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CalAttorney2, Lawyer
Category: Real Estate Law
Satisfied Customers: 10220
Experience:  I am a civil litigation attorney with experience representing HOAs, homeowners, businesses and others in real estate matters.
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I live in Iowa & have a Mortgage with ,My Bank .Several

Customer Question

I live in Iowa & have a Mortgage with ,My Bank .Several years ago I contacted my attorney & asked Him this question .Back in 1999 We needed Help Due to an estate problem ! So we had to get help !At the time because where we live they first said 120,000 No problem but No One in the area had a Comparable Home !!! So they put Our House & another home ,I had inherited on our 52,000 Mortgage. Several years later the property was destroyed & called My Attorney & asked if it was right for them to keep the house on Our Mortgage & taken95% of the insurance money due to the rental property being totally destroyed, He said back then it wasn't right,but not illegal? Now the House is been bulldozed & No longer belongs to Us Anyway !!! We are in a terrible position money wise. ,So we want to refinance Our home as Our remaining balance is only $12,000 ! But Our Credit score is bad due to my health on disability but My Husband work's for Our small town & picks up side jobs as much as He can !!!However some major problems arose & we maxed out our cards & a credit line !!!! My Question is Can they legally have a Mortgage on Our Ho!e with the property that is gone??? Have written to the bank President begging for Help,but no Answer back ??!!!Is that because, they Know the Mortgage is now illegal??!!! Help Me Please We Are Good People stuck in a bad situation??!!!
Submitted: 5 months ago.
Category: Real Estate Law
Expert:  WiseOwl58 replied 5 months ago.

No, under Iowa law it would not be legal for the bank to maintain a mortgage on the house that was destoyed and is no longer owned by you. Based on everything you have told me, it seems that the best move for you might be for you and your husband to file a personal bankruptcy, as a Chaper 7 liquidation, and then you can have the creditors and banks write off all of that bad debt and you will owe nothing and start fresh with a clean slate. It will also, believe it or not, improve your credit score and after a few years, the bankruptcy won't even show on your credit report, since the federal credit reporting act requires that the record of bankruptcy be removed after a certain number of years.

Again, I am sorry for your dilema. Please rate the answer 4 or 5 and close out the question. Good luck to you. I wish you all the best.

Expert:  WiseOwl58 replied 5 months ago.

Please rate 4 or 5 and close out the question. Good luck to you. I wish you all the best.

Expert:  WiseOwl58 replied 5 months ago.

Please rate 4 or 5 and close out the question. Good luck to you. I wish you all the best.

Expert:  WiseOwl58 replied 5 months ago.

Please rate 4 or 5 and close out the question. Good luck to you. I wish you all the best.

Expert:  WiseOwl58 replied 5 months ago.

Please rate 4 or 5 and close out the question. Good luck to you. I wish you all the best.

Customer: replied 4 months ago.
Thanks But We did that & just got it off Our Reports!!! We had a Lawyer tell Us the Same thing 10 years ago !!! The bank will pay !! Sorry but your advice is just not so in Iowa !! But good effort anyway !!!!!
Expert:  CalAttorney2 replied 4 months ago.

Dear Customer,

Thank you for using our forum. I am another expert on the forum, my name is ***** ***** I hope to assist you today.

While I do not have all of the details of your account or the transactions at issue, I am going to speculate that your home was "cross collateralized" in the mortgage transaction originally.

What this means is that the loans that you took out from the bank were made in such a way that if you defaulted on one, the bank still had the right to collateral against your other property. (This is not illegal, and it is commonly done, particularly with smaller banks and credit unions).

The issue that is harder for me to address here, and that you really are going to want to go over with the attorney that represented you in your bankruptcy case, is what exactly happened with the loan in your bankruptcy.

What often happens in bankruptcy matters where the debtors keep their primary residence is that they make what is called a "reaffirmation agreement" with the lender, so while the loan would be eligible for discharge (so you wouldn't owe it anymore), the tradeoff would be that the collateral (the home and property) would have to be liquidated (the mortgage is a secured loan).

I would speculate that as you still own your home (albeit with a mortgage still on it) that you entered into a reaffirmation agreement and that is why your loan survived the bankruptcy.

If you are still in financial distress, it can be worth filing for bankruptcy protection again. A good bankruptcy attorney can consult with you and go over your entire financial portfolio and what options are available to you. (Do this as a form of exploring your options and pre-bankruptcy planning, simply speaking to a bankruptcy attorney does not obligate you to file).

You can also try refinancing your current mortgage obligation. After reviewing your mortgage with the attorney that managed your prior bankruptcy (please confirm my speculations above, do not rely on this "general information" alone), I understand you are having issues based on low income and low credit scores, but there are often options out there particularly if you are willing to work with a loan broker or small lender (credit unions are particularly good options). (do not use "credit repair companies" or similar agencies, these are almost all fraudulent, please read the FTC articles about these companies prior to engaging any such company - almost everything they actually do you can do yourself, and many will simply take your money and do nothing (or even make your situation worse)).

But in response to your primary question "is my mortgage illegal" - I really doubt it.

Although again, this is "general information" and a local attorney can review all of your documents and see what, if any, contractual defenses you can raise to the specific documents, and what, if any, issues should have been raised in your bankruptcy (although I will caution you here - the statute of limitations is going to be an issue with any of these claims)

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