not be executed simultaneously to be treated as part of a single mortgage
   c) Nature of the Collateral Writing Most courts hold that the collateral writing need not
      satisfy the same formalities followed in executing the absolute deed.
5. The Conditional Sale includes the use of an absolute deed together with a second written
   document, which professes expressly to be an instrument such as a contract or option to resell
   to the grantor the land described in the deed. The two most common types include: (1) A sale
   and conveyance of the land by grantor to grantee with an option in grantor to repurchase it. (2)
   A sale and conveyance by grantor to grantee and a lease by grantee to grantor with an option
   in grantor to repurchase.
   a) Reasons For Use—lender’s desire to avoid the consequences of mortgage or usury law or
      to obtain capital gains tax treatment of what otherwise would be considered interest income
      subject to taxation as ordinary income.
   b) Extrinsic Evidence—admissible to establish that a conditional sale is a mortgage. While
      some courts require clear and convincing evidence of mortgage intent, others hold that a
      preponderance of evidence of such intent will suffice.

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   c) Two problems common to absolute deed and conditional sale transactions
      (1) Use of specific language negating a mortgage transaction is ineffctive when other
          credible evidence supports a finding that the parties intended to create a mortgage
      (2) Application of the same burden of proof to grantor and grantee While there is authority
          that the burden of proof is the same for grantee as well as grantor, persuasive arguments
          exist that a heavier burden should apply to a grantee who seeks to establish the
          transaction as a mortgage.
6. Equitable Mortgages. When the court declares the document an equitable mortgage, there is
   no deed, just a mortgage, then have to do a regular mortgage foreclosure. The court will really
   just cut to the chase, look to actual relationship b/n parties and say: if it looks like a mortgage,
   and smells like a mortgage, it is a mortgage regardless of what the parties call it. Stecklberg
   v. Randolph, 404 N.W.2d 144 (Iowa 1987)
   a) even where deed appears to be absolute conveyance on its face, can show through proper
      evidence that it was actually a mortgage. Parol evidence is admissible.
      (1) two elements you must prove to convert into a mortgage: 1) the consideration for the
          WD was an existing indebtedness, and the amount of that debt; and 2) the indebtedness
          was not extinguished by the conveyance.
         (a) Can satisfy the requirement of antecedent debt can be satisfied by an assumption of
             liability or a contract for future advances contemporaneously made.
            (i) Note if mortgagor (especially someone in mortgage business) buys land and then
                sells on ILK to the real purchaser of the land, courts will call it an equitable
                mortgage. However, if a bank becomes the legitimate owner of land through
                foreclosure of one of their mortgages, they can use an ILK to sell the land.
         (b) Party trying to convert to mortgage must establish by clear and convincing evidence.
             (burden is actually just a little lower than C&C).
      (2) Factors/Evidence. What the court is really asking here is if the parties intended to a
          create a grantor/grantee relationship (which would be of relatively short duration) or a
          debtor/creditor relationship (which would continue beyond the transfer).
         (a) transaction of which the ―deed‖ is a part operates to create or continue a debtor-
             creditor relationship b/n the parties to the transaction.
         (b) grantor retains possession of the ―transferred‖ property (could negate w/lease)
         (c) execution and delivery of an option to repurchase, unavailability of legal advice for
             the grantor, and grantor’s financial hardship also relevant.
         (d) consideration paid. If consideration ―grantors‖ receive was grossly inadequate for a
             fee simple sale, will likely find EM.
   b) Third parties who have received property from “grantee”
      (1) trial court has broad discretion in fashioning relief once it finds an equitable mortgage,
          which can include voiding subsequent transfers.

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     c) Determination of debt. Court will also have to determine extent of debt, so debtors know
        what they have to pay to redeem. May take expert testimony. Court credits the debtors with
        the value of collateral the creditor transferred, not with the amount the creditor received in
        a subsequent transfer.
7.   Deed In Lieu of Foreclosure (already have a mortgage and grant a deed at end of
     relationship, unlike EM, where usually have a deed to begin relationship, although a court
     may find a deed in lieu of foreclosure is an EM)
     a) Difficulties W/deed in lieu Mr may claim the deed in lieu is really an EM. Also subject to
        principle that equity can avoid transaction that is unfair/unconscionable.
     b) Right Of Redemption. Any grant of title from Mr to Me does not kill the equity of
        redemption (or I would presume, the right of statutory redemption) unless: 1) the language
        in the deed is clear to that effect; and 2) it is fair to the parties. Guttenfelder v. Iebsen,
        300 N.W. 299 (Iowa 1941)
        (1) A deed from Mr to Me is presumed not to be a deed. Presume intended as further
            security and  Mr rights (including redemption) continue.
        (2) Me has BOP to establish the transaction was fair and that the true purpose of the
            transaction was one of sale (and not one of security).
        (3) will only uphold conveyance when: 1) it is perfectly fair; 2) there is adequate
            consideration; 3) it clearly and unmistakably appears that the parties contemplated an
            absolute conveyance and not a transfer for security.
           (a) court looks behind form of instrument to real relationship b/n the parties to determine
           (b) fairness factors: 1) bargaining power and sophistication of parties; and 2) amount of
               equity in the RE. (have to show something in it for Mr)
           (c) intent: a key factor is whether the instruments of prior debt are canceled or continued.
               Possession important. Will also look to whether transfer depends on the payment of
               some fixed some or on the payment of an indebtedness.
        (4) If parties intended absolute conveyance—no redemption. If parties actually intended the
            transfer as security—redemption (redemption not extinguished, even if that was purpose
            of transfer, if parties did not intend an absolute conveyance).
     c) Statutory Safe-Haven 654.19 Deed in lieu of foreclosure: Ag.Land. In lieu of a
        foreclosure action in court due to default on a recorded mortgage or deed of trust of RE, if
        the subject property is ag. land used for farming ... the Me and Mr may enter into an
        agreement in which the Mr agrees to transfer the Ag. Land to the Me in satisfaction of all
        or part of the mortgage obligation as agreed upon by the parties. the agreement may grant
        the Mr a right to purchase the Ag. Land for up to five years, and may entitle the Mr to
        lease the Ag. Land. The agreement shall be recorded w/the deed transferring title to the
        Me. A transfer of title and agreement pursuant to this § does not constitute an equitable
        mortgage.[b/c this is an absolute conveyance equitable/statutory redemption do not apply].

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   d) Safe-Haven 628.26A Agreement to extend period of redemption—Ag. Land.
      Notwithstanding [right to redemption], the debtor and the Me of Ag land after the filing of
      the foreclosure petition, may enter into a written agreement to extend the debtor’s period of
      redemption up to 5 years and may set forth other terms and conditions of the extended
      redemption as agreed upon by the parties, including allowing the debtor to lease the
      property.... The agreement ... must be approved by the court and shall be filed in the
      foreclosure proceedings. An agreement pursuant to this section does not constitute an
      equitable mortgage.
      (1) 2-year limit to collect a deficiency judgment on farms or homes (Chapter 615) is not
          applicable where the parties have entered either of these agreements. 615.4 Does not
          just pause the limit, it ends it and puts Me back to renewable 10/20 year limits.
   e) Mr—Me Deeds Standard 4.3. There is a presumption that a deed from a Mr to a Me
      continues the security arrangement and is not an absolute conveyance. The BOP to show
      otherwise is on the party attempting to sustain the conveyance as absolute. If the grantee
      (Me) has already conveyed the property, the presumption does not apply. In that case, the
      Mr must take some affirmative action after the conveyance and before further conveyance
      of the property (e.g., recording an affidavit). Note that there are also statutory safe-havens
      for a Mr-Me deed, see supra.
8. Problems of Merger. When a Me receives a deed, the lesser interest (the lien or mortgage)
   merges w/the greater interest (the ownership interest) such that the Mr takes subject to the
   junior liens, even though he could sell under foreclosure senior to those (and buy at such sale
   not subject to those Jr. liens).
   a) Me foreclosure purchase where Me owns both junior and senior mortgages: merger
      and destruction of debt
      (1) Me Purchase at Junior Sale Where a holder of both junior and senior mortgages
          forecloses the junior mortgage and purchases at the foreclosure sale, many courts hold
          that the foreclosure purchase destroys the Me's right to sue the Mr personally on the first
          mortgage debt.
      (2) Me Purchase at Senior Sale Where the Me purchases at the senior sale, the general rule
          is that such a purchase does not destroy the Me's ability later to collect on the junior
          mortgage debt.
      (3) The Deed In Lieu Of Foreclosure It is common for a Me to take a deed from the Mr in
          satisfaction of the mortgage debt and as a substitute for foreclosure.
         (a) The Merger Problem If, subsequent to the original mortgage, the Mr has imposed
             another lien on the mortgaged land, the deed in lieu, unlike a foreclosure, will not cut
             off that junior lien. More important, the junior lienor may well argue that b/c both the
             fee title and the mortgage have merged in the Me, the mortgage has been destroyed.
             Most courts avoid this result by applying the presumption that the Me intended a
             result most favorable to him (that the mortgage continues to exist).
         (b) Avoidance of the Merger Problem Me should conduct a thorough title search before
             taking a deed in lieu to determine whether intervening liens exist. If such intervening

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                        interests are discovered, the only prudent alternative is to go through an actual
            b) Key is intent of Me, but court is really motivated by windfall to Jr. lienholder who did not
               rely on the conveyance in any way. If there is no merger, the Me has mortgage interest and
               separate interest of owner at time he gave deed (subject to all Jr. liens). So he will have to
               foreclose his Sr. interest to get rid of all the Jrs. That are superior to his ownership interest.
               The Jrs. Will have redemption and the Mr will have statutory redemption b/c of his
               separate ownership interest. Tom Riley Law Firm, 430 N.W.2d 416 (Iowa 1988).
                (1) when the battle is b/n Me and Jr., the intent of the Me controls, and the court will
                    presume the Me intended the result most favorable to him (no merger). Merger may
                    operate when you can establish that the Me took the deed w/the intent to satisfy all debts
                    attached to the property. Could look to purchase price v. FMV to determine this intent.
                (2) 615 2 year deficiency limit when took a deed in partial satisfaction of debt from date of
                    judgment on deficiency. If there was no foreclosure action, have bring an action for
                    deficiency. In that action, court will look at intent of parties who granted the deed to
                    determine if a deficiency was intended. The 2 year limit will start from the date that
                    judgment, if any, is entered.
VI. Recent Modifications of the Foreclosure Process
    A. FMV Redemption of Ag. Homestead—654.16 Separate redemption of homestead [have to
       remember Westphall process] If a sheriff's sale is ordered on ag. land used for farming ... the Mr
       may, by a date set by the court but not later than 10 days before the sale, designate to the court
       the portion of the land which the Mr claims as a homestead. The homestead may be any
       contiguous portion of 40 acres or less of the RE subject to the sheriff's sale. The homestead shall
       contain the residence of the Mr and shall be as compact as practicable. If a homestead is
       designated, the court shall determine the FMV of the homestead before the sheriff's sale. The
       court may consult w/the county appraisers ... or w/ one or more independent appraisers, to
       determine the fair market value of the homestead. The Mr may redeem the homestead by
       tendering the lesser of either any amount separately bid for the homestead ... or the FMV, as
       determined pursuant to this section, of the homestead at any time w/in 1 year from the date of the
       sheriff's sale, pursuant to the procedures set forth in chapter 628. [keeps creditor from screwing
       w/bid on homestead—can’t overbid for whitford value b/c Mr will redeem for lower FMV; can’t
       underbid to make deficiency b/c Mr will redeem for the lower amount]
    B.   Right of First Refusal to Repurchase Ag Land 654.16A. [this applies to sheriff’s grantee, not
         to purchaser at sale, if there was redemption, could be different people. Right of first refusal does
         not kick in (so SOL does not start) until that grantee sells land, so could be passed through
         inheritance, etc. for hundreds of years and then go to sell and not have clear title. No marketable
         title act covers it b/c it is based on a statute not on an instrument of conveyance]
         1. Not later than the time a sheriff's deed to ag. land used for farming ... is recorded, the grantee recording the
            sheriff's deed shall notify the Mr of the Mr's right of first refusal. The grantee shall record the sheriff's deed w/in
            1 year and 60 days from the date of the sheriff's sale. A copy of this section, titled "Notice of Right of First
            Refusal" is sufficient notice.
         2. If, after a sheriff's deed is recorded, the grantee proposes to sell or otherwise dispose of the ag. land, in a
            transaction other than a public auction, the grantee shall first offer the Mr the opportunity to repurchase the

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     agricultural land on the same terms and at the same price that the grantee proposes to sell or dispose of the ag.
     land. If the grantee seeks to sell or otherwise dispose of the ag. land by public auction, the Mr must be given 60
     days' notice of: a. The date, time, place, and procedures of the auction sale; and b. Any minimum terms or
     limitations imposed upon the auction.
  3. The grantee is not required to offer the Mr financing....
  4. The Mr has 10 business days after being given notice of the terms and price of the proposed sale ..., other than a
     public auction, to exercise the right to repurchase ... by submitting a binding offer to the grantee on the same
     terms as the proposed sale ..., w/closing to occur w/in 30 days after the offer unless otherwise agreed by the
     grantee. After the expiration of either the period for offer or the period for closing, w/o submission of an offer or
     a closing occurring, the grantee may sell or otherwise dispose of the agricultural land to any other person on the
     terms upon which it was offered to the Mr.
  5. Notice or offer... is considered given on the date that notice or offer is personally served on the other party or on
     the date that notice or offer is mailed to the other party's last known address by registered or certified mail, return
     receipt requested. The right of first refusal is not assignable, but may be exercised by the Mr's receiver ... or heir
     only in case of Mr’s bankruptcy, receivership, or death
  6. Consequences of Failure to Comply. There are money damages, and the contract to sell is
     still good but it may be set aside under equitable principles (so not a sure thing). If deed is set
     aside, bank will be liable to its grantee if gave a WD. Decorah State Bank v. Wangsness,
     452 N.W.2d 438 (Iowa 1990).
     a) grants the equitable relief (sets contract aside)
         (1) purpose of statute is to favor prior owners of Ag land.
         (2) if the option were given pursuant to contract, the presumption would favor specific
         (3) value of the property is uniue to the prior owners (Whitford).
         (4) distinguishes Hereen (no specific performance for breach of statutory right of first
             refusal on lease) b/c equities disfavored specific performance in that case Hereen also
             had mootness issues not present here.
C. 654.18. Alternative nonjudicial voluntary foreclosure procedure [available on all land but
   conditioned on consent]
  1. Upon the [1] mutual written agreement of the Mr and Me, a RE mortgage may be foreclosed pursuant to this
     section by doing all of the following:
     a) [2]The Mr shall convey to the Me all interest in the real property subject to the mortgage
     b) The [3]Me shall accept the Mr's conveyance and [4] waive any rights to a deficiency or other claim against
        the Mr arising from the mortgage.
     c) The [5]Me shall have immediate access to the RE for the purposes of maintaining and protecting the property
        [6][no redemption either].
     d) The [7]Mr and Me shall file a jointly executed document with the county recorder in the county where the RE
        is located stating that the Mr and Me have elected to follow the alternative voluntary foreclosure procedures
        pursuant to this section.
     e) The [8]Me shall send by certified mail a notice of the election to all junior lienholders as of the date of the
        conveyance under (a), stating that the junior lienholders have 30 days from the date of mailing to exercise any
        rights of redemption. The notice may also be given in the manner prescribed in 656.3 in which case the junior

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            lienholders have 30 days from the completion of publication to exercise the rights of redemption. [this is
            equitable redemption—redeem by paying debt]
        f) At the time the Mr signs the written agreement ... [9]the Me shall furnish the Mr a completed form in
           duplicate, captioned "Disclosure and Notice of Cancellation". The form shall be attached to the written
           agreement, shall be in ten point boldface type and shall be in the following form:

                                   (enter date of transaction)
            Under a forced foreclosure Iowa law requires that you have the right to reclaim your property w/in one year
            of the date of the foreclosure and you may continue to occupy your property during that time. If you agree to
            a voluntary foreclosure under this procedure you will be giving up your right to reclaim or occupy your

             Under a forced foreclosure, if your mortgage lender does not receive enough money to cover what you owe
            when the property is sold, you will still be required to pay the difference. If your mortgage lender receives
            more money than you owe, the difference must be paid to you. If you agree to a voluntary foreclosure under
            this procedure you will not have to pay the amount of your debt not covered by the sale of your property but
            you also will not be paid any extra money, if any, over the amount you owe.
            NOTE: There may be other advantages and disadvantages, including an effect on your income tax liability, to
            you depending on whether you agree or do not agree to a voluntary foreclosure. If you have any questions or
            doubts, you are advised to discuss them with your mortgage lender or an attorney.
            You may cancel this transaction, without penalty or obligation, within 5 business days from the above date.
            This transaction is entirely voluntary. You cannot be required to sign the attached foreclosure agreement.
            This voluntary foreclosure agreement will become final unless you sign and deliver or mail this notice of
            cancellation to ________________________(name of Me) before midnight of _________(enter
            proper date).
            ______________________________ ______________________________
            DATE                      SIGNATURE
     2. A junior lienholder may redeem the RE under 628.29. If a junior fails to redeem its lien as provided in (1), its
        lien shall be removed from the property. [takes care of the merger problem]
        a) See 628.29—special redemption for Jr. when this alternative foreclosure is used. Under redemption
           provisions, Jr. only has 30 days from date notice in 654.18(1)(e) is sent to redeem.
     3. Until the completion of foreclosure pursuant to this section, the Me shall hold the RE subject to liens of record at
        the time of the conveyance by the Mr. However, the lien of the Me shall remain prior to liens which were junior
        to the mortgage at the time of conveyance by the Mr to the Me and may be foreclosed as provided otherwise by
        law. [anti-merger language]
     4. A Me who agrees to a foreclosure pursuant to this section shall not report to a credit bureau that the Mr is
        delinquent on the mortgage. However, the Me may report that this foreclosure procedure was used.
D.   Foreclosure W/O Redemption Of Non-Ag Land dominant form of foreclosure for non-ag. Land
     1. 654.20. Foreclosure w/o redemption—non-ag. land If the mortgaged property is not used for an agricultural
        purpose, the  in an action to foreclose a RE mortgage may include in the petition an election for foreclosure w/o
        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:



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   includes a waiver of deficiency judgment) FROM ENTRY OF JUDGMENT IF THE MORTGAGED

    If the plaintiff has not included in the petition a waiver of deficiency judgment, then the notice shall include the



   If the election for foreclosure without redemption is made, then 654.21 -26 apply.

2. 654.20A. A mortgage or deed of trust shall not contain the notice in .20.
3. 654.21. Demand for delay of sale At any time prior to entry of judgment, the Mr may file a demand for delay of
   sale. If the demand is filed, the sale shall be held promptly after the expiration of 2 months from entry of
   judgment. However, if the demand is filed and the mortgaged property is the residence of the Mr and is a 1 or 2-
   family dwelling, the sale shall be held promptly after the expiration of 12 months, or 6 months if the petition
   includes a waiver of deficiency judgment, from entry of judgment. If the demand is filed, the Mr and Me can
   thereafter agree to prompt sale if Me waives deficiency. At any time prior to judgment, the Mr may pay the  the
   amount claimed in the petition and, if paid, the foreclosure action shall be dismissed. At any time after judgment
   and before the sale, the Mr may pay the  the amount of the judgment and, if paid, the judgment shall be
   satisfied of record and sale shall not be held.
4. 654.22. No demand for delay of sale If the Mr does not file a demand for delay of sale, the sale shall be held
   promptly after entry of judgment.
5. 654.23. No redemption rights after sale The Mr has no right to redeem after sale. Junior lienholders have no
   right to redeem after sale. The Mr or a jr. lienholder may purchase at the sale and, if so, acquire the same title as
   would any other purchaser. If the Mr at the sale bids an amount equal to the judgment, the property shall be sold
   to the Mr even though other persons may bid an amount which is more than the judgment. If the Mr purchases at
   the sale, the liens of junior lienholders shall not be extinguished. If a person other than the Mr purchases at the
   sale, the liens of junior lienholders are extinguished.
6. 654.24. Deed and possession purchaser at sale entitled to immediate deed and immediate possession.
7. 654.25. Application of other statutes If the  has elected foreclosure w/o redemption, chapter 628
   [redemption] does not apply. A provision in a mortgage permitted by 628.26 or 628.27 [agreements to shorten
   redemption period] shall not be construed as an agreement by the Me not to elect foreclosure w/o redemption ...
   The election for foreclosure w/o redemption is not a waiver of deficiency except as provided in 654.26.
8. 654.26. No deficiency judgment in certain cases If  has elected foreclosure w/o redemption, he may include
   in the petition a waiver of deficiency judgment. If  has elected foreclosure w/o redemption and does not include

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     in the petition a waiver of deficiency judgment, if the mortgaged property is the residence of the Mr and is a one-
     family or two-family dwelling, and if the Mr does not file a demand for delay of sale under 654.21, then  shall
     not be entitled to a deficiency judgment.
E. Nonjudicial Foreclosure of Non-Ag Mortgages
  1. Power of sale foreclosure. Is the predominant method in just over ½ the states. After varying
     degrees of notice, the property is sold at public sale, usually by a public official or 3rd party
     (but sometimes by the Me).
     a) effect of power of sale foreclosure. If done right, it will accomplish the same thing as a
        regular foreclosure w/o the time and cost. If you don’t screw up, it will terminate all
        interests junior to the foreclosing mortgage and put the purchaser in the shoes of the Mr as
        of the time the mortgage was executed.
     b) stability of power of sale titles. Are not as secure as a judicial sale title b/c: no court
     c) classification of power of sale foreclosure defects.
        (1) void—Purchaser and all subsequent grantees acquire nothing, even if purchaser was a
            BFP. Could arise if mortgage was forged or debt was not in default.
        (2) voidable—court will set the sale aside unless the land is now in the hands of a BFP.
        (3) inconsequential—defects that have no impact on the validity of the sale. Include things
            like typographical errors, etc.
     d) who is a BFP? A foreclosure sale purchaser will be treated as a BFP, and thus be protected
        from voidable defects, if he: (1) has no actual knowledge of the defects; (2) is not placed
        on reasonable notice of the defects from recorded instruments; and (3) the defects are not
        such that a reasonable person attending the sale and exercising reasonable care would have
        discovered. A Me who purchases at the foreclosure sale will not be treated as a BFP.
     e) specific defects.
        (1) Inadequacy of foreclosure sale price will not alone invalidate a sale. Usually have to
            have fraud, unfair dealing, or other irregularities in the sale process. Will, however,
            invalidate a sale b/c of inadequate price alone if: 1) price is grossly inadequate, or 2)
            disparity so gross it shocks the conscience of the court
            (a) Restatement adopts grossly inadequate standard and allows the court to invalidate a
                sale where the price was less than 20% of FMV, but generally cannot invalidate the
                sale where the price was in excess of that.
        (2) Time of sale Either the sale is held at a different day or time than specified in the notice
            or is held on date and time in notice, but that date and time is an unusual date or time for
            sales in the community. The greater the sale/FMV disparity, the more likely the court
            will scrutinize defects here.
        (3) Place of sale. Sale normally has to take place in the county in which the land is located,
            failure to do so renders the sale void. If the mortgage specifies a place of sale that the
            bank violates, the sale is voidable. If the place of sale varies significantly from that
            stated in the notice, the sale is voidable.

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  (4) Sale by parcel or bulk. Person exercising the power of sale often has the alternative of
      selling it in parcels. Must chose the method most beneficial to the Mr. This usually
      creates a presumption in favor of selling in parcels. Sales that violate these principles
      are voidable.
  (5) Chilled bidding.
     (a) collusive bidding—void
     (b) some error that suppresses bidding (like referring to a Sr lien that no longer exists)—
f) Nature of Trustee’s Duties Under a Deed of Trust.
  (1) Me purchase at trustee’s sale. As long as the trustee is not employed by or otherwise
      closely associated w/the Me, it is permissible for Me to buy at sale.
  (2) Trustee purchase at sale. Unless he has express consent of Me, he may not purchase at
      sale. If he does, the sale is voidable.
  (3) Trustee an employee or part owner of Me. Some courts find that when the connection
      b/n the two is substantial, the Me’s purchase is really the trustee’s purchase, so the sale
      is voidable. Other courts hold that where the trustee is an important officer of the Me,
      the deed of trust in effect becomes a mortgage, so the law of mortgages (requiring
      judicial foreclosure) applies. Other courts find that close connection b/n Me and trustee
      does not in itself affect the sale. Instead, these circumstances just put the BOP on the
      trustee to show his faithfulness, which is satisfied if he shows compliance w/ his
      affirmative duties under the deed of trust and statute.
  (4) Trustee does not have a duty to ascertain whether foreclosure is justified—can proceed
      upon advice of Me that mortgage is in default w/o any investigation.
  (5) Trustee duty to disclose title defects to sale purchaser—most courts find that the trustee
      has no duty to affirmatively disclose, he just cannot keep purchasers from finding, and
      any disclosure he does make must be full and accurate. Some courts require trustee to
      disclose latent defects.
  (6) Commercially reasonable standard from U.C.C. Some courts have borrowed the
      standard and found that every aspect of the sale must be commercially reasonable on an
      objective basis. Clear that standard may apply when trying to get a deficiency judgment,
      unclear whether failure to meet the standard is enough to set aside a sale.
  (7) The Impact of Presumption Statutes Several states have statutes providing that
      recitals of statutory compliance in a trustee's deed are prima facie evidence of
      compliance. Some also provide that recitals establish conclusive evidence of
      compliance as to BFPs.
  (8) Failure to Provide Notice to Junior Interests If a power of sale statute requires notice
      to the holders of junior interests (most such statutes do not), then logically the result of
      the foreclosing Me's failure to provide that notice would be identical to omitting a junior
      interest holder in a judicial foreclosure. Whether the courts will reach this result in

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           power of sale states is largely undecided. The question is complicated by the existence
           of the statutes establishing a presumption of validity for power of sale foreclosures.
     g) Remedies For Defective Power Of Sale Foreclosure
        (1) Injunction Against Sale Injunction is the remedy Mr or other injured party commonly
            uses to prevent an improper foreclosure sale from occurring when it has not yet been
            consummated. Some courts require that the Mr tender the mortgage debt as a condition
            precedent to injunctive relief.
        (2) The Suit to Set Aside the Sale Employed after the sale has occurred. May be based not
            only the substantive grounds that would have justified an injunction suit, but also on
            defects that were inherent in the foreclosure process itself. Tender is more frequently
            viewed as a condition precedent to this sort of suit than it is in a suit for an injunction. If
            the defect merely renders the sale voidable, this remedy is unavailable against a BFP.
        (3) Damages for Wrongful Foreclosure Mr or Jr. Lienor who cannot bring a suit to set
            aside the sale b/c of BFP can use this remedy. Mr's damages are measured as the
            difference b/n the FMV of the RE and the aggregate amount of liens as of the date of the
            defective foreclosure sale. For the junior lienor claimant, the measure is the difference
            between the FMV of the mortgaged RE and the value of senior liens thereon as of the
            date of the wrongful foreclosure. The majority of courts allow a Mr to sue for damages
            even though he could sue to set aside sale.
2.   Nonjudicial Foreclosure in IA—Chapter 655A [strict foreclosure]
     a) 655A.2. Conditions prescribed Except as provided in 655A.9 [can’t use on ag. Land], a mortgage may be
        foreclosed, at the option of the Me, as provided in this chapter.
     b) 655A.3. Notice
        (1) The nonjudicial foreclosure is initiated by the Me by serving on the Mr a written notice which shall:
           (a) Reasonably identify the mortgage and accurately describe the RE covered.
           (b) Specify the terms of the mortgage with which the Mr has not complied. The terms shall not include
               any obligation arising from acceleration of the indebtedness secured by the mortgage.
           (c) State that, unless w/in 30 days after the completed service of the notice the Mr performs the terms in
               default or files with the recorder of the county where the mortgaged property is located a rejection of
               the notice pursuant to .6 and serves a copy of the rejection upon the Me, the mortgage will be
               The notice shall contain the following in capital letters of the same type or print size as the rest of the

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     (2) The Me shall also serve a copy of the notice required in (1) on the person in possession of the RE, if
         different than the Mr, and on all junior lienholders of record.
     (3) As used in this chapter, "Me" and "Mr" include a successor in interest.
  c) 655A.4. Service Notice or rejection of notice under this chapter shall be served as provided in the rules of
     civil procedure for service of original notice.
  d) 655A.5. Compliance with notice If the Mr or a junior lienholder [adds this amount to his debt] performs the
     default, w/in 30 days of completed service of notice, then the right to foreclose for the breach is terminated.
  e) 655A.6. Nuts Notice If either the Mr, or successor in interest of record including an ILK purchaser [but not a
     Jr.], w/in 30 days of service of the notice, files w/the recorder of the county where the mortgaged property is
     located, a rejection of the notice reasonably identifying the notice which is rejected together with proofs of
     service required under 655A.4 that the rejection has been served on the Me, the notice served upon the Mr is
     of no force or effect. [then back to regular foreclosure]
  f) 655A.7. Proof and record of service If the terms and conditions as to which there is default are not
     performed w/in the 30 days, the party serving the notice or causing it to be served shall file for record in the
     office of the county recorder a copy of the notice with proofs of service required under 655A.4 attached or
     endorsed on it and, in case of service by publication, a personal affidavit that personal service could not be
     made w/in this state, and when those documents are filed and recorded, the record is constructive notice to all
     parties of the due foreclosure of the mortgage.
  g) 655A.8. Effect of foreclosure Upon completion of the filings required under 655A.7 and if no rejection of
     notice has been filed pursuant to 655A.6, then w/o further act or deed:
     (1) The Me acquires and succeeds to all interest of the Mr in the RE.
     (2) All liens which are inferior to the lien of the foreclosed mortgage are extinguished.
     (3) The indebtedness secured by the foreclosed mortgage is extinguished. [no deficiency]

  h) Incompetency/Constitutionality. Non judicial foreclosure is constitution b/c 1) no state
     action, and 2) the Mr has a right to reject and end up back w/regular foreclosure. Moreover,
     there is no relief for Mr who was incompetent unless adjudged so at time Me completed
     proceedings. Me under no duty to determine competency of Mr. Putensen, 564 N.W.2d
     404 (Iowa 1997)
3. Power Of Sale Foreclosure—Constitutionality
  a) Constitutional Notice Requirements Assuming that power of sale legislation constitutes
     state or federal action for purposes of the due process clauses of the 14th and 5th
     amendments, such legislation violates due process to the extent that it does not require at
     least mailed notice to those parties who, in a judicial foreclosure, would be characterized as
     necessary parties.
  b) Constitutional Hearing Requirements Assuming that state or federal action is present,
     power of sale legislation violates the hearing requirements of due process to the extent that
     it does not require a hearing at which interested parties can challenge both the legal right to
     foreclosure and the propriety of the decision to do so. There is some authority that where
     the foreclosing Me is the U.S. government, federal agency rules, regulations or practice that
     mandate an internal agency hearing may satisfy procedural due process requirements even
     though the state power of sale statute that is used by that agency otherwise fails to meet
     hearing requirements.

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          c) Enforceability Of Waiver Provisions Waiver must be very clearly expressed and
             specifically bargained for. Most waiver attempts will be either constitutionally unsound or,
             for practical purposes, unworkable.
          d) The State Action--Federal Action Problem Power of sale legislation can be
             unconstitutional only if, "significant state involvement" or sufficient "federal action" is
             (1) Power of Sale and "State Action" State action litigation has focused on five theories:
                 "direct" state action; the "encouragement" theory; the governmental function theory; the
                 judicial enforcement theory; and the "pervasiveness" theory. It is increasingly unlikely
                 that state action can be found on any of the foregoing theories
             (2) Power of Sale and the Government as the Foreclosing Entity Where a direct
                 instrumentality of the state or federal government is the foreclosing Me, courts cannot
                 avoid the notice and hearing defects inherent in power of sale foreclosure. In such cases,
                 it is not the power of sale legislation, but rather the foreclosing Me itself that supplies
                 the requisite governmental action under the 5th or 14th amendment. The FMHA, the
                 VA, and the FHA will probably each be considered direct instrumentalities of the U.S.
                 There is authority that GNMA will not be considered the federal government.
                 Quasi-governmental entities like FNMA and the FHLMC will probably not be
                 considered to be acting as the federal government for foreclosure purposes. If the
                 foreclosing entity is a non-governmental entity, the presence of federal subsidies or
                 federal regulation will not trigger a finding of federal action.
VII. Installment Land Contracts (are not nearly as uniform as mortgage contracts)
    A. Forfeiture. The vendor has an option to forfeit or judicially foreclose like a mortgage.
       1. Black Letter. Economic function of an installment land contract is identical to a purchase-
          money mortgage.
          a) Distinguished from earnest money contracts. Different from the ordinary executory
             contract to buy/sell RE (an ―earnest money contract‖). The ILK is a financing device,
             unlike the earnest money contract.
          b) Forfeiture remedy. Virtually every ILK provides that time is of the essence and that if a
             vendee defaults, the vendor may declare the K terminated and retake possession of the
             premises and retain all previous payments as liquidated damages. Usually relieves vendor
             from any further obligations under the contract (e.g., providing deed) upon vendee’s
          c) Other remedies for vendee’s breach
             (1) specific performance for the price. Is basically reducing your debt to an in personam
                 judgment. Usually would only use if the vendee has significant assets. Note that you
                 generally need an acceleration clause in the contract to avail yourself of this remedy.
             (2) specific performance for installments due. Gives the vendor only the amount of past-
                 due payments w/interest.

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     (3) foreclosure of the vendee’s rights. Allows the vendor to treat ILK like a mortgage and
         get a judicial sale. If sale price is in excess of contract price, excess goes to vendee, but
         vendor can also get a deficiency judgment.
     (4) suit for damages. Vendor’s damages are usually the difference b/n the contract price
         and the FMV of the land on the date of the vendee’s breach. This remedy is only
         available where the vendee has abandoned the land b/c if you have to use forfeiture to
         regain the land, a subsequent action for damages is barred by the doctrine of election of
         remedies (if there is going to be a deficiency and the land is not abandoned, should treat
         it like a mortgage and get a foreclosure and judgment at the same time).
  d) comments on the forfeiture remedy. Traditionally, ILK forfeiture provisions were
     routinely enforced. Today, however, it is not so automatic. Traditional view was to treat
     ILKs under law of contracts. Today, most courts treat them under the law of mortgages.
     This is especially true when the vendee has substantial equity in the property.
  e) judicial limitations of forfeiture. Many courts find ways to limit the enforcement of
     forfeiture clauses. Some focus on contract principles, some just treat it under the law of
     (1) waiver. Often a vendor will accept a few late payments before he loses his patience and
         declares the contract in forfeiture. Some courts will find that the vendor has waived the
         forfeiture provision by accepting prior late payments.
     (2) recognition of an equity of redemption. Some courts find that a vendee has the right, in
         equity, to a reasonable time to pay the amount due under the contract. Some courts have
         even found that the vendee only has to pay the amount in default to redeem. [IA has 30
         day right to cure by statute]
     (3) restitution. Some courts allow forfeiture but require vendor to return all payments made
         under ILK less rental value for the vendee’s occupancy.
     (4) foreclosure as mortgage. several states, treat ILKs as mortgages, at least where the
         vendee has made more than nominal payments. This is the approach of the restatement.
  f) Election of remedies. A vendee who obtains a forfeiture is usually barred from then
     seeking to recover the mortgage equivalent of a deficiency judgment (i.e., an action for
     damages on the contract). Is a particular problem when the value of the land has dropped.
     May want to foreclose like a mortgage and get a deficiency judgment that way. The same
     result obtains even if the vendor got a promissory note in relation to the contract (cannot
     forfeit under contract and then sue for personal obligation of promissory note).
2. Iowa forfeiture statutes. [forfeiture is K creation, not statute, the statute just provides
   mechanisms to enforce them if the K has a term—vendee gets more generous of K term or
   statute. If K silent, can still foreclose b/c that is statutory remedy]
  a) 656.1. Conditions prescribed Can only forfeit land contract under provisions of this Chapter.
  b) 656.2. Notice
     (1) The forfeiture shall be initiated by the vendor by serving on the vendee a written notice which shall [no
         maximum # of times have to serve right to cure, could be every month if he cures each time]:

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          (a) Reasonably identify the contract and accurately describe the RE covered.
          (b) Specify the terms of the contract with which the vendee has not complied.
          (c) State that unless, within 30 days after the completed service of the notice, the vendee performs the
              terms in default and pays the reasonable costs of serving the notice, the contract will be forfeited.
          (d) Specify the amount of attorney fees claimed by the vendor pursuant to 656.7 and state that payment of
              the attorney fees is not required to comply with the notice and prevent forfeiture.
      (2) [have to serve notice on person in possession if different than vendee, on all vendee’s ME’s of record, on
          all government claims and on judgment lienholders. J.Lienholder, however, have to file a request for
          notice which is good for 5 years and is renewable]
      (3) As used in this section, the terms "vendor" and "vendee" include a successor in interest but the term
          "vendee" excludes a vendee who assigned or conveyed of record all of the vendee's interest in the RE.
   c) 656.3. Service Said notice may be served personally or by publication, on the same conditions, and in the
      same manner as is provided for the service of original notices, except that when the notice is served by
      publication no affidavit therefor shall be required before publication. Service by publication shall be deemed
      complete on the day of the last publication.
   d) 656.4. Compliance with notice If the vendee or a Me of the RE cures the breach w/in 30 days of completed
      service, plus costs of notice, cannot forfeit. The payment of attorney fees under 656.7 is not necessary to
      prevent forfeiture.
   e) 656.5. Proof and record of service If the terms and conditions as to which there is default are not performed
      w/in the 30 days, vendor may file for record in the office of the county recorder a copy of the notice w/ proofs
      of service attached or endorsed thereon (and, in case of service by publication, a personal affidavit that
      personal service could not be made w/in this state), and when so filed and recorded, the said record shall be
      constructive notice to all parties of the due forfeiture and cancellation of said contract. [forfeiture is
   f) 656.6. Scope of chapter This chapter applies to all cases where the intention of the parties, as gathered from
      the contract and surrounding circumstances, is to sell or to agree to sell an interest in RE, any contract or
      agreement of the parties to the contrary notwithstanding.
   g) 656.7. Attorney fees. Have to state in notice that you are seeking attorney’s fees. Limited to $50 and must be
      for services that require a lawyer, cannot be for clerical services, regardless of who performs them. Not
      necessary for vendee to pay to prevent a forfeiture. Vendor limited to small claims action to recover.
   h) Can elect to foreclose like a mortgage. Then parties treated just like Mr/Me—all of mortgage law applies.
      654.11 & 12
   i) Title clearling—656.9 defect in forfeiture proceedings—limitation of actions. An action shall not be
      commenced after 7/1/92, which asserts a claim against RE previously subject to a forfeiture proceeding,
      based on a defect in the forfeiture proceeding, in which the proof and record of service of notice of forfeiture
      required by 656.5 has been filed for record in the office of the county recorder prior to 7/1/91.

3. Due Process. B/c the statutory forfeiture procedure requires notice, and gives the vendee the
   opportunity to cure, it does not violate due process. Moreover, there is no state action simply
   by the statute (might have a different case if it was a federal agency making or guaranteeing
   the loan). Jensen v. Schreck, 275 N.W.2d 374 (Iowa 1979).
   a) Only way a vendor on a land contract can forfeit in Iowa is through Chapter 656.
      (1) purpose of the statute is to give vendee rights and limit vendor’s rights, so the court has
          trouble seeing how the statute, which expands the traditional rights of a vendee, could
          violate a vendee’s constitutional due process rights.

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  b) unconscionability—court hints that if the retention of payments would not pass the
     liquidated damages test, it may order restitution. It also hints that where the vendee has
     made a lot of payments, it might be a different story.
4. Small Breaches. The breach must impair security to allow forfeiture. However, even when
   the security is not impaired, where the vendor has attempted to gain compliance through other
   methods and it appears that forfeiture is the last means of enforcement b/c the vendee is
   thumbing his nose at the vendor, then the court will allow forfeiture no matter how small the
   breach. When the breach is small, however, the vendor has to do more than simply comply
   w/the 30 day right to cure. [court rules against the jerk]. Important factors: 1) amount of
   equity; 2) flagrance of breach; 3) effect on security; and 4) size of breach.
  a) Miller v. American Wonderlands, Inc., 275 N.W.2d 399 (Iowa 1979) (court of equity
     does not favor forfeiture, but may allow it when there is no other way to enforce the
     contract; allowing forfeiture for default of $10.48 for unpaid interest where vendee had
     repeatedly failed to respond to vendor’s request for such payment; and noting that there is
     no waiver by failure to strictly follow 656 provisions if the vendor continued to insist on
     performance and warn that he would enforce 656, especially where vendee continued to
     promise future compliance);
  b) Lett v. Grummer, 300 N.W.2d 147 (Iowa 1981) (refusing to allow forfeiture for failure to
     replace 6 broken windows in an obsolete out-building. Court noted that vendor’s security
     was not impaired and that it appeared that vendor was attempting to use technical breach to
     kick vendee off land.)
     (1) The court notes the difference b/n a willful failure to pay a small obligation, such as
         Miller, and the situation herein where vendee has kept property in good condition but
         did not replace 6 windows b/c he was planning to replace the building.
     (2) Cannot, however, force vendor to accpet full payment prior to end of contract.
     (3) Can sue after the 30 day 656 period to anull a forfeiture
  c) Sheeder v. Lemke, 564 N.W.2d 1 (Iowa 1997) The breach must impair security. Note,
     however, that all these cases really say is that unless the breach is significant and impairs
     security, you have to try to handle it outside of 656. If you try that and the vendee still does
     not come around, 656 is available.
     (1) party claiming forfeiture has the burden to prove facts that, based on the contract, entitle
         the vendor to forfeit the contract. Only enforced when the vendor shows the equities are
         clearly on his side.
     (2) The vendor retains title as security.
     (3) The inclusion of any demand that is either unreasonable or unfounded in the 656 notice
         renders forfeiture invalid b/c the vendee is in no position to predict which items a court
         will accept and which it will reject (not consistent w/Miller).
     (4) Vendor may have to provide more than the statutory 30 days if more than 30 days is a
         reasonable time to cure the breach.

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        (5) Breaches that actually improve the value of the land (and  the vendor’s security) will
            not result in forfeiture.
        (6) Cannot require vendee to perform a disputed obligation to a 3rd party as a requirement
            to cure where the lien that would result form that dispute would be junior to the
            vendor’s interest in the property.
        (7) Note: still have to mediate w/ag. ILKs before can forfeit.
     d) 558.46. Mandatory recording of certain residential RE installment sales contracts.
        Have to record installment sales contracts on residential RE w/in 180 days of execution. If
        fail to do so vendor has to pay $100 per day fine. Cannot initiate forfeiture proceedings if
        not recorded. Late recording, although it subjects vendor to a fine, is still valid. This could
        lead to some huge bargaining power for vendee in default. [fine is prospective, forfeiture
        restriction is retrospective]
  5. Insurance Proceeds and Election of Remedies. If there are insurance proceeds, had better
     foreclose like a mortgage b/c if you forfeit, you are not entitled to insurance proceeds paid to
     vendee regardless of any deficiency (even if foreclose, only get amount of debt). Forfeit means
     land only, as is). The contract is gone, so no right to insurance proceeds. If there is a
     deficiency, foreclose, if there is not don’t ask the court to give you a windfall. Risken v.
     Clayman, 398 N.W.2d 833 (Iowa 1987).
     a) Issue preclusion—bank brought prior that determined the vendee could not use the
        proceeds to stop forfeiture, but this action is to determine who gets those proceeds, so
        different issue.
B. Foreclosure. If vendor wants, he can post a bond and foreclose his interest like a mortgage, but
   all of mortgage law then applies. 654.11 & 12.
  1. The two year limit on deficiency judgments applies to deficiencies obtained by treating a land
     sale contract like a mortgage and foreclosing. 615.1. Also applies to a land sale contract
     whereon the vendor seeks damages (and not forfeiture or foreclosure). 615.3.
  2. Subcontracts. 1(owner)2(vendee)3(subcontracor); (notice must go to 2 and 3); all ILKs.
     Owner can accept a quitclaim deed from vendee and then foreclose on subcontractor under
     vendee’s contract with him (point is to get a deficiency judgment from subcontractor). If took
     forfeiture of 2 to completion, may have different story. In that case, the 23 ILK would be
     like insurance proceeds and 1 could only get the land as is (should have foreclosed if wanted
     more). But 2 can voluntarily give 1 his interest in the land, including the 23 ILK.
     Gottschalk v. Simpson, 422 N.W.2d 181 (Iowa 1988).
     a) Automatic Forfeiture After 30-day Statutory Period. The filing of the notice and
        affidavit are for constructive notice to 3rd parties only. The forfeiture is generally effective
        as b/n the parties upon the running of the 30 days, but the parties can agree to extend that
        period. The vendor can waive the 30 day forfeiture, and if the parties are negotiating during
        the 30 day period, that waiver can come after the 30 day period has run.
        (1) Election of remedies. The owner may accept a quitclaim from vendee (in effect an
            agreed forfeiture) and the foreclose on subcontractor. B/c the owner did not pursue

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           forfeiture to its conclusion, it did not elect that remedy. , it may pursue foreclosure
           against sub.
C. Other Contract Remedies—Damages. When the vendor breaches, the vendee may be entitled
   to rescission and restitution damages. When land prices are in the crapper, that is often more
   favorable for the vendee than other remedies. Potter v. Oster, 426 N.W.2d 148 (Iowa 1988).
  1. If the vendor is unable to deliver title, he has breached the implied warranty of quiet
  2. There are three types of contract damages: 1) expectation (benefit of your bargain—difference
     b/n contract price and FMV of object of contract); 2) reliance (non-breaching party gets back
     money he expended in reliance on the contract); and 3) restitution (breaching party has to
     give back what he has received).
     a) restitution damages are the only one of the three that look at the breaching party. The goal
        is to prevent unjust enrichment. This remedy will be granted when other remedies are
        inadequate. Expectation is inadequate b/c the FMV of the property would have to be
        calculated at the time performance was due, which is in the future and, , cannot be
     b) Rescission of contract (killing K before time of performance) is an extraordinary remedy
        and will only be granted when: 1) injured party not in default; 2) breach is substantial and
        goes to the heart of the K; and 3) remedies at law are inadequate.
     c) Calculation of damages for restitution—the money you paid less the rental value of the
        place while you were there.
D. Absolute and Security Transfers of Csontract Interests. The vendee’s interest is RE (record
   and foreclose like RE). Vendor’s interest is personal property (Article 9 and could foreclose
   under 9-504—also no 615 2 year limit). Most vendors will perfect as both, however, and will
   also go to court to foreclose.
  1. Mortgaging the Vendee’s Interest. When the land increases in value, and as the vendee
     pays-off the land contract, his equitable interest becomes increasingly valuable. Is, ,
     common for the vendee to mortgage his interest in the contract.
     a) Rights of Me to notice. The vendor cannot declare and enforce a forfeiture w/o first
        providing the vendee’s Me w/notice and opportunity to protect itself (by curing the
        default). A minority approach, however, limits the duty of the Vendor to situations where
        the vendor has actual (as opposed to constructive) Knowledge of the Me’s interest. Iowa
        law requires notice if of record (if J.Lien have to file request for notice)
  2. J.Creditors of the vendee. The vendee’s interest is RE for purposes of judgment liens. A
     J.Creditor of the vendee can, , obtain a valid lien on the vendee’s ILK interest. Two theories
     that lead to this result:
     a) Equitable Conversion. At the time an earnest money contract or installment contract is
        executed, the vendee’s interest is considered in equity as RE.
     b) Statutory Construction. Just interpret the statute to have intended to cover a vendee’s
        interest in a land sale contract.

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      3. Mortgaging the Vendor’s interest. The vendor’s interest is clearly mortgabable. Perfection,
         however, is unclear. Used to treat it just like a security interest in a mortgage and record like
         an interest in RE. Recent courts have held that the vendor’s interest is personal property. As a
         result, the creditor’s interest is only perfected if the creditor has complied w/Article 9 (i.e.,
         filed a U.C.C. 1). Some courts have held that there are actually 2 interests: 1) legal title (RE)
         and 2) the right to payment (personal property). The prudent lawyer will now perfect as both
         RE and personal property.
VIII.Advanced Dimensions of Mortgage Performance.
   A. Transfers of the Mr’s Interest Subject to or With Assumption of the Mortgage Obligation.
      The original borrower is still on the line, the only question is whether the third guy in line is also
      on the line. Subject to, no personal liability. Assumption—personal liability. The property is
      always on the line.
      1. Borrower always on the hook, buyer’s personal liabilty will depend on whether he takes
         subject to (no personal liability) or assumes (personal liability).
      2. Land is always on the hook. If Buyer assumed, Bank can go after buyer on 3rd party
         beneficiary theory.
      3. Subject to—Subrogtation. If Borrower pays bank and Buyer took subject to (no personal
         liability), Borrower is subrogated to Bank’s rights against the land and Borrower can foreclose
         against the land.
      4. Assumed—Personal liability and subrogation. If Borrower pays Bank and Buyer assumed
         (personal liability) Borrower has personal action against Buyer (breach of K) and can also
         foreclose on land b/c of subtogation. In addition, the Mr may, without paying the debt, apply
         for a court order compelling the grantee to pay it under the doctrine of exoneration.
      5. Me Rights Against Successive Grantees When mortgaged RE has an unbroken chain of
         assuming grantee-owners, each of them becomes and remains liable to the Me until the
         mortgage debt is paid.
      6. Grantee's Assertion Of Mr's Defenses Against The Me The general rule is that an
         assuming or subject to grantee cannot utilize any defenses Mr may have against the Me.
         Reasoning is that the courts assume the amount of the loan has been subtracted from the
         purchase price, so to let the grantee then avoid the loan would unjustly enrich him.
      7. Release Of The Mr Upon A Transfer Of The RE Normally the Mr remains liable on the
         mortgage debt after transferring the RE. However, it is possible that the Me will give an
         express release of liability to the Mr. Under FHA loans the Mr is automatically released from
         liability 5 years after making the transfer if the loan is not then in default.
      8. Methods Of Avoiding The Suretyship Defenses There are several methods by which the Me
         may prevent the suretyship defenses discussed above from arising.
         a) Mr's Consent to Me's Action If the Mr consents to the release, modification, or extension
            by the Me, the Mr will not be discharged. The consent may be given in the original

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         mortgage, or it may be given before, at the time of, or after the release, modification, or
      b) A "reservation of rights" clause in the modification agreement Under          traditional
         concepts, the Me could insert a "reservation of rights" clause in the modification
         agreement, and could thus prevent the discharge of the Mr. However, this result has been
         strongly criticized, and is rejected by the Restatement § 38.
      c) A "preservation of recourse" clause in the release or extension agreement Under the
         Restatement § 38, a Me that grants a release of liability or a time extension to a grantee
         may insert a "preservation of recourse" clause. This clause, in effect, warns the grantee that
         the release or extension is not binding on the Mr, and that the Mr may still enforce the
         obligation against the grantee according to its original terms. Using such a clause does not
         guarantee that the Mr won't be discharged, but it makes a discharge less likely, since by
         preserving the Mr's full recourse against the grantee, it makes it less probable that the
         grantee will suffer damage as a result of the release or extension.
B. Iowa Law on Agreements b/n grantee and Bank. Must show some type of damage. The
   Bank’s action must somehow harm Borrower’s right or ability to get payment from Buyer. If
   Bank simply released lien (w/o applying to debt) would likely have prejudice. If bank granted
   Buyer extensions at time when he was solvent and he is now insolvent, should have prejudice.
   The Bank, however, can release the Buyer’s personal liability to it w/o harming Borrower b/c
   Buyer is still liable to Borrower on K obligation (Iowa in minority on that, which is why most
   other courts hold that if the Bank releases personal obligation of Buyer, it also relases personal
   obligation of Borrower). FLB v. Christensen, 298 N.W. 641 (Iowa 1941).
   1. When grantee assumes, both grantee and Mr are primarily liable to the Me on the debt (joint
      and several liability).
   2. An extension agreement b/n Me and grantee does not relieve Mr of his obligations on the
      a) will relieve the Mr (as surety) to the extent that the Me makes an agreement w/the grantee
         that harms the Mr’s ability to collect from the Me.
   3. Release of lien no harm here b/c morgagee applied full value of the property that is no longer
      subject to Mr’s claim to the debt.
   4. Note: Fannie Mae/Freddie Mac form has language that would trump most defenses Borrower
      may have against Bank.
C. Restrictions on Transfers of the Mr’s Interest (Due-On-Sale) Clauses
   1. Due on sale and due on encumbrance clauses give the Me the option of declaring the entire
      debt due and payable if the Mr respectively either transfers or encumbers the mortgaged RE
      w/o the Me’s consent. Due on sale is very common and is in most federal loan forms.
      Generally, however, due on encumbrance is not used, and they are not enforceable against
      residential units if the encumbrance is Jr. to the mortgage in question.
      a) Purpose—most people sell their home before they pay off the loan, and the idea is to have
         a long term loan w/a means to adjust the interest rate.

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2. Prior State Law
  a) Judicial approaches. Some courts had invalidated the clauses as unreasonable. Among the
     courts that invalidated them, there were two camps. In the first, they court would presume
     them valid (w/BOP on Me to show unreasonable). In the other, the courts would presume
     them invalid (BOP on Mr to show reasonable).
  b) Legislatures. Some legislatures invalidated them unless the new borrower did not meet the
     bank’s standard requirements for borrowers. Basically, the bank could only raise the
     interest rate if its security was harmed by any of the three Cs.
  c) Iowa enforced them. Pre-1979 loans were enforceable, then had statute banning
     enforcement prospectively, but now have GARN ACT, which renders them enforceable
     despite state law to the contrary. The court basically took the approach that they do not
     harm the seller b/c he gets the same price that he would absent a mortgage (so no restraint
     on alienation problems). Invalidation of the clause would just allow the seller to extract a
     premium, at the bank’s expense, for the below-market-rate of interest, which (b/c the due
     on sale clause must come from the contract) was a right the seller previously contracted
     away. The court also was persuaded by the harm that invalidation would do to banks and
     other borrowers. The inability to get out of below-market-rates would put state banks at a
     disadvantage (b/c federal banks, by federal regulation, could use them). In addition, the risk
     of an interest rate rise would simply result in higher interest rates at the outset. Martin,
     319 N.W.2d 220 (Iowa 1982).
     (1) outside of statute/regulations these are purely creatures of contract—created and
         governed by contract terms and law.
     (2) Note that if a contract term greatly reduces market price of property, the court may find
         a restraint on alienation (but the only affect here is on the premium, not on the price of
         the land itself).
  d) Iowa legislation banned them on residential property (now prempted).
     (1) Scope 535.8(1) Loan means a loan of money that is used in whole or in part for the purpose of
         purchasing RE that is a single or 2 family dwelling occupied or to be occupied by the borrower. It
         includes refinancing, and the assumption of a prior loan, whether or not the borrower of the new loan is
         the same as the borrower of the old loan.
     (2) Ban—Garn Preempts 535.8(2)(c) If the purpose of the loan is to enable the borrower to purchase a
        single or two family dwelling, for the borrowers residence, due on sale clauses are not enforceable except
        if the lender on reasonable grounds believes that its security interest or the likelihood of repayment is
        impaired, based solely on criteria that is not more restrictive than that used to evaluate a new mortgage
        loan applicant, the lender may accelerate the loan, or to offset any such impairment may adjust the interest
        rate, repayment schedule, or term of the loan. A provision of a loan agreement that violates this paragraph
        is void.
     (3) Garn likely preempts 558.8(2)(e) 3 year redemption period when foreclose b/c of a due on sale clause
        Mr in the meantime, shall be entitled to possession; and for the first 30 months redemption is exclusive to
        Mr. Any RE redeemed is free and clear from any liability for any unpaid portion of the judgment under
        which the RE was sold. The redemption right in this paragraph is not subject to waiver and cannot be
        shortened. Creditor redemption is 30-33 months. Only applies if only default was a due on sale clause...
        does not apply if the lender establishes, based on reasonable criteria that are not more restrictive than

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            those it uses for regular mortgage applicants, that the security interest or likelihood of repayment is
            impaired b/c of the transfer.

3.   Garn Act—Federal Premption—Due on Sale Clauses Enforceable. 12 U.S.C. § 1701j-3.
     a) Definitions. For the purpose of this section--
        (1) due-on-sale clause means a contract provision which authorizes a lender, at its option, to declare due and
            payable sums secured by the lender's security instrument if all or any part of the property, or an interest
            therein, securing the real property loan is sold or transferred without the lender's prior written consent;
        (2) lender means a person [broad] or government agency making a RE loan or any assignee or transferee, in
            whole or in part, of such a person or agency;
        (3) real property loan means a loan, mortgage, advance, or credit sale secured by a lien on real property, the
            stock allocated to a dwelling unit in a cooperative housing corporation, or a residential manufactured
            home, whether real or personal property; and
        (4) residential manufactured home means a manufactured home as defined in 42 U.S.C. 5204(6) which is
            used as a residence;
     b) Loan contract and terms governing execution or enforcement of due-on-sale options and rights and
        remedies of lenders and borrowers; assumption of loan rates.
        (1) Preemption clause Notwithstanding any provision of the constitution or laws (including the judicial
            decisions) of any State to the contrary, a lender may, subject to (c), enter into or enforce a contract
            containing a due-on-sale clause with respect to a real property loan.
        (2) DOS Clause enforceable if have K provision. Except as otherwise provided in (d), the exercise by the
            lender of its option pursuant to such a clause shall be exclusively governed by the terms of the loan
            contract, and all rights and remedies of the lender and the borrower shall be fixed and governed by the
        (3) In the exercise of its option under a due-on-sale clause, a lender is encouraged to permit an assumption of
            a real property loan at the existing contract rate or at a rate which is at or below the average between the
            contract and market rates, and nothing in this section shall be interpreted to prohibit any such assumption.
     c) Window period of historical interest only.
     d) Exemption of specified transfers or dispositions. With respect to a real property loan secured by a lien on
        residential real property containing less than five dwelling units, including a lien on the stock allocated to a
        dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not
        exercise its option pursuant to a due-on-sale clause upon—
        (1) the creation of a lien or other encumbrance subordinate to the lender's security instrument which does not
            relate to a transfer of rights of occupancy in the property;
        (2) the creation of a purchase money security interest for household appliances;
        (3) a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
        (4) the granting of a leasehold interest of three years or less not containing an option to purchase;
        (5) a transfer to a relative resulting from the death of a borrower;
        (6) a transfer where the spouse or children of the borrower become an owner of the property;
        (7) divorce decree;
        (8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not
            relate to a transfer of rights of occupancy in the property; or
        (9) any other transfer or disposition described in regulations prescribed by the Federal Home Loan Bank

4. The Garn Act was effective on October 15, 1982 and broadly preempts state laws that restrict
   the enforcement of due-on-sale clauses, thereby making such clauses enforceable.

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a) lenders covered. It covers any person or government agency making a RE loan. Includes
   individuals, state banks, and federal banks.
b) loans covered. It covers any loan secured by a lien on RE (or stock in a coop) or a
   manufactured home (are generally personal property). Also covers loans secured by
   mortgages of leasehold or subleasehold interests.
c) types of transfer restrictions covered. Only covers clauses that allow the lender to
   accelerate debt, so clause that simply allows lender to collect a fee or increase the interest
   rate is not literally covered by the act (so state law would still apply, and could ban the fee,
   which Iowa does).
d) Time of transfer. Act applies to all loans, regardless of when made, but only applies if the
   transfer was made after 10/15/82. The act, however, lists certain transfers that cannot
   trigger a due on sale clause.
e) Cannot get around a due on sale clause by using ILK.
f) Window period exception. If there was state law already existing when act passed, it
   continued to be effective if loan was made while due on sale clauses not enforceable and
   land is transferred w/in a 3 year window (b/n 10/15/82 and 10/15/85). States could in that
   3 year period exempt loans made before the law went into effect (10/15/82) regardless of
   when sold.
g) estoppel if the Me delays enforcement of a due on sale clause for a long period of time,
   court may estop it from later enforcing that clause.
h) release of original Mr. Regulations appear to provide that if the bank allows the new
   buyer to assume the loan, the old Mr must be let off the hook on the loan (although this
   point is not exactly clear).
i) future owners. A due on sale clause generally will bind future buyers who assume the loan
   (usually the Mtg. has boilerplate language that provides such a result, although sloppy
   drafting could render a different result possible).
j) Concealment of the transfer. Parties may try to hide the transfer to avoid the DOS
   (1) may not have to record to protect interest. If the buyer goes into possession, that
       provides the same constructive notice that recording the interest would provide.
   (2) generally the seller does not have a duty to notify the lender of the transfer, the lender’s
       sole remedy is to accelerate the loan when it learns of the transfer. Some mortgages now
       contain language giving the Mr the affirmative obligation to notify the lender of the
       transfer, which would probably support an action for damages.
   (3) Lawyer’s duty—generally not duty to inform b/c ethical obligation to disregard client
       confidences only applies to criminal acts that threaten physical harm. Could advise them
       to transfer and not tell the bank (and hide it) b/c nothing wrong w/telling client to breach
       a client and the conduct you are advising the client to undergo is likely not fraudulent.
k) Restrictions on transfer in ILKs. provide that vendee may not transfer his interest w/o
   vendor’s consent.

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        (1) judicial approach. Courts are very harsh against vendors. Courts generally both
            construe the clause itself against the vendor, and then when the transfer is still w/in the
            prohibition require the vendor to establish that enforcement of the clause is reasonable
            (note that enforcement in the case of an ILK could result in a forfeiture, which is a harsh
            result). This usually means the vendor will have to establish that his security was
            impaired. Even then, the courts may require the vendor to treat the contract like a
            mortgage (grace period, equitable and statutory redemption, judicial sale, etc.)
        (2) Garn Act covers installment land contracts, but most of the language in ILKs does not
            fit the requirements of the Act, so it is not a ―due on sale clause‖ under the Act’s
            provisions. ILKs generally flatly prohibits transfer, rather than simply giving the vendor
            an option to accelerate (which is the language the Act covers). Even if the Act applies, it
            will likely only give the vendor foreclosure remedies, not forfeiture remedies.
D. Prepayment. Under the common law, unless prepayment was expressly allowed, there was no
   prepayment. Obviously, , a prepayment penalty would be enforced if it passed the liquidated
   damages analysis (b/c prepayment would be a breach and the Me would be entitled to damages
  1. modern-minority view. Majority follows the common law rule. A few modern cases indicate
     that when the contract is silent there can be no prepayment penalty (reverse of default rule,
     but parties can K around). Courts uniformly enforce a specific clause prohibiting prepayment.
  2. Fees—lenders use them for a number of reasons. First, they spread the administrative costs of
     making the loan over the loan period, so early payment means they are deprived of some of
     their administrative costs. Second, if interest rates fall, a borrower could refinance and deprive
     the Me of his long-term interest return. Courts generally subject these fees to a regular
     liquidated damages analysis. Outside of bankruptcy, however, courts generally enforce them
     (in bankruptcy, § 506’s ―reasonable‖ requirement subjects them to increased scrutiny in order
     to be secured; of course, unsecured status means as a practical matter the lender will not get
     his fee). Are not usurious and are not a restraint on alienation.
  3. Acceleration. Most courts prohibit a prepayment fee if the prepayment is b/c of Me’s
     acceleration of the loan. Courts have three rationales: 1) once obligation is accelerated full
     payment is no longer early (b/c under terms of K, full payment is due now); 2) by accelerating,
     the lender has waived his right to the prepayment fee; 3) intent of the parties was for the fee
     only to apply to voluntary prepayment (note that you could K around this reasoning).
     a) Intentional default to avoid fee. Court will generally enforce the fee in these cases b/c the
        Mr is choosing default as a means of prepayment.
  4. Other involuntary prepayments, e.g., casualty loss, condemnation, etc., courts will
     generally prohibit the collection of the prepayment fee in these cases. However, it appears the
     parties can K around this result, and if the loan documents clearly call for a prepayment
     penalty in this context, the courts will enforce it. The Restatement’s position is that it depends
     on what the lender wants. If repair would be feasible and the lender nonetheless calls for
     prepayment, there is no fee.
  5. Due on sale clauses—generally a Me cannot both accelerate b/c of DOS and also collect a
     prepayment fee.

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      6. Federal law. Federal savings association may enforce a prepayment penalty regardless of
         what the state law says about enforcement. The current federal forms, however, allow
         prepayment w/o penalty on single family mortgages but impose a penalty for prepayment of
         multi family mortgages. Fannie Mae/Freddie Mac have provisions similar to Iowa statute,
      7.   535.9 Iowa prohibits them on residential and ag land but can require 30 days’ notice.
           a) "loan" means a loan of money which is wholly or in part to be used for the purpose of purchasing RE which
              is a single-family or a two-family dwelling occupied or to be occupied by the borrower, or for the purpose of
              purchasing ag. land. "Loan" includes the refinancing of a contract of sale, and the refinancing of a prior loan,
              whether or not the borrower also was the borrower under the prior loan, and the assumption of a prior loan.
           b) Cannot charge a prepayment penalty (in any form, including higher interest rate). A lender may, however,
              require advance notice of not more than 30 days of a borrower's intent to prepay.
           c) If any lender receives a prepayment penalty, the borrower shall have the right to recover all amounts paid the
              lender which are in excess of the amounts permitted by (2), plus attorney's fees and court costs incurred in
              any action necessary to effect such recovery.

           d) Lender can expressly prohibit prepayment, however. The statute only prohibits charging a
              fee, it does not prohibit a blanket (and express) prohibition on prepayment. Note, however,
              that this is a federal court interpreting state law, so it may not be binding on a state court.
              Prudential Ins. Co. v. Rand & Reed Powers Partnership, 141 F.3d 834 (8th Cir. 1998).
IX. Advanced Dimensions of Mortgage Foreclosure
   A. Fixtures and Growing Crops. A fixture is a former chattel that, although retaining its distinct
      separate physical identity, is so connected to the RE that a disinterested observer would consider
      it a part of the RE. Things like building materials that were once chattel but are now so integrated
      w/the RE that an observer (or RE law) would consider them part of the RE are RE, not fixtures.
      1. there are three classes of goods: pure personal property (U.C.C. to perfect); personal property
         that is so integrated w/RE that RE law (not U.C.C.) would consider them part of the RE (but
         they retain their separate identity) (RE law to perfect); and building materials (which are RE).
      2. Priority rules
           a) prior RE mortgage. Chattel mortgage on a fixture prevails if it is purchase money and
              the SP files a fixture filing (where file RE interest, not where you file your U.C.C. 1)
              before it becomes a fixture or w/in 10 days therefrom. The idea is that the prior lender did
              not rely on the fixture so to give him an interest therein would be a windfall.
           b) subsequent RE mortgage. Chattel mortgage has priority if the goods became fixtures and
              the chattel mortgage was perfected by a fixture filing both occurring before the filing of the
              RE mortgage.
      3. Construction Mortgages pay out the proceeds of the loan in installments as the building
         progresses. Have future advances clauses so the priority for all the advances will relate back to
         the original date of perfection. As to any goods that become fixtures during the course of the
         construction, the construction Me enjoys priority to the extent of all conveyances made under
         the mortgage to finance the construction, including the cost of acquiring the land. Will prevail
         even against purchase money interest. Basic reasoning is to prevent double financing—so if

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     you sell someone appliances for a house they are building, you have better insist on cash if
     they have a construction loan.
4. Readily removable machines may technically be fixtures, but mortgage lenders do not rely
   on them for security, so they are perfected in regular U.C.C. way, and are not considered
5.   Remedies—the fixture creditor must have priority over the RE creditor to take the collateral.
     Even if he has priority, he can only take the collateral if he pays the RE creditor for any
     damage the removal caused (not including the lower value of the property b/c the fixture is
     now gone).
6.   U.C.C.
     a)   554.9313 Priority of security interests in fixtures.
          (1) In this section and in the provisions of Part 4 of this Article referring to fixture filing, unless the context
              otherwise requires
             (a) goods are "fixtures" when they become so related to particular RE that an interest in them arises under
                 RE law.
             (b) a "fixture filing" is the filing in the office where a mortgage on the RE would be filed or recorded of a
                 financing statement covering goods which are or are to become fixtures and conforming to the
                 requirements of 554.9402(5).
             (c) a mortgage is a "construction mortgage" to the extent that it secures an obligation incurred for the
                 construction of an improvement on land including the acquisition cost of the land, if the recorded
                 writing so indicates.
          (2) A security interest under this Article may be created in goods which are fixtures or may continue in goods
              which become fixtures, but no security interest exists under this Article in ordinary building materials
              incorporated into an improvement on land.
          (3) This Article does not prevent creation of an encumbrance upon fixtures pursuant to RE law.
          (4) Pirorities A perfected security interest in fixtures has priority over the conflicting interest of an
              encumbrancer or owner of the RE where
             (a) [pre-exis ting interests] the security interest is a purchase money security interest, the interest of the
                 encumbrancer or owner arises before the goods become fixtures, the security interest is perfected by a
                 fixture filing before the goods become fixtures or within ten days thereafter, and the debtor has an
                 interest of record in the RE or is in possession of the RE; or
             (b) [after-arising interests] the security interest is perfected by a fixture filing before the interest of the
                 encumbrancer or owner is of record, the security interest has priority over any conflicting interest of a
                 predecessor in title of the encumbrancer or owner, and the debtor has an interest of record in the RE or
                 is in possession of the RE; or
             (c) the fixtures are readily removable equipment or readily removable replacements of domestic
                 appliances which are consumer goods, and before the goods become fixtures the security interest is
                 perfected by any method permitted by this Article including 554.9302(1)(d); or
             (d) the conflicting interest is a lien on the RE obtained by legal or equitable proceedings after the security
                 interest was perfected by any method permitted by this Article including 554.9302(1)(d).
          (5) A security interest in fixtures, whether or not perfected, has priority over the conflicting interest of an
              encumbrancer or owner of the RE where
             (a) the encumbrancer or owner has consented in writing to the security interest or has disclaimed an
                 interest in the goods as fixtures; or

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            (b) the debtor has a right to remove the goods as against the encumbrancer or owner. If the debtor's right
                terminates, the priority of the security interest continues for a reasonable time.
         (6) Notwithstanding (4)(a) but otherwise subject to (4) & (5), a security interest in fixtures is subordinate to a
             construction mortgage recorded before the goods become fixtures if the goods become fixtures before
             the completion of the construction. To the extent that it is given to refinance a construction mortgage, a
             mortgage has this priority to the same extent as the construction mortgage.
         (7) In cases not within the preceding subsections, a security interest in fixtures is subordinate to the
             conflicting interest of an encumbrancer or owner of the related RE who is not the debtor.
         (8) Remedies When the secured party has priority over all owners and encumbrancers of the RE, the secured
             party may, on default, subject to the provisions of Part 5, remove the secured party's collateral from the
             RE but the secured party must reimburse any encumbrancer or owner of the RE who is not the debtor and
             who has not otherwise agreed for the cost of repair of any physical injury, but not for any diminution in
             value of the RE caused by the absence of the goods removed or by any necessity of replacing them. A
             person entitled to reimbursement may refuse permission to remove until the secured party gives adequate
             security for the performance of this obligation.

   7. Growing Crops. Depends on whether are dealing w/a lease or a land sale contract. In a lease,
      the crops are personal property upon maturation, so they belong to the tenant (if he planted
      them), even if they are not yet severed from the ground. In a land sale contract, the court
      indicates in pure dicta that the crops are RE (so they pass to the vendee upon the sale if the
      vendor planted them) unless they are severed from the ground. At least in a lease situation, do
      not need physical separation from the ground to become personal property (and therefore the
      property of the tenant, even after default). Ownership of grain in that context is determined by
      the condition of the grain, not by the act of cutting (which could be done at any time). Hecht
      v. Dettman, 7 N.W. 495, 10 N.W. 241 (on rehearing) (Iowa 1881).
   8. Article 9 covers growing crops 554.9105(h). Goods includes all things which are movable at
      the time the security interest attaches or which are fixtures ... Goods also includes standing
      timber which is to be cut and removed ... the unborn young of animals and growing crops.
B. Waste. Doctrine designed to protect the value of RE security from harm due to Mr’s acts or
   omissions. Is a tort and does not depend on any K provisions for recovery. Used to occur only
   when there was some type of physical damage to the RE, but now can recover for encumbrances
   (like tax liens), insurance lapse, etc. that threatens the SP’s security. Generally, however, a Mr’s
   failure to keep prior liens current is not waste (b/c SP can just redeem at sale and get full value of
   its security out of the land).
   1. Remedies—damages, injunction, and foreclosure (although foreclosure merely for waste is
      not very likely). Generally can recovery amount of damage done w/a cap of the amount of
      harm to security. Note also that b/c this judgment is based on a separate tort and not on a
      deficiency judgment, any recovery would not be subject to Iowa’s 2 year deficiency limit.
      a) measuring harm to security. Some will not award damages unless the SP is now
         undersecured. Some allow a ―reasonable‖ security cushion. Others allow the SP to be
         restored to its original loan to value ratio, while others allow restoration to loan to value
         ratio just before waste occurred. Others will allow restoration to loan to value ratio if all
         payments had been made and schedule was current at time of waste.

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  2. Anti-deficiency legislation. Ca is the only state to find that anti-deficiency legislation bars
     damages for waste. In addition, generally can be liable for waste even if the mortgage is non-
  3. Third party waste—Mr is not liable for damages unless he authorized the conduct. Me can
     seek damages from the 3rd party, however. If the Mr authorized the work and the 3rd party had
     no notice of the Me’s interest, no liability (e.g., construction worker the Mr hired). Some
     courts find the constructive notice that recording provides is sufficient knowledge, but the
     better view is that the 3rd party must have actual knowledge. When action is against 3rd party,
     do not have to show security was impaired and 3rd party is liable for the full amount of the
     damages, capped at the amount of the debt.
  4. Damages recovered for waste, whether from Mr or from 3rd party must be applied to the debt.
     Once debt is gone, Me cannot recover any further damages for waste (from any party).
  5. 626.101 Damages for injury to property. When RE has been sold on execution, the
     purchaser can, after the estate becomes absolute, recover damages for any injury to the
     property committed after the sale and before possession.
  6. 658.7 Purchaser at execution sale. The purchaser of lands or tenements at execution sale
     may have and maintain an action against any person for either of the causes above mentioned
     (658.1 allows treble damages for waste by a guardian, tenant for life or years, or tenant in
     common of RE), occurring or existing after such purchase; but this provision shall not be
     construed to forbid the person occupying the lands in the meantime from using them in the
     ordinary course of husbandry....
C. Termination of (farm) Tenancies. Have to have notice by September 1 or get another year. The
   tenancy is not effective, even if you give notice, however, until March 1 following. The notice
   requirement is pretty strict and can override a landlord’s forfeiture under his ILK.
  1. 562.5 Termination of farm tenancies. [all tenancies end on March 1] In the case of tenants
     occupying and cultivating farms, the notice must fix the termination of the tenancy to take
     place on March 1, except in cases of mere croppers, whose leases shall be held to expire when
     the crop is harvested; if the crop is corn, it shall not be later than December 1, unless
     otherwise agreed upon.
  2. 562.6 Agreement for termination. [if no notice of termination, auto renew unless tenant is in
     default]. If an agreement is made fixing the time of the termination of the tenancy, whether
     written or oral, the tenancy shall cease at the time agreed w/o notice. In the case of farm
     tenants, except mere croppers, occupying an acreage of 40 acres or more, the tenancy shall
     continue beyond the agreed term for the following crop year and otherwise upon the same
     terms and conditions as the original lease unless written notice for termination is served
     upon either party ... in the manner provided in .7, whereupon the tenancy shall terminate
     March 1 following (looks like any term that ends lease before March 1 is  unenforceable).
     However, the tenancy shall not continue b/c of absence of notice if there is a default in the
     performance of the existing rental agreement.
  3. 562.7 Notice—Written notice shall be served basically by September 1 by personal service,
     certified or regular mail.

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   4. Rights of tenant when landlord loses his rights. The tenant has the rights provided above
      irrespective of whether his landlord loses his rights to the land. Although the common law
      held that tenant could gain no greater rights than his landlord, the court found that 562
      overrides the common law in favor of granting security to farm tenants. As a result when
      landlord forfeits rights under ILK (or is foreclosed b/c of mortgage, I assume), the tenant
      nonetheless gets one more year of possession if he did not get notice (from someone) by
      September 1 terminating tenancy. There are two problems w/this case: 1) the purpose of the
      statute really is to prevent landlords from screwing tenants by evicting them after they have
      planted but before they have harvested, in this case there were no crops, the issue was over
      PIK payments; 2) the proper cause of action here should be against the landlord for breach of
      covenant of quiet enjoyment, but landlord should not be able to grant greater rights than he
      has, this leaves the situation ripe for fraud (e.g., vendee leases land to wife on sweatheart deal,
      like keeping ½ of PIK payments and paying little rent, then screws the vendor). Note that
      tenant still has to perform obligations under lease in favor of new owner. Gazner v. Pfab, 360
      N.W.2d 754 (Iowa 1985).
   5. Notice of forfeiture. If tenant is in possession, Vendor has to serve tenant w/notice of
      forfeiture for forfeiture to be effective. Tenant only has to act consistently as true owner would
      to be in possession (if ag land, do not have to touch the land in the winter, just have to do
      normal stuff, like fertilize when season is right, plant, etc.). Possession requires act of
      dominion. Must be sufficient to give 3rd party notice that someone is claiming a right to the
      property. If you do not give notice to tenant, the forfeiture is invalid even as against the
      vendee, so the vendee continues as owner (entitled to rents, etc.) b/c there was never a proper
      foreclosure. Jamison v. Knosby 423 N.W.2d 2 (Iowa 1988).
D. Homestead rights and marshalling. Generally, marshalling allows a Jr to require a Sr. to
   foreclose on his security in a certain order if it would result in more debts being paid and it would
   not harm the Sr. This could generally be applied to prevent a SP from releasing its liens in certain
   property when it results in harm to creditors Jr to the SP in other land. As to the homestead,
   however, Iowa law requires a reverse marshalling, so the SP may release its lien and satisfy its
   debt completely out of other land that has Jr creditors, b/c that is how the statute would require
   him to foreclose anyway.
   1. 561.1 Homestead Defined. Homestead must embrace the house used as a home by the owner,
      and, if the owner has 2 or more houses thus used, the owner may select which the owner will
      retain. It may contain one or more contiguous lots or tracts of land, w/the building and other
      appurtenances thereon, habitually and in good faith used as part of the same homestead.
   2. 561.2 Extent and value—unlimited value, w/ ½ acre in the city and 40 acres in the county.
   3. 561.3 Dwelling and appurtenances. It must not embrace more than one dwelling house, or
      any other buildings, except such as are properly thereto....
   4. 561.4 Selecting-Platting. Owner or spouse thereof, may select the homestead and cause it to
      be platted, but a failure to do so shall not render the same liable when it otherwise would not
      be, and a selection by the owner shall control... designate by legal description.... Shall be filed
      and recorded by the recorder of the proper county in the homestead book.

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5. 561.5 Platted by officer having execution. Officer who has execution must give written
   notice to owner to plat the homestead w/in 10 days from service of notice; if the owner does
   not plat w/in that 10 days, the sheriff must do it for him.
6. 561.6 court platting—creditor can petition court to judicially determine and plat the
   homestead, which judgment shall be recorded.
7. 561.13 Conveyance or encumbrance. A conveyance or encumbrance of, or K to convey or
   encumber the homestead, if the owner is married, is not valid unless and until the spouse of
   the owner executes the same or a like instrument, or a power of attorney for the execution of
   the same or a like instrument, and the instrument or power of attorney sets out the legal
   description of the homestead. However, when the homestead is conveyed or encumbered
   along w/or in addition to other RE, it is not necessary to particularly describe or set aside the
   tract of land constituting the homestead, whether the homestead is exclusively the subject of
   the K or not, but the K may be enforced as to RE other than the homestead at the option of the
   purchaser or encumbrancer....
8. 561.21(2) The homestead may be sold to satisfy debt created by written K by persons having
   power to convey (i.e., must be same as required in .13), expressly stipulating that homestead
   shall be liable for the debt, but reverse marshalling applies (must satisfy debt out of all other
   property in which you have security—do not have to resort to general execution—before can
   take homestead).
9. 561.22 Waiver If waive as to ag land, has to have a disclaimer in document.
10.Westfall. Procedure to sell. 1) offer non-homestead in 40 acre tracts, if not enough; 2) offer
   all non-homestead together, if not enough; 3) of homestead and non-homestead separately, if
   not enough; 4) offer whole parcel and only sell together if can get more for it and separate
   sales will not bring enough (note the FMV redemption rights for homestead also). The whole
   purpose of this, together w/FMV of homestead redemption is to allow the owner to redeem
   homestead w/o paying whole debt.
11.Execution Sales
   a) 588.1 Failure to make proper entries. (title clearing). All execution sales heretofore had
      wherein the execution officer has failed to endorse on the execution the day and hour when
      received ... or has failed to endorse an exact description of the land levied ... are legalized
      and effective as if had complied w/those requirements.
   b) 588.2 Homestead Selection—Deficiency. If sheriff does not provide the notice to plat or
      does not offer in proper Westfall order, sale is still valid.
12.Receiver—if mortgage contains proper language (see supra), then bank can get a receiver for
   homestead prior to sale if there is evidence indicating there will be a deficiency, only security
   is homestead (if non-homestead land, would have to sell that first b/c of reverse marshalling
   requirements), and satisfy statutory requirement of showing some type of danger to property.
   This can result in Mr having to pay rent on his homestead (which will likely be close to the
   amount of his mortgage payments). Wellman Savings v. Roth, 462 N.W.2d 697 (Iowa Ct.
   App. 1988).

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      13.Marshalling generally. Applies when the same debt is secured by mortgage in two or more
         properties and one is otherwise unencumbered and one has Jrs on it. Doctrine does not affect
         ability to foreclose but simply the order with which the Sr. can foreclose. Will not require any
         order that would harm the Sr.
         a) Must harm the Jr. to require it. When dealing w/homestead and the homestead is otherwise
            unencumbered, the Sr. can release lien in homestead and seek full recovery of debt out of
            non-homestead property, even when non-homestead property has Jrs on it b/c the Sr. would
            have had to foreclose on the non-homestead property first anyway (so Jr. is not harmed).
            This rule prevails even if the lien was released for the express purpose of screwing the Jr.
            b/c Jr. would have been screwed to the same degree by operation of statute, even if Sr. did
            not release his lien in the homestead. Gaumer v. Hartford-Carlisle Savings Bank, 451
            N.W.2d 497 (Iowa 1990).
      14.Home equity lines of credit—cannot foreclose on homestead if debt is $2k or less.
X. Competing Nonmortgage Claimants.
   A. Judgment Liens. There is a lien on all RE in the county where judgment entered from date
      entered (or other county from date transcribed). 624.23 Liens of judgments -- RE -- homesteads
      -- support judgments.
      1. Judgments in the appellate or district courts of this state, or in the circuit or district court of the US within the
         state, are liens upon the RE owned by the defendant at the time of such rendition, and also upon all the defendant
         may subsequently acquire, for 10 years from the date of the judgment.
      2. Put up or shut up letter. Judgment liens described in (1) do not remain a lien upon RE of , platted as a
         homestead pursuant to 561.4, unless execution is levied within thirty days of the time the defendant or the
         defendant's agent has served written demand on the owner of the judgment.... Written demand shall be served in
         any manner authorized for service of original notice under the IRCP. A copy of the written demand and proof of
         service of the written demand shall be recorded in the office of the county recorder of the county where the RE
         platted as a homestead is located.
      3. Judgment liens ... shall not attach to subsequently acquired RE owned by the  if the personal liability of the
         defendant on the judgment has been discharged in bankruptcy.
      4. In addition to other provisions relating to the attachment of liens, full faith and credit shall be afforded to liens
         arising for overdue support due on support judgments entered by a court or administrative agency of another state
         on RE in this state owned by the obligor, for the period of ten years from the date of the judgment.
         Notwithstanding any other provisions of law, including but not limited to the formatting of forms or requirement
         of signatures, the lien attaches on the date that a notice of interstate lien promulgated by the US secretary of
         health and human services is filed with the clerk of district court in the county where the RE is located.

         The lien shall apply only prospectively as of the date of attachment to all RE the obligor may subsequently
         acquire and does not retroactively apply to the chain of title for any RE that the obligor had disposed of prior to
         the date of attachment.

         623.24 When judgment lien attaches. When the RE lies in the county wherein the judgment issued from, (and
         was docketed in courthouse records) the lien shall attach from the date of such entry of judgment, but if in
         another it will not attach until an attested copy of the judgment is filed in the office of the clerk of the district
         court of the county in which the RE lies.
      5. Outline of judgment liens

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   a) Duration—up to 10 years. Lien expires at end of 10 years, and levy w/in the 10 years
      followed by a sale outside the10 years is valid, but purchaser only gets priority from date of
      levy (have execution lien still, but lose judgment lien). Have to 2 year limit for deficiency
      judgments on residential and ag mortgages.
   b) Attachment. Attach to RE in county where judgment issues when entered, in other counties
      when transcribed. Judgment of appellate courts are not liens until attested copy of
      judgment filed w/clerk of court in county where RE lies.
   c) after acquired property—if there is a lien in effect in the county where the RE is located, it
      will attach. Judgment liens then in existence attach to AAP in equal priority (foreclosure of
      one does not wipe out the others).
   d) different than execution lien—execution lien arises from date execution lien is levied
      against property (spear not a net). Execution can issue anytime w/in the 20 year life of the
      judgment (even though J.Lien only good for 10 years).
   e) Interests the J.Lien Reaches. Reaches leaseholds, joint tenancy interests, and equitable title
      from ILK (but not the vendor’s interest b/c that is personal property, have to execute to get
   f) non-recorded interests—if J.Lien does not appear of record, a BFP from debtor takes free
      of the interest. The recording statutes trump the common law shoes principle. , if
      J.Debtor’s interests are not of record, J.Lienholder must commence an equitable
      proceeding to have J.Debtor’s interest put of record, then the J.Lien (if of record) will
      provide notice b/c title will no longer appear to be in 3rd person (who is not subject to
      J.Lien) but will appear in J.Debtor (who is subject to J.Lien).
6. ILKs. A vendor’s interest in personal property, so a J.Creditor cannot reach the vendee’s
   interest. Could execute on the vendor’s interest in the payments, but vendee retains his rights.
   This result obtains even if vendee’s interest not of record for two reasons: 1) J.Creditor not a
   subsequent purchaser for value; 2) vendor is in possession, which is constructive notice just
   like recording. Cumming v. 1st Nat’l Bank Sicourney 202 N.W. 556 (Iowa 1925).
7. J.Lien on H.S. The exemption statute only exempts homestead from sale, it does not
   specifically exempt the homestead from the J.Lien. As a result, a creditor may argue that the
   lien attaches and that future purchasers take subject to the J.Lien. The court holds, however,
   that the J.Lien never attaches to the H.S. so can sell it free and clear (the proceeds are
   exempt if being held to buy new homestead and new homestead is exempt to the same extent
   as the old). Lamb v. Shays, 14 Iowa 567 (1863).
8. Purchase Money Mortgages. A purchase money mortgage, whether taken by vendor or 3rd
   party (as enabling loan) executed at the same time as the deed of purchase, or as part of one
   transaction, is Sr. to any other claim or lien that arises against or is created by the buyer-Mr
   prior to the Mr’s acquisition of title. The recording act can alther this, however, if the record
   does not make it appear that the interest is a purchase money interest.
   a) Record must make it appear that the interest is a purchase money interest. If J.lienholder
      executes and sells on interest and the Mr’s interest does not appear from the record to be a
      purchase money interest, the purchaser at sale will think that he is taking Sr. (b/c J.lien

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     would be Sr. to a regular subsequent mortgage). Thus, even when J.Creditor is purchaser at
     sale (through credit-bid) b/c the record did not reveal the purchase money nature of the
     interest, the purchase money Me does not have the priority he regularly would. Keefe v.
     Cropper, 194 N.W. 305 (Iowa 1923).
  b) Against mechanics liens. –Midland savings bank v. The Steward Group, LC, 533
     N.W.25 191 (Iowa 1995).
     (1) Construction mortgage lien. Mechanics liens generally relate back and get priority from
         first date of any mechanics’ lien, but they do not get priority over a construction
         mortgage lien that was recorded prior to the date the person claiming the lien began
         work after the construction mortgage lien was recorded.
        (a) this priority, however, only extends to funds granted to improve the land, it does not
            extend to funds given to acquire the land itself.
        (b) do not have to actually pay the money to the people providing the labor/materials,
            just have to give it to Mr for that purpose, so suppliers or workers dealing w/ new
            construction should get cash.
     (2) Purchase Money Status v. Mechanics’ Lien. Even if the purchase money mortgage is
         executed and recorded after the mechanics’ lienholder begins work, the purchase money
         mortgage has priority over the mechanics’ lien. Does not matter whether it is a vendor-
         purchase money mortgage or a 3rd party enabling purchase money mortgage. It does not,
         however, have priority as to costs and attorneys’ fees, it only covers the amount loaned
         to acquire the land (and to fund the improvements).
9. 654.11B Priority of recorded purchase money mortgage lien. The lien created by a
   recorded purchase money mortgage shall have priority over and is Sr. to preexisting
   judgments against the purchaser and any other right, title, interest, or lien arising either
   directly or indirectly through, or under the purchaser. A mortgage is a purchase money
   mortgage to the extent it is either:
  a) [seller] taken or retained by seller of RE to secure all or part of its price including all costs
     in connection w/the purchase.
  b) [enabling loan if the proceeds are indeed used to purchase the property]

     the 1st mortgage to be recorded has priority if there are more than two purchase money
     mortgages. The mortgage must contain a recital that it is a purchase money mortgage, but
     failure to include that recital only affects the Me’s rights under this section, is still a
     purchase money mortgage for other purposes.
10.Subordination agreements
  a) Subordination Agreements As A Two Stage Process Often, as part of an earnest money
     contract, the seller will agree to subordinate his or her purchase money mortgage to a
     potential construction loan. At this stage, the subordination agreement is executory. Once
     the construction loan is arranged, the seller will then usually execute a second
     subordination document whose terms are much more detailed and complete.

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         b) Actions To Enforce Executory Subordination Agreements Most courts refuse to
            enforce subordination agreements that are too vague and indefinite or that fail to define and
            minimize the risk that the subordination will impair or destroy the seller's security. An
            executory subordination agreement should at least spell out the following features of the
            loan gaining priority: the new lender or type of lender; an upper limit on the initial amount
            of the debt; and an upper limit on the interest rate. If the proceeds of the future mortgage
            loan will be used for improvements to the real estate, and the subordinating Me is relying
            on those improvements as security (as will ordinarily be the case), the subordination
            include a statement requiring use of the future loan proceeds for that purpose, and a
            reasonable description of the improvements.
         c) Actions To Reverse Priorities After Construction Loan Default When an action has
            been brought after a construction loan default, some courts find that the seller is estopped
            from raising that issue where there has been detrimental lender reliance.
         d) Conditional Subordination Where the subordination of seller's purchase money
            mortgage to a construction loan is expressly conditional upon application of the loan
            proceeds to construction costs, courts will protect the lender's priority only to the extent
            that disbursements are utilized for construction purposes. A few courts will even imply
            such a condition where the parties did not express it.
XI. Federal Preemption
   A. Soldiers' and sailors' civil relief act provides certain protections to servicemen Mrs w/respect
      to mortgages on RE executed prior to entrance on active duty.
      1. Statutes of imitation section 525 generally tolls all statutes of limitation that otherwise
         would run against a service person. This section has been held specifically applicable to
         statutory redemption periods after foreclosure.
      2. Section 590 stay during military service or within six months thereafter, a serviceman-debtor
         may petition (they have to take affirmative step) a court to suspend enforcement of any civil
         obligation which arose prior to military service. If a Mr is able to establish that military
         service had a material effect on his ability to pay the obligation, he may get an extension for a
         period as long as the time spent in service, plus the time yet to run on the obligation as of the
         date of discharge (gets time in service plus remaining time on obligation to makeup the
         amount missed).
      3. Installment land contracts a criminal offense to exercise any right or option such as
         termination of the contract, repossession of the land or rescission, except by judicial action,
         with respect to most contracts executed prior to vendee's entry into the military. As a practical
         matter, forfeiture, even if authorized by state law, is unavailable if the court believes the
         application of state law unfairly burdens the service person.
      4. Mortgages and deeds of trust after default in a mortgage loan executed prior to the Mr's
         entrance into military service, the Me can not sell, foreclose, or seize the mortgaged RE
         during the period of service plus three months thereafter without a court order. As a practical
         matter, power of sale foreclosure against a serviceman is unavailable.

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5. Section 526 limitation on mortgage interest rates limits interest to 6 percent during military
   service on obligations incurred before entering service, even though a higher rate was
   originally agreed upon. The interest rate is automatically reduced unless the Me establishes
   that military service has no material effect on the ability to pay in excess of 6 percent.
6. Acts of congress preempting state mortgage law
  a) Due-on-sale clauses § 341 of the depository institutions act of 1982 expressly preempts
     state law which limits the enforceability of due-on-sale clauses in mortgages, and expressly
     makes such clauses enforceable except in certain limited circumstances.
  b) Alternative mortgage instruments the alternative mortgage transaction parity act of 1982
     authorizes all types of state-chartered financial institutions to make mortgage loans of the
     same types approved by federal agencies for the analogous federally-chartered institutions.
  c) State usury laws congress preempted state usury laws for first mortgage residential
     loans. Under the preemption, there is no interest rate ceiling. All states had the option to
     avoid the federal preemption by enacting legislation prior to April 1, 1983 stating that they
     did not want the preemption to apply to loans made in that state. About a dozen states so
  d) Mortgage foreclosure procedures since 1981, a federal statute has HUD. In 1994 a
     similar act for single-family home mortgages was enacted.
  e) Preemption of state law by federal agency regulations when mortgage loans are made
     by institutions which are chartered or regulated by federal agencies, those institutions may
     be free to disregard state law, because (1) there are specific contrary federal regulations, or
     (2) there is a general federal preemption as a result of pervasive federal control.
  f) Cradle-to-grave preemption numerous cases state that the ots regulations "occupy the
     field" of federal savings and loan associations and regulate them "from cradle to grave."
     These cases, however, deal with internal corporate operations, relations with members,
     etc., And should not be taken to refer to all aspects of mortgage contracts.
  g) Express federal regulation preemption a 1994 regulation of ots states that the agency
     "hereby occupies the entire field of lending regulation for federal savings associations."
     However, the regulation seems to be less than absolute; it also states that state rules of
     contract and commercial law, real property law, homestead, tort law, and criminal law are
     not preempted if they affect the lending operations of federal S&Ls only incidentally, or if
     they are consistent with the standards of safety and soundness.
  h) Loans held by federal instrumentalities when a federal agency or instrumentality holds
     a mortgage loan which is in default, that agency's range of remedies is not necessarily
     limited by state law restrictions. The applicable law is clearly federal. However, the content
     of federal law may be determined by adoption of an existing state law rule.
     (1) The kimbell test in united states v. Kimbell foods, inc., The united states supreme
         court adopted the following test to be applied in determining whether the federal courts
         should adopt state law as the rule of decision: a. Is the nature of the federal program
         such that uniform federal law is required; b. Would adoption of state law frustrate

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            specific objectives of the federal program?; c. Would a uniform federal rule disrupt
            local commercial relationships predicated on state law?
        (2) Post-kimbell cases some post-kimbell decisions involving mortgage remedies have
            adopted the kimbell analysis and have applied state law as the rule of decision on the
            ground that no important federal interest would be frustrated by doing so. Others have
            discerned a sufficient federal interest and applied a federal common law rule. It is
            difficult to see a clear pattern in the cases.
        (3) Ability of secondary market agencies to preempt state law it is unclear whether the
            federal secondary market agencies have the regulatory power to preempt state mortgage
7.   28 U.S.C. 2410. Actions affecting property on which US has lien
     a) Under the conditions prescribed in this section and 28 U.S.C. 1444 for the protection of the U.S., the can
        name U.S. in (basically foreclosure proceedings), in any matter to—
        (1) to quiet title to,
        (2) to foreclose a mortgage or other lien upon,
        (3) to partition,
        (4) to condemn, or
        (5) of interpleader ...
            real or personal property on which the US has or claims a mortgage or other lien.
     b) The complaint or pleading shall set forth with particularity the nature of the interest or lien of the US. In
        actions or suits involving liens arising under the internal revenue laws, the complaint or pleading shall
        include the name and address of the taxpayer whose liability created the lien and, if a notice of the tax lien
        was filed, the identity of the internal revenue office which filed the notice, and the date and place such notice
        of lien was filed. In actions in the State courts service upon the US shall be made by serving the process of
        the court with a copy of the complaint upon the US attorney for the district in which the action is brought or
        upon an assistant US attorney or clerical employee designated by the US attorney in writing filed with the
        clerk of the court in which the action is brought and by sending copies of the process and complaint, by
        registered mail, or by certified mail, to the Attorney General of the US at Washington, District of Columbia.
        In such actions the US may appear and answer, plead or demur within 60 days after such service or such
        further time as the court may allow.
     c) A judgment or decree in such action or suit shall have the same effect respecting the discharge of the
        property from the mortgage or other lien held by the US as ... the local law of the place where the court is
        situated. However, an action to foreclose a mortgage or other lien, naming the US as a party under this
        section, must seek judicial sale. A sale to satisfy a lien inferior to one of the US shall be made subject to and
        without disturbing the lien of the US, unless the US consents that the property may be sold free of its lien ....
        Where a sale of RE is made to satisfy a lien prior to that of the US, the US shall have one year from the date
        of sale within which to redeem, except that with respect to a lien arising under the internal revenue laws the
        period shall be 120 days or the period allowable for redemption under State law, whichever is longer, and in
        any case in which, under 12 U.S.C. 1701k 38 U.S.C. 820(d), the right to redeem does not arise, there shall be
        no right of redemption. In any case where the debt owing the US is due, the US may ask, by way of
        affirmative relief, for the foreclosure of its own lien and where property is sold to satisfy a first lien held by
        the US, the US may bid at the sale such sum, not exceeding the amount of its claim with expenses of sale, as
        may be directed by the head (or his delegate) of the department or agency of the US which has charge of the

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      administration of the laws in respect to which the claim of the US arises. In any case where the US is a bidder
      at the judicial sale, it may credit the amount determined to be due it against the amount it bids at such sales.
   d) Amount US has to pay to redeem, shall be the sum of—
      (1) the actual amount paid by the purchaser at such sale (which, in the case of a purchaser who is the holder
         of the lien being foreclosed, shall include the amount credit-bid),
      (2) interest on the amount paid at 6 percent per annum from the date of such sale, and
      (3) the amount (if any) equal to the excess of (A) the expenses necessarily incurred in connection with such
         property, over (B) the income from such property plus (to the extent such property is used by the
         purchaser) a reasonable rental value of such property.
   e) When you hold a lien in property that the US also has a lien in, can ask US to waive the lien. If after
      appropriate investigation, it appears that the proceeds from the sale of the property would be insufficient to
      wholly or partly satisfy the lien of the US, or that the claim of the US has been satisfied or by lapse of time or
      otherwise has become unenforceable, such officer may issue a certificate releasing the property from such

8. 18 U.S.C. § 1823(e) FDIC monies—Agreements against interest of Corporation. No
   agreement that tends to diminish or defeat the interest of the Corporation in any asset acquired
   by it under this § (by receivership, etc.), either as security for a loan or by purchase or as
   receiver of any insured depository institution shall be valid against the corporation unless such
   a) is in writing
   b) was executed by the depository institution and any person claiming an adverse interest
      thereunder, including the obligor, contemporaneously w/the acquisition of the asset by the
      depository institution,
   c) was approved by the board of directors of the depository institution or its loan
      committee, which approval shall be reflected in the minutes of said board or committee,
   d) has been continuously, from the time of its execution, an official record of the depository
9. Serves a statute of frauds purpose as well as requiring proper/thoughtful proceedures before
   making agreements. The purpose of this provision is to prevent side, secrete oral agreements
   that harm the FDIC’s ability to liquidate assets of a failed bank. It also ensures that banks take
   proper procedures before they make these agreements. The protection of this statute passes to
   future purchasers of obligations the FDIC sells (a shelter principle). This statute preempts
   state law anytime talking about FDIC. Willow Tree v. Wagner, 453 N.W.2d 641 (Iowa
10.Federal Common Law Foreclosure—note that here we are dealing w/a loan made by a
   federal agency, not by the foreclosure of a loan made or held by a private entity that is simply
   federally chartered (also not dealing w/a federal agency who bought on the secondary market,
   not clear if either of those would be subject to state foreclosure laws). Will adopt state
   foreclosure procedures when they help further the purposes of the program/law establishing
   the lending agency. U.S. v. Ellis, 714 F.2d 953 (9th Cir. 1983).

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a) even when contract is a standard form, it could be rendered unenforceable by state law if
   court adopts state law as the federal common law.
b) if purpose of the program is debtor protection, then will likely enforce state laws that aid in
   protecting debtors (like redemption)
c) if purpose is the efficient/fast flow of money (like providing construction loans) will likely
   not enforce pro-debtor state laws.
d) just have to look at purposes of each.

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