Mortgages and Foreclosure
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MORTGAGES & FORECLOSURE
There are a number of methods by which a buyer can finance the purchase of real estate. If the buyer has the funds on hand the buyer can pay cash. If the buyer does not have sufficient resources to pay the purchase price in full the buyer often borrows money from a financial institution. In return for the loan from the financial institution the buyer gives that financial institution a mortgage. The mortgage is signed at the same time as the promissory note that provides how the borrowed money must be repaid. The borrower typically pays the mortgage in monthly installments that include both interest and principal payments. If the buyer/borrower fails to make the required payments, the mortgagee (the lender), can foreclose the mortgage on the property. In most foreclosure actions, the lender declares the entire debt to be payable immediately. If it is not repaid the lender can file a foreclosure action in the Iowa District Court. If the lender is successful, a judgment is entered against the buyer and the land is sold at a sheriff’s sale to satisfy the judgment.
A foreclosure action in the Iowa District Court can be controlled by both federal and state laws. The terms of the mortgage itself can also affect the mortgage procedure. If a foreclosure is threatened, a borrower should consult with an experienced real estate attorney to protect the buyer’s interest in the property.
The parties can also agree to buy and sell the property under an installment real estate contract. This is a private contract between the seller and the buyer. No lender is involved in this procedure. In order to follow this procedure, the parties will enter into a written agreement establishing the purchase price and how that price will be paid. If the buyer fails to meet all of its obligations under the real estate contract the seller can choose to either foreclose the contract or forfeit it. A foreclosure of real estate contract works like a foreclosure of a mortgage described above. In the forfeiture of a contract, the buyer receives a notice from the seller. If the required corrective actions are not taken, the title to the real estate reverts to the seller.