Lender may pursue second foreclosure decree, as long as debt remains unsatisfied

Mollie Pawlosky Iowa Real Estate & Land Use Iowa Banking Law Dickinson Law Des Moines Iowa

Posted on 06/30/2015 at 07:00 AM by Mollie Pawlosky

In U.S. Bank, N.A. as Trustee in Trust for SASCO 2006-BC3 Trust Fund v. Jereme Lamb, the Iowa Court of Appeals affirmed the trial court's grant of a summary judgment in favor of U.S. Bank in a real estate mortgage foreclosure action. Cathy Callen and Jereme Lamb signed a promissory note for real property in 2006, which note was secured by a mortgage.  After a default, U.S. Bank filed a foreclosure action and obtained an in rem judgment in February 2010.  Two attempts to sell the property at sheriff's sale were both postponed, and each execution was returned unsatisfied. In March 2012, U.S. Bank filed a notice of rescission, pursuant to Iowa Code section 654.17. 

Section 654.17 allows a judgment creditor, prior to the recording of a sheriff’s deed or a bar of the statute of limitations, to rescind the foreclosure action.  Upon the filing of the notice of rescission, the mortgage loan is enforceable according to the original terms of the mortgage loan, and the rights of all persons with an interest in the property may be enforced as if the foreclosure had not been filed.  The filing of a rescission sets aside a foreclosure decree. In October 2013, U.S. Bank filed a second foreclosure action.  U.S. Bank sought summary judgment, which Callen resisted.  When the district court granted summary judgment, Callen appealed, claiming summary judgment was improper because Iowa Code section 615.1 barred U.S. Bank from further relief when U.S. Bank failed to enforce its first judgment or file its notice of rescission within two years of the first foreclosure decree. Iowa Code section 615.1 states that after the expiration of a period of two years from the date of entry of judgment, the judgment entered in an action to foreclose a real estate mortgage is null and void, all liens are extinguished, and no execution can issue, except as a setoff or counterclaim. U.S. Bank disputed the application of section 615.1, but asserted that even if a statute of limitation barred enforcement of the February 2010 judgment lien, U.S. Bank could still enforce the mortgage and obtain a new judgment. The Court of Appeals began and ended its analysis by recognizing that U.S. Bank did not lose its mortgage by taking a judgment; the mortgage was a lien until the secured debt was paid.  Thus, the appellate court did not need to decide whether section 615.1 extinguished the judgment lien arising from the suit, because the mortgage remained for U.S. Bank to foreclose.  Moreover, the court did not need to determine whether section 654.17 had been satisfied; whether U.S. Bank timely rescinded its judgment did not matter, because U.S. Bank could still enforce the mortgage itself.  Thus, U.S. Bank was entitled to its foreclosure, and the Court of Appeals upheld the trial court’s entry of a summary judgment. U.S. Bank v. Lamb demonstrates that even in what appear to be unusual circumstances—like a bank pursuing a second foreclosure of the same mortgage—foreclosure legal analysis is often guided by mortgage fundamentals.  U.S. Bank still had its mortgage, and both Code sections at issue applied to judgments.  Thus, when analyzing foreclosure questions, remember the basics of real estate mortgages, which will often give insight, or even a simple solution, to what appears to be an unusual problem.

For questions regarding U.S. Bank v. Lamb or regarding estate mortgage foreclosure, contact Mollie Pawlosky.

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