Foreclosure Law in Iowa
In Cherokee, Iowa, foreclosure is a legal process through which an entity which has issued a mortgage takes possession and/or ownership of the property that secured the mortgage, because the person who took out the mortgage has consistently failed to make payments on it. The property in question is usually a house.
When individuals are facing foreclosure, it usually involves a house. The bank will take the house with the intent of selling it at an auction, hoping to cover whatever's left on the mortgage, giving them at least a chance to break even on the loan.
In every U.S. state, including Iowa, a borrower has a right to a judicial sale of their foreclosed property. A judicial sale is simply an auction overseen by a court. The purpose of this is to make sure that the lender takes reasonable steps to sell the home for the highest possible price, and to ensure that the homeowner has an opportunity to bid on the house, if he or she is able. It is in everybody's interest for the bank to get the highest price possible for the house, even the borrower's. If the house fetches a higher price than what's left on the mortgage, the buyer can keep what's leftover. On the other hand, if it fetches less, the buyer might have to pay the deficiency.
In some states, original mortgages are known as "non-recourse" loans, making the above problem a non-issue. This basically means that once the mortgaged property is sold by the lender, the debt is discharged, even if the sale nets less than the remaining balance on the mortgage. The borrower will simply have to write this off as a loss. However, this usually does not apply to refinanced or second mortgages.
How to Possibly Avoid Foreclosure in Cherokee, Iowa
It's very important that you engage in continued communication with your bank. Lenders are surprisingly willing to make accommodations if it means they still get paid something, but in order to accommodate your situation, they have to know about it.
Throughout all this, you should remember one thing: the bank doesn't really want your house. After all, banks aren't real estate speculators, they're primarily money lenders. They stand to make a great deal of money if you are able to make your mortgage payments until it's paid off. They're likely to make much less if they're forced to sell your house.
It's possible that your lender is willing to negotiate a plan that results in temporarily-lower payments on your mortgage, especially if this means that they will be able to get some payments, instead of none at all.
Finally, there is the "short sale." Usually considered a last resort, a short sale results in the borrower losing their home, but discharges almost all of their remaining mortgage debt. If the house is worth far less than the balance of the mortgage, this might be a good option. In Iowa, when a house is sold in a short sale, the proceeds go to the lender. If it sells for less than the mortgage balance, whatever's leftover is forgiven. If it sells for more, the surplus goes to the homeowner.
Can a Cherokee, Iowa real estate attorney help?
If you are worried that your Cherokee, Iowa house is going to be foreclosed, and want to try and stop this, a good real estate lawyer can help.