The Iowa Court of Appeals, in the earlier unpublished decision Freedom Financial Bank v Estate of Boesen and Boesen (2010), came to the same conclusion set forth in JP Morgan Chase v Hawkins (concluding that a purchase money mortgage signed by only one spouse is a valid enforceable encumbrance). However, in contrast, the Court of Appeals had previously ruled in Citimortgage, Inc. v. Danielson (2009) that a purchase money mortgage was invalid if not executed by both spouses (pursuant to the Iowa statutory homestead requirement). The hope was that the Iowa Supreme Court would take this issue under further review and offer some clarity, and it should be noted that the Supreme Court has in fact granted the application for further review in the Freedom Financial Bank v Estate of Boesen and Boesen case.
Not to be outdone with regards to this issue, the state legislature has proposed an amendment to the homestead statute (Iowa Code § 561.13) as documented in Senate File 400. The proposed amendment seeks to amend said Code section in pertinent part as follows:
Not to be outdone with regards to this issue, the state legislature has proposed an amendment to the homestead statute (Iowa Code § 561.13) as documented in Senate File 400. The proposed amendment seeks to amend said Code section in pertinent part as follows:
“3. A conveyance or encumbrance or a contract to convey or encumber the homestead is not invalid…if any of the following apply:
a. The nonsigning spouse’s interest is terminated by a decree of dissolution of marriage or other order of the court.
a. The nonsigning spouse’s interest is terminated by a decree of dissolution of marriage or other order of the court.
b. The nonsigning spouse’s right of recovery is barred by section 614.15 [Limitations of Actions].
c. The encumbrance is a purchase money mortgage…
d. A court sitting in equity enters a decree holding that invalidating the conveyance or encumbrance or a contract to convey or encumber the homestead would, directly or indirectly, unjustly enrich the nonsigning spouse…”
d. A court sitting in equity enters a decree holding that invalidating the conveyance or encumbrance or a contract to convey or encumber the homestead would, directly or indirectly, unjustly enrich the nonsigning spouse…”
This issue has become one of statewide debate following recently published news stories detailing the decision and underlying facts of Citimortgage, Inc. v. Danielson. Again, in this case, a purchase money mortgage was deemed invalid due to the fact that the mortgagor’s spouse did not join in the execution of the mortgage. Additionally, the mortgagor filed for bankruptcy thus leaving the lender with no other remedy and the mortgagor and his spouse remain in their home “free of charge”.
Often missing from the general public's discussion of this issue is the underlying purpose of this long standing requirement in the homestead statute. It should be noted that the statutory homestead joint spousal signature requirement exists for the purpose of protecting the ownership rights and interests of each spouse. Hence where one spouse attempts to convey or encumber the homestead, such attempt is deemed invalid without the other spouse’s consent thereto.
Stay tuned for updates on this issue as it continues to be addressed by the state judiciary and legislature, and make sure to contact the firm with any related questions or concerns.