Iowa Loophole Voids Mortgage Gives Couple a Free House

[CoffeeCat]

Source: Des Moines Register

Talk about sticking one to the bank.

Matt and Jamie Danielson own their $278,000 Ankeny home outright, and paid almost nothing for it.

A hasty home-loan approval and a 123-year-old law that requires mortgages be signed by both spouses helped the couple fight foreclosure all the way to the Iowa Court of Appeals. They won, and though they made only one payment to lender Citimortgage, the mortgage is now void and they get to keep the home.

"It's dumb luck that we're in this house," said Matt Danielson, 33.

The banking lobby is chagrined. The Iowa Bankers Association is backing legislation that would change the law so this never happens again.




Read more: http://www.desmoinesregister.com/article/20110317/BUSINESS/103170343/Iowa-loophole-voids-mortgage-gives-couple-a-free-house-?odyssey=tab|topnews|text|Frontpage

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I'm sure there will be a wide range of reactions to this article. My reaction is pure joy for
these people. Day after day--we hear horror stories about the banks screwing over people and
destroying their lives. I am happy for this couple. I don't care if they knew what they
were doing and planned it all--or if this really was a loophole that was later discovered by
their lawyer. I'm relieved that the little guy won--for once.

[Oasis_]

1. This isn't a "win" for the little guy at all

It will simply provide more ammunition for those that support legislation making it much easier to foreclose on delinquent homeowners---citing this case as an example.

The couple made one payment. That's it. There's no reason they should have been permitted to keep the home employing any objective standard of what constitutes financial responsibility.

People that are getting their loans modified and attempting in good faith to adhere to the conditions of their loans I'd term a victory for the little guy.

Not this.

Oasis

[lonestarnot]

2. Jealous much?

[Oasis_]

4. Not at all

I'm paying off my thirty year loan in monthly increments per the terms of my home loan. I understand many people have had significant problems meeting their terms, and loan modification has been a useful tool in keeping families in their homes while playing a major part in stabilizing the market. I have zero issue with the loan modification program.

This couple in the article represent the very essence of freeloading and freeloaders, and now own a home via exploiting a loophole--despite making just one single payment.

The law will certainly come under intense scrutiny and will undoubtedly be amended. It will, however, give momentum to those who would seek to further restrict homeowner redress of legitimate abuses.

Oasis

[xxqqqzme]

8. "the very essence of freeloading and freeloaders..."

Know them personally, do you?

Exploited a loophole did they? Well call out the armed guards! That must be the first time in the history of financial transactions that someone exploited a loophole. What only corporation and TBTF banks are allowed to exploit loopholes? GMFB

What will they think of next?

"...Danielson's home-building business went under that summer, and the family made one loan payment. Anticipating foreclosure, they rented another home and moved half their belongings there.

"We had our bags packed," Jamie Danielson, 29, said. "We know if you can't pay, you can't stay..."

Yep, you're right! Sure sounds like freeloaders to me!

[girl gone mad]

3. It's a total win for the little guy.

Laws are for bankers, too.

[sweetloukillbot]

5. As much as I like seeing the bank eat it...

It still feels like theft - they only made one payment on a $273,000 house. In Iowa. When my wife and I looked at moving back to the Quad Cities area three years ago to be near her family, we were looking at a restored 4 bedroom Victorian w/ finished basement that was only $80K. I can't imagine a quarter mil house although I don't know where exactly that town is.

[Oasis_]

9. I wouldn't term it theft

The couple simply used a state law to their benefit. My issue is with the OP declaration. This isn't a good thing. It's the law of unintended consequences in full view. It will be amended and will be employed to restrict homeowner rights against the lenders.

Oasis

[Name removed]

14. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Tansy_Gold]

25. +1 and

:spray:

[sweetloukillbot]

27. I don't need to do any looking - I lived thru it.

But at the same time, while I spent the better part of a year trying to get them to work with me and arrange some sort of modification, or some sort of refinancing, I made no illusions that when I stopped paying my bill due to losing my job that eventually I would lose the house.
I'm pissed at the bank for not working with us to modify the loan, for avoiding our phone calls, for a million things, but I never felt I should keep the house. I entered a contract that I wasn't able to complete, due to unforseen circumstances. When I packed up my stuff and moved into a rental three days before auction date, I never thought I'd see the house anymore - and was surprised at that point to find out the bank had decided not to foreclose and would offer a modification. Would've been nice to know beforehand, coulda stayed in there for a few more months. Not that it mattered much, the modification would've gotten us a great fixed rate, and would have lowered the payment a whopping $100 by adding $40K onto the price thanks to capitalizing the missed payments.
I got my feeling of karma a year later when we had a $50,000 cash offer for the house, which we payed 200K for, and the band decided not to accept that offer and auctioned it for $25K.

And reading further about the original subject, it sound's like they felt the same way as I did, they just got lucky.

[CoffeeCat]

11. Ankeny is a town of about 35,000...

...it's a suburb about 10 minutes from downtown Des Moines. It's all suburb--strip malls, and nice neighborhoods.

$250,000 buys a lot of house in this area, although $210,000 is the avg price of a home.

The house in question is very nice, but pretty typical for this area.

[CoffeeCat]

7. It's a win because they only made one payment...

I am happy that finally--a homeowner was able to turn the tables.

The law is the law. They simply used the law to their advantage. In my opinion, this is the
exact opposite of the raping and pillaging that has been happening to the middle class.

It just warms my heart to see a homeowner win against the banks.

I don't see how this case could be used to foreclose on others. This is about a law requiring that both spouses
sign for a mortgage. This has nothing to do with any foreclosure process, and I can't imagine how any bank
could use this situation to speed up a foreclosure.

[plumbob]

16. The bank did not do their paperwork correctly. They did not follow the law.

Why should they benefit? You will notice that the bank solution is not to start following the law, but to change it to allow sloppy work on the part of the bank.

Don't feel too sorry for the banks; they've just recorded record profits and big bonuses all the way around.

[DainBramaged]

30. So, are you blaming homeowners for the housing crisis?

:dilemma:

[Rex]

6. Well I guess I would say they are one of the first winners on our

side of the Class War.

Our side - 1
Bazillionares - Bazillions.

[unblock]

10. by any reasonable standard, they committed fraud and theft

ok, the banks didn't do their homework on the law and lent money out without getting the proper signatures.

but this couple position is that the bank handed them a ton of money in exchange for a worthless note legally entitling the bank to absolutely nothing in return?

again, no great sympathy for the bank, but i don't see why the couple should get a windfall here.

[Oasis_]

12. The banks asked for this kind of stuff..

When they pushed the origination of NINA (no income no assets), Stated, Limited income docs, Pay Option Arm (Neg Am loan) as well as the plethora of Interest only loans options.

Freddie and Fannie played a HUGE role as well, and probably contributed to the mess more than any other, as it degenerated into a lending free-for-all where even the worst of the worst paper was considered ok.

It doesn't excuse this, however. Two wrongs and all.

Oasis

[Tansy_Gold]

13. Fraud and theft are two terms that imply illegality

What they did was apparently perfectly legal. good on them for doing it.


remember how a couple of weeks or days or hours ago we were all up in arms about those who are jealous of the unionized workers and want to bring everyone down to the non-unionized level? We need to look at this family and say, YESSSS! they did it! Now is not the time to be jealous of their success but to find a way for that -- or something reasonably close to it -- to happen to everyone.



TG, TT

[Oasis_]

17. I don't think so

"We need to look at this family and say, YESSSS! they did it! Now is not the time to be jealous of their success but to find a way for that -- or something reasonably close to it -- to happen to everyone."
________________________________________________________________________________________________________

Everyone should default on their loan after one payment? Is this the example we wish to set for our children? This is how we choose to define "success"?

Not me, thanks.

I'll teach mine to honor agreements as well as their word.

This is NOT success. This is receiving something of value for almost nothing.

The homeowners should be ashamed of their "success".

Oasis

[plumbob]

21. My dad's business partner ran off with all the money in 1958.

He disappeared; possible in '58, not like now.

Dad could have declared bankruptcy and paid something on the cratered business, but he insisted on paying every dime to that large bank, even though:

We lost our house and had to live in a 14'x32' two room structure with tar paper on the outside (no sheathing underneath).
We lost our truck and car and had to borrow a 20 year old Studebaker from my grandparents to drive.
No air conditioning, even after the house was better finished. When I graduated college in 1975, my parents bought their first evaporative cooler.
We never had a vacation of any sort, ever.
We could get 2 pairs of pants, 5 shirts, 7 pair of underwear, 7 pairs of socks, and 1 pair of shoes for school every year. Wear last year's as play clothes.
No haircuts in the summer.
Only meat in the house from 1958-1971 when I graduated high school were the chickens we raised ourself. I had my first steak at a college event in 1972 at age 20.
We ate only vegetables we grew.
We could not go to the movies, participate in any school activity that required money, or have presents at Christmas, our birthdays, or any other holiday.

You know what I learned? Anyone who rather give all their money to a large, profitable bank rather than take care of their family suffers from some disorder. It's cruel, and it shortened both my parents' lives - mother dead at 52 of heart disease, dad dead at 62 of cancer. Who can afford healthcare?

Take legal remedies and take care of your family. The banks will be just fine. Really.

[pengillian101]

26. Wow.

That is something to have to live through. :-( Too bad your folks didn't think of putting family first.


Seems to me like you are the better informed and learned a good lesson for it. Take care :-)

[unblock]

19. it's not at all clear that what they did was legal.

my point wasn't to get into a question of whether or not it *is* legal or not, but rather, whether or not it is right and should be permitted.

but now that we're here, i'd say that just because the bank's foreclosure action wasn't successful is not remotely an argument that what the couple did was legal. they took money in exchange for NOTHING OF VALUE. ordinarily, the bank wouldn't even question it, a successful foreclosure would satisfy them and they would see no need to press for criminal or civil action.

however, now that the bank has been essentially cheated (i'll use a non-legal term here just in case), i rather expect them to seek action in a civil court and/or refer it for criminal charges. my guess is that the couple legally owes the money, it's just that the bank can't foreclose on the house.


AT BEST, the couple is playing "gotcha capitalism", which is basically saying to the other guy, ha, ha, we found a loophole or legal fine print and we win and you lose, way more than you expected, ha ha! that's not a basis for a reasonable system and a reasonable allocation of resources. i don't like it when banks play that game, e.g., surprise fees or jacking up interest rates or any of the other crap they pulled that was only recently outlawed -- and is now merely being replaced with other tricks. so i'm not going to defend it when some homeowners do the same thing.

it's wrong, no matter who does it.

[plumbob]

18. The bank attempted fraud. They tried to enforce an illegal contract.

Who would you expect to know more about the law? The banks or people who borrow?

It's nonfeasance on the part of the bank, and they ought to pay for it.

Finally, ONE did. ONCE.

[unblock]

20. making a claim and then showing all the necessary paperwork is not remotely fraud.

if the paperwork turns out to be insufficient to make a valid claim, the claim is denied. that's called an unsuccessful claim, not fraud.

had they put in the missing signature themselves, THAT would have been fraud.

i'm quite certain that banks have committed fraud in other cases, but in this one, it appears that they presented the relevant paperwork exactly as they it had been prepared and there's no fraud involved on their part.

if the couple knew that the mortgage would be invalid if one of the spouses didn't sign it (i rather suspect they only learned this well after the fact), THAT would have been fraud. they represented to the bank that they would repay the loan and allow their house to be used as collateral. they didn't execute the documents properly BUT TOOK THE MONEY ANYWAY. that's fraud and/or theft.

did you know that if a bank ERRONEOUSLY posts money to your account and you take it and spend it, THAT'S THEFT ALSO?
just because money comes your way doesn't mean it's legally yours.

[Tansy_Gold]

24. the first home my husband and I bought, in 1970

right after he got out of the navy, was a 12 x 60 mobile home. Brand new, it cost $4,995 and after paying off the borrowed $500 down payment, our monthly payments were $81.64.

A week after I proudly made the first payment, I received something in the mail from the bank. It was our original promissory note with a red rubber stamp on the front of it: PAID IN FULL. I had no idea what that meant exactly, and thought it had something to do with maybe the down payment being process or something. I put the paper in my little box of important papers and promptly forgot it. A few weeks later, before I'd made the second payment on the house, I got a frantic call from a lady at the bank asking me if I had that paper. Well, sure, I told her I did. And when she asked me to bring it back to the bank because the bank examiners were there and that note was missing and if I didn't bring it back she'd be in big trouble, well, I hopped in the car and took it back to her.

Had I not done so, the bank could have taken no action against us. I knew this then, even though I didn't know it when they originally sent it to me. That "PAID IN FULL" stamp was essentially a receipt showing that somehow or other, we had paid off that loan. We didn't need to show a cancelled check or anything else: That was THE receipt.

I still took it back. And I've really never regretted it. We were ultimately treated fairly by the banks in that small Indiana town for the next 15 years or so while we lived there.

But if that happened to me today, I would not hesitate to thumb my nose at them and say sorry Charlie.

So one family screws the banks by finding a loophole? Good for them. Honor and integrity don't put food on the table. The moral high road often leads straight to the poorhouse. As long as the oligarchs are in charge, I say any victory against them is a moral victory to be cheered and celebrated.

But then I'm just your friendly neighborhood socialist, aka



Tansy Gold

[Duer 157099]

15. It's the penalty the bank pays for being careless

I'm for that. We ALL suffer enormous penalties when we are careless, pay your bill a day late, overdraft fees, etc.

It's simply the penalty they pay for not paying attention.

[plumbob]

22. Well said!

PEOPLE cannot catch a break. Why should a corporation?

[unblock]

23. i don't mind bank taking a bit of a hit for their carelessness, but

i don't see the value in letting the homeowner have 100% of the mortgage free and clear.

a reasonable remedy would be for the the court to reinstate a mortgage as the parties originally intended, but have the bank pay for court costs and perhaps the homeowner's legal fees. but there's really no excuse for the mortgage not to be fixed AS BOTH PARTIES CLEARLY INTENDED.

[eilen]

28. why do we hold individuals to high standards of

what we consider "fairness" but not financial institutions, government and corporations?

Would we feel different if the family was financially destroyed d/t health problems like cancer instead of the economic collapse? What if they had paid a large amount on their down payment (40%) and made one payment-- would that make people feel better?

This time the little guy won. We should all be so lucky.

When I think of the lives destroyed by that horrible HAMP program, ---and in the Gulf region too (imagine how upside down people are there in a virtual Love Canal environment)-- I can't cheer loud enough for this couple.

[bullwinkle428]

29. UPDATE : Jamie Danielson involved in similar case involving relative's mortgage

back in 2006.

I just heard a local news report on the radio that mentioned this...no further details. It does make me a little more suspicious of their actions.

[Dr. Strange]

33. More info:

http://www.citizen-times.com/article/D2/20110318/NEWS10/103180345/0/NEWS02/Couple-s-earlier-foreclosures-questioned?odyssey=nav

[taught_me_patience]

31. This is sickening

These guys are fraudsters and deserve nothing. This will make it harder for the legitimate cases to modify their loans.

[FLSurfer]

32. I wonder if the bank can issue the homeowners

a 1099. or whatever the relevant IRS form, and cause the homeowners to pay tax on the amount of money not repayed.
Forcing the homeowners to claim this money as income.

[Cal Carpenter]

34. I'm with you

Seeing how easily many people defend the banking industry and the ruling class makes me sick. Especially because they often don't grasp that that is what they are doing. It's not about the rule of law or some noble concept. The banks steal from the people for the benefit of their executives and major shareholders. It's a bad bad system.

How many BILLIONS of dollars do owners and shareholders get in profits and tax breaks and loopholes? Off the backs of the working class. While people get kicked out of their homes for circumstances that are ultimately out of their control, people are homeless and living in cars because maybe, someday, some bank will make a few grand off of a house so it sits there empty and decrepit.

Fuck that noise and anyone who legitimizes and defends it.

Fuck the banks. The economic system under which we live is unjust, unfair, impossible for most to succeed in, and it is not natural, inevitable, or right.

[Nye Bevan]

35. They played the system! They used a loophole! It's not morally right!

Because the banks *never* use the system, exploit loopholes, or do anything morally questionable.

Sauce for the goose......