USA - IOWA Law and Practice Contributed by: David M Erickson, Robert J Douglas, Jr, Christopher S Talcott and Amy S Montgomery, Dentons Davis Brown
procedures of Iowa Code Chapter 654A prior to enforcing the default. While there is no legal requirement to provide a notice of default and opportunity to cure to a borrower under a mortgage encumbering commercial real estate, under Iowa Code Sec - tion 654.4B applying to all mortgages, a lender must provide at least a 14-day demand for the accelerated balance due under the mortgage loan prior to commencing a foreclosure action in order to qualify for an award of attorney fees in such action. Iowa law does not recognise a “power of sale” in a mortgage instrument purporting to grant the lender authority to conduct a private sale of the mortgaged property to satisfy the secured debt. Rather, all mortgages and deeds of trust must be foreclosed judicially under the procedures set forth in Iowa Code Chapter 654 or under statu - tory non-judicial procedures. In general, the judi - cial process involves a civil action to establish the validity of the debt and mortgage and the borrower’s default thereunder, and, if successful, will result in a decree of foreclosure issued by a judge that directs the county sheriff to conduct a public auction under statutory procedures to sell the mortgaged property in satisfaction of the debt. A lender may avoid the judicial procedures of Chapter 654 by pursuing the statutory non-judi - cial foreclosure procedures provided under Iowa Code Section 654.18 and Iowa Code Chapter 655A, but each alternative procedure requires the assent of the borrower to some degree in order to avoid the need for a judicial action. While certain moratoria were put in place dur - ing the COVID-19 pandemic, no such restric - tions are ongoing and there do not appear to
be any lingering pandemic effects on lenders’ decisions to enforce or forbear enforcement of security interests in the current market. Lender Security Interest A lender perfects its security interest against real estate by recording the mortgage in the county recorder’s office at the time of the loan closing. No further action is required to maintain the priority of the security interest as against other persons acquiring an interest in the real estate so long as the mortgage remains unsatisfied of record. When a foreclosure action is filed in dis - trict court, the clerk of court will enter the action in the clerk’s lis pendens index, and any person acquiring an interest in the property subsequent to such entry will be subject to the outcome of the foreclosure action, whether or not such per - son is joined as a party to the action. 3.7 Subordinating Existing Debt to Newly Created Debt In general, the priority of debt secured by a mortgage against real estate is determined based upon the time of recording the mortgage in the county recorder’s office. One exception to this rule occurs for mechanics’ liens under Iowa Code Chapter 572, which secure payment for material or labour furnished for the improve - ment, alteration or repair of real estate. If such material or labour were first furnished prior to the recording of the mortgage, the claimant may obtain a lien with priority ahead of the mortgage (as of the date the furnishing of material or labour was first commenced) so long as the claimant files its mechanic’s lien within 90 days after com - pletion of the furnishing of material or labour. A second exception may occur by voluntary agreement between the original mortgagee and the holder of a later-recorded mortgage to sub -
1187 CHAMBERS.COM
Powered by FlippingBook