Free House: Foreclosure Glitch in Homestead States Could Mean The House Is All Yours

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Free house, anyone? Or how to save on real estate big time. You’ve got to read this story by my colleague Sheree Curry and chime in — hope I get it straight: a couple in Iowa made one payment on their $278,000 home and then went to see a bankruptcy attorney about letting the house go after just one payment. The guy lost his business and could no longer afford it. Matt and Jamie Rae Danielson were in a pickle, a big pickle. First of all, they had just lost a larger home and property, and I am not clear on how they managed to get this second, smaller home financed after that you-know-what show, but they did. And Jamie even worked for a mortgage broker, First Horizon. Well, that bankruptcy attorney they went to see ended up being their best friend ever. He found a loophole in the Iowa homestead laws. Seems their mortgage with CitiMortgage was invalid or void without the signature of both spouses, not merely void-able by the spouse who did not sign. In other words, both spouses must sign a mortgage in order for it to be valid. But Jamie never signed it. Matt met the mortgage broker at a Food Court and signed without her because he could not reach her. I guess no one caught it and — now they own a home.

I sent Sheree an email with some questions, but here’s my BIG question: could this happen here in Texas with our Homestead laws?

Let’s find out!

Reader Interactions

Comments

  1. Scott Barretto says

    That doesn't make sense at all. I am sure the mortgage company has some recourse to get its money back.

  2. Scott Barretto says

    That doesn't make sense at all. I am sure the mortgage company has some recourse to get its money back.

  3. Lindsey Townsend says

    I agree, there is something missing here. If both partners did not sign and it was not ever considered a valid mortgage, I would think it would revert back to the bank. Don't see how they would own it.

  4. Lindsey Townsend says

    I agree, there is something missing here. If both partners did not sign and it was not ever considered a valid mortgage, I would think it would revert back to the bank. Don't see how they would own it.

  5. Jeff says

    I believe it can happen. Texas is a community property state, and a non-borrowing spouse's homestead rights are superior to a mortgage lien, unless the non-borrowing spouse signs the deed of trust acknowledging the debt.

  6. Jeff says

    I believe it can happen. Texas is a community property state, and a non-borrowing spouse's homestead rights are superior to a mortgage lien, unless the non-borrowing spouse signs the deed of trust acknowledging the debt.

  7. Charles Nuber says

    Well there you go again – mmmmmm – could it happen in Texas is an interesting concept. I would think that to be a Real Estate Attorney question for on that really understands todays laws. From what you showed it was a glitch in teh loan laws not so much homestead. The loop hole is probably in the "Cookie Cutter" loan documents that the banks use for most states. They do not comply with state laws at times – I call then problematic – Like that word problematic – it fits many many things. =)
    Chow
    Charles

  8. Charles Nuber says

    Well there you go again – mmmmmm – could it happen in Texas is an interesting concept. I would think that to be a Real Estate Attorney question for on that really understands todays laws. From what you showed it was a glitch in teh loan laws not so much homestead. The loop hole is probably in the "Cookie Cutter" loan documents that the banks use for most states. They do not comply with state laws at times – I call then problematic – Like that word problematic – it fits many many things. =)
    Chow
    Charles

  9. Tax Payer says

    No matter what the case, the intent is all wrong. We all fall on hard times, but it hurts everyone if a technical error allows someone to walk away with a home free and clear after one payment. There is no such thing a free and clear….someone has to pay. You think it is the bank who absorbs the cost cost, but who is really paying for it….we are. The taxpayers! Nothing is free, everything has a cost.

  10. Tax Payer says

    No matter what the case, the intent is all wrong. We all fall on hard times, but it hurts everyone if a technical error allows someone to walk away with a home free and clear after one payment. There is no such thing a free and clear….someone has to pay. You think it is the bank who absorbs the cost cost, but who is really paying for it….we are. The taxpayers! Nothing is free, everything has a cost.