On March 17, 2011, a news story was published about a couple from Ankeny, Iowa that won a lawsuit for which the consequence was they got to own their home for close to no money due to a fluke in an Iowa law regarding their mortgage. This story caused many phone calls to our office and between our office and other attorneys in the area. The couple, Matt and Jamie Danielson, won their case fair and square in court, however, many feel that there were some questionable circumstances in the case that have created controversy all over Iowa.

Many news sources picked this story up, including but not limited to the Des Moines Register, KCCI and WHO. In addition, this story was carried by the National Association of Chapter 13 Trustees. Each source reported the story slightly differently, and many new details have come out since the initial stories. As with any case, fact patterns are merely situational, but the following are the facts that we understand as of now:

• A 123-year-old Iowa law provides that a mortgage would be considered void if both spouses' signatures are not included on the mortgage document – this law was originally created to protect a spouse from the "evil intent" or foolishness of the other spouse.
• Matt Danielson signed a mortgage in 2007 for the couple's $278,000 Ankeny home.
• Jamie Danielson's signature was not included on the mortgage.
• After making only one payment on the home, Matt's business went under and the couple went to a bankruptcy attorney to discuss their options.
• The bankruptcy attorney noticed that Jamie had not signed the mortgage and took the case to court.

The more controversial facts are as follows:

• Prior to the Danielson transaction, Jamie Danielson's cousin, Troy Hudson, obtained the same result in 2006 when his wife did not sign their mortgage.
• The Hudson case was considered by the Iowa Supreme Court.
• Matt Danielson obtained the financing in question from First Horizon.
• Ironically, this was the company at which Hudson obtained financing from.
• Jamie's mother was the branch manager at the bank when both Hudson and Danielson obtained their financing.
• The mortgage signed by Matt Danielson recites Matt to be a single person.
• The application that Matt Danielson submitted for the mortgage has been questioned regarding his employment and income indicated on the application. More specifically, Matt listed an employer for which the address was 1234 Fifth Street. No such company or address has been found to be in existence.
• The original loan application did not disclose that Matt and Jamie owned other properties at that time, one of which they were living in.
• The application indicated that the couple was renting their home at the time.
• Jason Larson, the broker that finalized the couple's mortgage, lost his license after the deputy director at the Iowa Finance Authority filed a complaint against him for his role in the Danielson's mortgage.
• The Iowa attorney general is currently investigating the matter.

On March 22, the Iowa House approved a bill to address situations like the Danielsons'. Once again, Iowa law currently provides that a mortgage not signed by both spouses is void unless fraud can be proven. The new bill states that when fraud cannot be proven, but the non-signing spouse would benefit in a voiding the mortgage, the court will be able to look at whether the situation is fair and the court will have the ability to enforce the terms of the mortgage. This bill has already passed the Iowa Senate and is now going to Governor Branstad for consideration.

The new bill seems to address the public's concern regarding the gaming of the system and possible underhanded attempts by people to borrow money to buy a home and not have the loan secured by a mortgage. Most people are unaware that there are currently both State and Federal laws that protect lenders from unscrupulous borrowers. Concerns have been raised by different real estate attorneys as to what the ultimate outcome will be.

The key provision in the new law that is raising concerns is the part where it states the court has the ability to enforce the terms of the mortgage where the non-filing spouse would benefit from setting aside the mortgage. No one who we have visited with has been able to come up with a fact pattern where a non-signing spouse would not realize a benefit. Therefore, it seems that until the perfect set of facts arise, the door to a free home has been closed.