Iowa's foreclosure laws have some unusual quirks. One is the ability to request a delay of sale. Make no mistake--requesting a delay of sale does nothing except delay the date of the sheriff's sale. Here is a brief overview of how delay of sale works:
A foreclosure petition is filed.
The borrower/mortgagor/defendant (will call this person the borrower from here on out) files a demand for delay of sale.
If the property is not the residence of the borrower, the sheriff's sale will be delayed two months from the date the foreclosure decree is entered.
If the property is the residence of the borrower, and the lender is seeking a deficiency judgment, the sheriff's sale will be delayed twelve months from the date the foreclosure decree is entered. A deficiency judgment is best explained with an example: The borrower owes $100,000 on the mortgage. The lender only gets $80,000 when it sells the property after the foreclosure. The $20,000 difference is the deficiency. If the lender is going to try to get that difference from the borrower, the lender is seeking a deficiency judgment.
If the property is the residence of the borrower, and the lender is NOT seeking a deficiency judgment, the sheriff's sale will be delayed six months from the date the foreclosure decree is entered.
Remember, these delay periods only apply IF the borrower demands a delay of sale.
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2 comments:
Hmm, this is an interesting topic and one that I'm not sure I totally agree with on the whole.
Are you saying that if someone borrows against a home, then defaults (foreclosed on), and then complains they want a delay that they can live in the house for a whole year more for FREE!?
At that point I truly feel sorry for the bank who is stuck holding the note and worrying about the property because this person wasn't responsible with their money.
Is this true or did I read the post wrong somehow?
Joshua: I don't know about for "free," since if the borrower has an option to delay the sale for a year, that means the lender is seeking a deficiency judgment against the borrower. But, otherwise, you read it absolutely correctly. Add that to the year or more it can take for the house to be sold after the sheriff's sale, and you can see why foreclosure properties sell for so little.
However, most lenders do not seek a deficency, so the delay is limited to only six months. This is ostensibly the purpose of the statute, to encourage lenders to forego any deficiency against the borrower. And honestly, the backlog for getting on the sheriff's sale schedule approaches six months in most counties anyway.
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