Iowa Home Foreclosure Laws

Learn about the steps in an Iowa foreclosure.

If you're facing a foreclosure in Iowa, it’s essential to understand some of the basics, including:

  • the most common type of foreclosure procedure (judicial or nonjudicial) used in Iowa
  • what happens if you don't respond to the foreclosure
  • your rights and protections in the process, and
  • what happens afterward (like whether you’ll be liable for a deficiency judgment).

Below we have outlined some of the most important features of Iowa's foreclosure laws. Keep in mind that this is just a summary; we’ve included statute citations so you can get more details from the laws themselves. Keep in mind that statutes change, so checking them is always a good idea. How courts and agencies interpret and apply the law can also change. And some rules can even vary within a state. These are just some of the reasons to consider consulting a lawyer if you’re facing a foreclosure.

Iowa Foreclosures

Iowa foreclosures are usually judicial, which means a court handles the process.

Before Foreclosure

The foreclosing bank has to mail a notice of default and right to cure to you at least 30 days (45 days for agricultural properties) before filing the lawsuit to begin the foreclosure. (Iowa Code § 654.2D, Iowa Code § 654.2A).

Once the cure period ends, the bank will send a demand letter that gives you 14 days to pay off the loan, or it can’t qualify to get attorneys’ fees. You’ll also get a notice about counseling and mediation, if available. (Iowa Code § 654.4B).

Foreclosure

The bank officially begins the foreclosure by filing a lawsuit (a petition) in court. If you don’t respond formally with the court, the bank will win the case by default—an automatic win—and get a court judgment permitting it to sell the home. But if you file an answer, the bank can’t get a default judgment, and the case will go through the litigation process. If the bank eventually wins, the court orders a foreclosure sale. Then, notice of the sale is posted publicly and published twice in a newspaper, with the first publication at least four weeks before the sale happens. (Iowa Code § 626.75).

Reinstatement Rights

“Reinstating” is when the borrower catches up on the defaulted mortgage's missed payments, plus fees and costs, to stop a foreclosure. As noted earlier, for nonagricultural properties, the bank must give the borrower 30 days to cure the default before starting the foreclosure lawsuit. For agricultural properties, it’s 45 days. But Iowa law states that you don’t get the right to reinstate if the bank gave you:

  • a prior notice of the right to cure the default within one year of the present default (agricultural and nonagricultural properties) or
  • two prior notices of the right to cure the default at any time in the past (agricultural properties). (Iowa Code §§ 654.2A, 654.2D).

Your mortgage contract might also give you the right to reinstate the loan after the deadline given in the notice of the right to cure the default expires. To find out whether your mortgage gives you a more extensive right to reinstate, read your mortgage contract.

Even if the mortgage doesn’t provide you with a longer time to reinstate, the bank might nevertheless agree to let you reinstate.

Redemption Period

Some states allow the borrower to redeem the home within a specific period after a foreclosure. In Iowa, you can repurchase or “redeem” your home after losing it in a foreclosure, but only under certain circumstances and for a limited amount of time.

When You Can Get Your Home Back After a Judicial Foreclosure in Iowa

In Iowa, the redemption period after a judicial foreclosure is generally one year from the date of sale. (Iowa Code § 628.3). But, if the bank forgoes a deficiency judgment (discussed below) and the terms of the mortgage allow for it, the redemption period can be reduced to six months or three months depending on the circumstances, or 60 days if you permanently move out of (abandon) the home. (Iowa Code §§ 628.3, 628.26, 628.27).

You Can Redeem Your Home Before the Sale in a Foreclosure Without Redemption

If the foreclosure is without redemption, you’ll get a notice saying so along with the petition for foreclosure. (Iowa Code § 654.20). In this type of foreclosure, the sale takes place immediately after the court enters a judgment in the foreclosure case, unless you file a written demand to delay the sale. In most cases, if you file a written demand, the sale will be delayed for six months (or three months if the bank waives a deficiency judgment in the foreclosure lawsuit). If you don't file a written demand to delay the sale and if the property is your residence and a one- or two-family dwelling, then the bank can't get a deficiency judgment against you. (Iowa Code § 654.20).

This all means that, depending on the circumstances, there might be a downside to filing a demand for delay of sale—the bank could go after you for a deficiency judgment when it might not otherwise be able to. You might want to consider consulting with an Iowa attorney to discuss the pros and cons of asking for a delay of sale and risking a deficiency judgment if the bank doesn’t waive the deficiency judgment in the petition.

To be eligible for a six-month or three-month delay of sale, the home must be:

  • your residence
  • a one-family or two-family dwelling, and
  • not agricultural. (Iowa Code § 654.20, § 654.21).

If the property isn’t your residence, or is your residence but not a one-family or two-family dwelling, you can delay the sale for two months from when the court enters judgment. A deficiency judgment may be entered against you even if you don’t file a written demand to delay the sale in this situation. (Iowa Code § 654.20).

Deficiency Judgments Following Foreclosure

When the total mortgage debt exceeds the foreclosure sale price, the difference is called a "deficiency." Some states allow the foreclosing bank to seek a personal judgment, which is called a "deficiency judgment," against the borrower for this amount. Other states prohibit deficiency judgments with what are called anti-deficiency laws.

In Iowa, the foreclosing bank isn’t allowed to get a deficiency judgment in some situations, like when:

  • The mortgage contract reduces the redemption period and the bank waives a deficiency judgment in the foreclosure. (Iowa Code § 628.26).
  • The bank opts to foreclose without redemption and waives the right to get a deficiency judgment in the petition. (Iowa Code § 654.26).
  • The bank forecloses without redemption and doesn’t include a waiver of the deficiency in the lawsuit, but you don’t request a delay of the foreclosure sale (and the property is a one- or two-family primary residence). (Iowa Code § 654.26).

When to Seek Counsel

If you have questions about the foreclosure process in Iowa or want to learn about potential defenses to a foreclosure, consider talking to a foreclosure lawyer. If you can’t afford a lawyer, you might be eligible to get free help from a legal aid attorney. It’s also a good idea to make an appointment to speak to a (free) HUD-approved housing counselor, especially if you want to learn about different foreclosure avoidance options.

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