Foreclosure and Forfeiture Questions and Answers

I am worried that we might lose our house. We’re having trouble making payments. What can happen?
There are two basic ways that people buy a home: one is taking out a mortgage loan from a bank or mortgage company to pay the seller. Then you owe money to the bank or mortgage company. The other is buying a home on contract, where you pay the seller a monthly payment. It is important to know which one you have because it makes a difference to how someone can take back your home.
If you have a mortgage loan, the process to take back your home is called foreclosure. If you have a contract, the usual process is called a forfeiture. Before either process can start, you have to be in default on your loan. That means you have failed to comply with the agreement, usually having missed payments.
Mortgage loan and foreclosure

I have a mortgage loan. What should I do if I know I may miss a payment?
Call the mortgage lender as soon as you know you can't make a mortgage payment. Ask about their forbearance policies and other options like a repayment plan to "cure" the default over a period of time. All lenders will have programs and policies you can use to get your mortgage loan reinstated. Whether you qualify for these programs will depend on if you can make "catch up" payments beyond your regular monthly payment.
What happens if I can’t pay?
Before a lender can start a foreclosure, they have to give a notice of right to cure. That notice will say what you have failed to do, usually that you missed one or more payments. The notice has to say what you owe, including any late charges, and how you can make payments to cure the problem. If you miss payments, you are in default. This notice tells you how to cure the default and must include language required by the law. It gives you 30 days to cure the problem. If you can cure, then the mortgage continues as before. If you can’t, then the lender will likely move to a court action to foreclose your mortgage.
How does a foreclosure start?
The lender files a written petition in Iowa District Court in the county where the land is located. You must be given a copy of the petition. Most often, the county sheriff gives or serves you the papers. After getting the petition, you have twenty days to respond. You need to file an answer in the court file. You need to state any defenses that you have as to why your home should not be foreclosed. You can see a sample answer here. https://www.iowalegalaid.org/resource/facts-about-foreclosure-answer-example-linked A borrower who is served a foreclosure petition should contact a lawyer right away for legal advice on the foreclosure process and any defenses to the foreclosure.
After I file an answer, what happens?
If you file an answer to the foreclosure petition, then no judgment can be entered against you without further action.  You would receive notice of any new papers filed in the case through EDMS (Iowa’s Electronic Document Management System), unless you have been excused from electronic filing.  In most foreclosure cases, the lender will move for summary judgment if you file an answer and no settlement is reached.  A summary judgment motion is the lender’s request to have judgment entered without a trial.  If you have defenses, you must file a response explaining what defenses you have.  If you have no potential defenses, then summary judgment will be granted in favor of the lender.  If you are able to explain a potential defense to the foreclosure, then the case would proceed to trial.
After filing an answer, is there more I should do?
In most cases, you should file a demand for delay of sale. Most lenders say in the petition that they are electing foreclosure without redemption. What that means is that right after a judgment of foreclosure is entered, the lender can start the process to sell the property. If a lender elects foreclosure without redemption, you can delay the sale for three months after judgment by filing a demand for delay of sale. You can find a sample here. https://www.iowalegalaid.org/resource/facts-about-foreclosure-attachment-demand-for Most lenders waive a deficiency judgment. It will say this in the petition. What this means is that they won’t go after you for any money owing after the sale of the property. If they don’t waive a deficiency, then filing for a demand for delay of sale can allow them to go after the deficiency. You would also get six months to delay the sale after judgment. But they can usually only go after a deficiency for two years after the judgment is entered. These issues are complicated and you should contact an attorney for advice.
What happens if a foreclosure judgment is entered?
The court will decide how much is owed, including charges and attorney fees. Usually the court order says that the property will be sold to pay the amount owed. If the lender said it was electing foreclosure without redemption, the sale would take place right after judgment unless you filed a demand for delay of sale. If you filed a demand for delay of sale, you usually have three more months to live in your home. If the order allows for a deficiency judgment, you would have six months. A deficiency judgment allows the lender to come after you for money still owed after the sale of the house. Usually that deficiency judgment only lasts for 2 years.
Once the sale takes place, the court order usually says that you can be evicted without any further court orders. You would need to be out of your house after the sale.
The mortgage lender won't help me but I still want to keep my home. Will filing bankruptcy help?
A Chapter 13 bankruptcy might help you cure the delinquency on your home if your income is enough to make regular mortgage payments plus "cure" the delinquency over a period of three to five years. This is a longer period than what you would be allowed under one of the mortgage company's own programs but you'll also have attorney and trustee fees to pay in a Chapter 13 bankruptcy. But if you can't reach a good agreement to resolve the delinquency with the lender you should talk with a bankruptcy attorney about Chapter 13. It may be your last best option. And don't wait too long to discuss this option. Sometimes mortgage lenders will lead debtors along letting them think some agreement can be reached until just before a sheriff's sale. That might be too late.
I can't afford my house any longer. Can I just give it back to the lender?
Yes, under Iowa law there are alternatives to foreclosure if you don't want to keep the house. You can deed the house back to the lender voluntarily while the lender waives any right to collect a deficiency. A house can also be "surrendered" in a bankruptcy if there are other debts you need to discharge. Talk with an attorney about which of these options is best if you've decided to give up the house.

Seller and forfeiture

I have a contract where I’m buying my home from the seller and paying the seller monthly. What happens when I can’t pay?
These kind of contracts can be ended more quickly but the contract has to have the right language in it. The contract has to say that the contract can be forfeited if you have failed to comply with the agreement. If it doesn’t say this, then the seller has to end the agreement through foreclosure.
If the contract does say it can be forfeited, then the process is very quick. The seller has to give you a written notice that says you have 30 days to cure the problem. If the notice is proper and you don’t cure, then the contract is forfeited. That means that the seller automatically becomes the owner of the property again and is entitled to keep all of the payments you have made so far. If you cure the default within 30 days, then you can continue with the contract. You should contact a lawyer right away for legal advice if you get a notice of forfeiture.
What happens after a contract is forfeited?
If a seller properly forfeits the contract, the seller now owns the property and will be entitled to get possession of the property back. If the contract says that the relationship becomes one of landlord and tenant after the forfeiture, then the seller can file an eviction in court to get you out. This can happen very quickly. The seller can start an eviction by first serving you with a "three-day notice to quit." The three-day notice to quit tells you that unless you leave the property within three days, the seller will file an eviction action. The eviction action is handled in the same manner as an eviction from a rental property, with certain exceptions. See Evictions  
What if I don’t believe the contract should be forfeited?
A buyer who wants to contest a forfeiture of a land contract should contact a lawyer as soon as the buyer gets a written notice of forfeiture. This allows the lawyer to provide the best legal help to the buyer and may avoid a court action entirely.
A buyer who believes that the seller has incorrectly forfeited a land contract can file a paper with the court to raise the issue of ownership of the property (also known as "title"). If the buyer raises the issue of title, the Iowa District Court must handle the case, rather than Small Claims court. If the buyer can show that the land contract does not adequately specify a remedy of forfeiture, or that no default in the contract occurred, the buyer may be able to defeat the forfeiture action and regain ownership of the property. In a forfeiture for nonpayment of the monthly installments, the court may cancel the forfeiture if the buyer has paid a substantial part of the purchase price and brings the total amount of missed payments to the court hearing. However, this is not guaranteed.