Iowa loophole voids mortgage

April 21, 2011 6:36 AM

Matt and Jamie Danielson, with the aid of their bankruptcy attorney, were able to use a little known loophole in the Iowa law to void their mortgage and own their house outright after making just one payment. However, further investigation has uncovered some unsavory events in the couple's past.
posted by reenum (60 comments total)

At last, the press has discovered the real cause of the mortgage crisis. This ought to let all those honest, hard-working bankers off the hook!
posted by warbaby at 6:42 AM on April 21, 2011 [3 favorites]

This is like a perfect storm of all the things I hate about mortgages, people who scapegoat a "bad economy" for their shady decisions, and assholes who live in Ankeny.
posted by mikeh at 6:44 AM on April 21, 2011 [4 favorites]

Classic, classic bank behavior:

1. Screw something up badly;
2. Be held accountable;
3. Get pieces in the paper demonizing the people who actually DID follow the law;
4. Ram through legislation protecting banks from actually having to follow the law, while doing nothing equivalent for the little people.
posted by Malor at 6:45 AM on April 21, 2011 [9 favorites]

Must've been fraud. Banks would've never signed off on lending to a couple with bad credit and a history of using legal proceedings in thier favor. I'm sure there was an extensive review of thier loan applications by the lending bank. If the bank lost even a penny, that's UnAmerican. Send in the Feds, these people are what ruined the economy.
posted by T.D. Strange at 6:45 AM on April 21, 2011

Oh good god, the wife had previously been involved in a case where a relative pulled a similar trick. If this wasn't premeditated, then I'll eat my hat.
posted by mikeh at 6:45 AM on April 21, 2011 [4 favorites]

Let me get this straight: They think, somehow, they don't owe the bank the money? (NB: I mean "owe" as in "You gave me this with the expectation that I'd pay you back. And I said I would. So I owe you.")
posted by MarshallPoe at 6:48 AM on April 21, 2011

However, further investigation has uncovered some unsavory events in the couple's past.

Under skeptical questioning, Citmortgage spokesman The Dude replied "Well, okay, you're not privy to all the new shit, so uh, you know, but that's what you pay me for."
posted by Horace Rumpole at 6:49 AM on April 21, 2011 [2 favorites]

I'd also like to state that the "in this economy" statements are crap, because if these people were still thinking that being a home builder and a mortgage officer post-2007 were excellent career choices and that they should build themselves a new home, they're already being several kinds of disingenuous.

The move where they defrauded the mortgage originator that the wife and her mother worked for in one of their previous home situations was pretty classy, too.
posted by mikeh at 6:57 AM on April 21, 2011 [4 favorites]

OK, last skeptical comment: What the hell was with them renting another place before foreclosure proceedings started? It takes forever to get booted out of a house, and they were supposedly trying to make payments while renting a second property?

If you'll excuse me, I'm going to see about renting a bulldozer in Ankeny about now.
posted by mikeh at 6:59 AM on April 21, 2011

At last, the press has discovered the real cause of the mortgage crisis. This ought to let all those honest, hard-working bankers off the hook!

It is possible for both banks and their customers to be lying scumbags.
posted by empath at 6:59 AM on April 21, 2011 [18 favorites]

I suspect the ability to use this example to get legislatures to enact policies to strong-arm other, non-fraudulent distressed mortgage-holders will end up being worth far more than $320,000 to the banking industry.
posted by ghharr at 7:03 AM on April 21, 2011 [3 favorites]

It is possible for both banks and their customers to be lying scumbags?

Nope. The banks have so much virtue the US Government bailed 'em out.

And banks are made up of people, people who are customers of banks! So they too must be without flaw.

The problem must be with the legal system. Did not a Bard of olde write "lets kill all the lawyers"?
posted by rough ashlar at 7:16 AM on April 21, 2011

The Iowa law is not some bizarre, obscure "loophole". Comparable laws are on the books of a number of other states including California. The idea is to protect one spouse against the other secretly selling the family home. Even if only one spouse is on the promissory note, both spouses have to be on any instrument that encumbers the homestead property. There is nothing, zero, outrageous about this.

If a bank doesn't do the basic minimum due diligence in the underwriting process, then fuck the bank. If the shoe were on the foot (like it is for hundreds of thousands of borrowers who got themselves into bad loans without fully understanding the details), and if Matt and Jamie were the ones claiming that the end result of the transaction was not what they thought it was supposed to be, then it is the bank who would be saying, "Tough luck, suckers, you signed the docs."

In this case, only Matt was on the promissory note and the mortgage securing repayment of that note. If Matt had represented during the underwriting process that he was unmarried, then he would have committed fraud that would prevent any discharge in bankruptcy. Apparently this was not the case. The mortgage encumbering the property was voided because of long-standing laws, leaving the bank with an unsecured claim against Matt, which he was able to discharge in bankruptcy.

I just can't understand the outrage against Matt and Jamie, unless people are fundamentally against the concept of the bankruptcy discharge or state law homestead exemption.
posted by chicxulub at 7:16 AM on April 21, 2011 [37 favorites]

That is more garage than house.
posted by R. Mutt at 7:19 AM on April 21, 2011 [2 favorites]

That is more garage than house.

That is Ankeny.
posted by webhund at 7:22 AM on April 21, 2011 [4 favorites]

Classic case of "you got me, now I'm going to nuke your ass from orbit" response from the bankers and their cronies.
posted by Old'n'Busted at 7:29 AM on April 21, 2011 [2 favorites]

#5 - Profit.
posted by stevil at 7:30 AM on April 21, 2011

The homeowners might have done shady, unethical stuff -- but it was legal, and the bank screwed up.

"She knew the law and used it to her own advantage" is rather what the banks have been doing, but the hypocrisy is unsurprising.
posted by jeather at 7:31 AM on April 21, 2011 [8 favorites]

That second article.... reads to me like a piece which was commissioned to destroy the reputation of a couple of people who came out on top due to negligence on behalf of the banks and their rush toward greed at the end of the mortgage bubble. It doesn't read like a follow-up article showing the progress of an existing story at all. Instead, it's just a laundry list of supposedly bad things that those people did. It's not even written by the reporter who wrote the first piece, and I could swear that the usual pattern I see from newspaper reporting is that the person who knows the story best keeps tracking it.

It's just s smear piece, nothing more.

Why can't we get a similar rundown on the personal lives of all the bankers and derivative traders who fleeced the populace and the national coffers and who haven't had a single thing go bad for them all this time? They could use a lot more smearing than this couple.
posted by hippybear at 7:38 AM on April 21, 2011 [30 favorites]

Why can't we get a similar rundown on the personal lives of all the bankers and derivative traders who fleeced the populace and the national coffers and who haven't had a single thing go bad for them all this time? They could use a lot more smearing than this couple.

+1
posted by zombieApoc at 7:40 AM on April 21, 2011

If a bank doesn't do the basic minimum due diligence in the underwriting process, then fuck the bank

Yeah. Matt and Jamie are scumbags, but it's the basic function of a lending institution to lend correctly. If I do something (advantageously) wrong a couple times, that's on me. If it's my fucking purpose in life to do something, then I have no excuse for doing it wrong.

Put a different way: Matt and Jamie worked the system a couple times; the banks worked the system hundreds of thousands of times, if not millions. Fuck 'em both, but if only one can get fucked, it's the bank.
posted by fatbird at 7:46 AM on April 21, 2011 [6 favorites]

Everything and everyone is loathsome.
posted by wreckingball at 7:46 AM on April 21, 2011 [1 favorite]

"...$55,000 for repossessed vehicles, $37,541 owed on four Bank of America accounts, more than $12,200 owed to five collection agencies, and more than $96,500 owed to numerous creditors for other purchases."

LIVIN' THE AMERICAN DREAM, BABY...
posted by quonsar II: smock fishpants and the temple of foon at 7:48 AM on April 21, 2011 [3 favorites]

If 1000 people use legal loopholes to bilk banks out of tens of thousands of dollars, it would still not equally the daily take banks get from the billions of legal loopholes they use to bilk their own customers, nickle and diming them for using cash machines, overdrawing on checks, getting automatic transfers, speaking to a live teller, and any other unremarkable transaction that the banks have chosen to tack $5 to $50 fees onto, and, if the customer goes under a result, tack more fees on, and more fees, until they go into a spiral of owing a bank 200 or 300 times more than the initial amount they misjudged.

Fuck the banks. They owe us a few free houses.
posted by Astro Zombie at 7:49 AM on April 21, 2011 [7 favorites]

Fuck the banks.

Bankers. "Fuck the bankers" you certainly mean. There is nothing wrong with banks. It's the people who run them who deserve to be in jail. Pretty much all of them it seems.
posted by three blind mice at 7:55 AM on April 21, 2011

Well, yeah Astro Zombie, I'd just prefer the banks pay out those free houses to people who actually could use a damn house, not a couple who has a history of mortgage fraud and scumfuckery.
posted by mikeh at 7:56 AM on April 21, 2011 [4 favorites]

Yeah Mefi, stick to to the man, regardless of moral principle!
posted by Xoebe at 7:56 AM on April 21, 2011 [1 favorite]

Well, yeah Astro Zombie, I'd just prefer the banks pay out those free houses to people who actually could use a damn house, not a couple who has a history of mortgage fraud and scumfuckery.

I have a feeling honest people won't take advantage of this loophole. Sometimes it takes a criminal to punish a criminal.
posted by Astro Zombie at 8:00 AM on April 21, 2011 [1 favorite]

Another perfect time to link to Fuck The Bank
(skip to 1:10)
posted by 8dot3 at 8:11 AM on April 21, 2011

This is one of those things that really bugs me about our society. When a corporation takes advantage of legal loopholes, it's usually seen as okay, or simply in the nature of corporations. However, when private citizens do so, they are considered to be bad people. In short, only people are held to a moral standard.

I've said it before, but people who do this are essentially bounty hunters. You may not like what they do, but they serve a purpose. Their game doesn't work if the banks follow the law. It's just like those people who make a living suing under the Fair Debt Collection laws. You may think they are scumbags, but if the lenders were following the law these people would not make a dime. Yet the lenders are "just doing business" and these people are painted as cretins.
posted by Nothing at 8:26 AM on April 21, 2011 [15 favorites]

Another good example of the phenomenon: strategic default is considered perfectly normal for businesses, but morally wrong for individuals.
posted by Nothing at 8:29 AM on April 21, 2011 [7 favorites]

Living even in a free house in Iowa is too costly for me
posted by Postroad at 8:30 AM on April 21, 2011 [2 favorites]

Bankers. "Fuck the bankers" you certainly mean. There is nothing wrong with banks.

Except the lender in this case, Citimortgage, is a notorious robo-signer that has fraudulently back-dated documents and lied to cover their "mistakes" across the country. To run a laundry list of the couple's questionable decisions without covering the fact that Citimortgage's widespread fraud nationwide is culpable is journalistic hackery. That second article should say "advertising supplement" at the top.
posted by Challahtronix at 8:37 AM on April 21, 2011 [6 favorites]

When a corporation takes advantage of legal loopholes, it's usually seen as okay...

What? No it's not. Bilking people is bilking people. It's wrong when the banks bilk their customers, and it's wrong when their customers try to bilk them. Wrong, wrong, wrong. These people are so clearly in the wrong you'd need to be blind (with rage at "banks") not to see it.

I live in Iowa. I've dealt with several local banks. I know, personally, the banker who arranged the mortgage on my house. He's a professional. Sends me holiday cards.
posted by MarshallPoe at 8:38 AM on April 21, 2011

This whole thing is just an asshat farce, isn't it?

No one wins here. If you are thinking, "Yeah, stick it to the banks!" you are just being naive.

Now, honest people who want mortgages in Iowa are going to have to go through the wringer because of the Danielson asshats. And already exorbitant bank fees will go up because SOMEONE has to pay for that house, and do we really think the Citimortgage asshats will step up and take the financial responsibility? And the Bankers Association asshats are lobbying to make changes in the mortgage laws so this can't happen again, and it takes money to grease palms and run that legislation through, you know.

So, one way or another, we're all going to end up paying for the Danielson house. And I bet those asshats don't even have the guest bedroom ready for us.
posted by misha at 8:41 AM on April 21, 2011 [3 favorites]

Wow, so much hate for the couple. I don't get it.

The sad irony is, as was pointed out earlier, non-Metafilterians who absolutely don't give a shit what shenanigans companies pull will be in full agreement that this situation is just. awful. We'll end up fucked once again because we are collective morons who can't see that sometimes we need to keep our tsk tsk to ourselves for a while.
posted by wierdo at 8:55 AM on April 21, 2011 [1 favorite]

Does anyone know which other states (besides CA, as noted above) have similar laws?
posted by tomswift at 8:56 AM on April 21, 2011

MarshallPoe, if you feel that it's "wrong, wrong, wrong" whether it's flesh-and-blood people or corporate "persons" doing it, then I hope you don't own any stocks. Or especially shares of mutual funds of the like. Otherwise chances are some of the companies you're investing in are not averse to gaming the system like this.
posted by gauchodaspampas at 8:56 AM on April 21, 2011

I'll argue, as I have before, that it is not immoral at all. The bank and the Danielsons freely agreed to deal with each other according to the law and the contract. Not according to anyone's subjective idea of moral or proper behavior. It was not a handshake deal with a friend where that subjective standard would be appropriate. No one forced either side to do it. No one is alleged to have have broken any laws. Neither side is entitled to expect that the other will give them any breaks. You won't get any from Citibank. You are not required to give them any.

If anything, I think the corporation, being an artificial creation, and having greater resources and expertise, ought to be the party held to a higher standard.
posted by tyllwin at 9:07 AM on April 21, 2011 [6 favorites]

I don't know why a state can dictate who goes on a mortgage. I don't like that 'husband and wife must" crap. My DH signed off a quit claim because his biz was a liability and he had bad credit. Why should I get dragged down?
posted by stormpooper at 9:19 AM on April 21, 2011

I keep reading their last name as Navidson for some reason, and I worry that even trying to read their mortgage documents would lead to strange clauses appearing in-between previously adjacent paragraphs, incomprehensible page-numbering systems, never-ending litanies of legal doctrines and zoning codes, and somehow, a minotaur.
posted by Rock Steady at 9:28 AM on April 21, 2011

This is an asshat farce. Of course the banks are at fault for throwing money around like confetti, but I really have to wonder about the way that mortgage was signed for given the knowledge of the other deal, and this also makes me wonder about the factuality of their representations to federal bankruptcy court. I suspect their other creditors are now going to wonder. If any of those representations turn out to have been false, the bankruptcy discharge could be voided and they would be on the hook for much of their debt once again, and have the possibility of federal prison terms on top of that.
posted by dhartung at 9:29 AM on April 21, 2011 [2 favorites]

I don't know why a state can dictate who goes on a mortgage. I don't like that 'husband and wife must" crap. My DH signed off a quit claim because his biz was a liability and he had bad credit. Why should I get dragged down?

Well... if you'd read the article, you would have come across this:

The law's original intent was to protect husbands and wives from liability if one spouse made a disastrous financial decision unbeknownst to the other or against her or his wishes.

and a bit later also this:

The Iowa law invoked by Wanek in the Danielson case dates to 1888, and has its roots in a law passed in 1851. It was intended to stop one spouse from ripping off the other. It invalidates sales of — or loans on — a home, unless both spouses sign. The idea is to prevent one spouse from refinancing a mortgage and taking off with the cash.

which I think both explain why the state was dictating that both people in a marriage need to sign a mortgage.
posted by hippybear at 9:35 AM on April 21, 2011

HEY! Let's stop the Ankeny hate, please. I mean, HAVE YOU SEEN THEIR MARCHING BAND.
posted by Lutoslawski at 9:35 AM on April 21, 2011

I also don't see anywhere that dual-signing a mortgage and then later having one party quitclaim out of it would be a violation of anything. The point is to keep the deal from being made behind your spouse's back, not to keep them bound into a mortgage if they're going to be a financial liability.
posted by hippybear at 9:36 AM on April 21, 2011

hippybear, you can't quitclaim out of a mortgage, you can quitclaim out of a deed.
posted by tomswift at 9:37 AM on April 21, 2011

Right yes, that. Whatever. My argument still stands.
posted by hippybear at 9:39 AM on April 21, 2011

Maybe the lender should have investigated these people they were giving all that money to in the first place. I have zero sympathy for the bank in this case now that the facts are known about the buyers. Citimortgage needs to spend less on lobbyists and more on doing their diligence.
posted by humanfont at 9:42 AM on April 21, 2011

That house looks like a place where cars park their people.
posted by seventyfour at 10:06 AM on April 21, 2011 [5 favorites]

No one wins here.

Well, except for Matt and Jamie Danielson.
posted by Astro Zombie at 10:28 AM on April 21, 2011 [2 favorites]

We have a saying about this type of thing in Trinidad, which sums up how I feel: "Thief from thief does make God laugh."
posted by two or three cars parked under the stars at 4:17 PM on April 21, 2011 [2 favorites]

Wow, so much hate for the couple. I don't get it.

Because they are fucking grifters who exploited a loophole to steal a house.
posted by gjc at 7:50 PM on April 21, 2011

Can we knock off the general "kill all the bankers/lawyers" tone? Intentionally or not, it reads very much like antisemitism.
posted by gjc at 7:51 PM on April 21, 2011

gjc: "Because they are fucking grifters who exploited a loophole to steal a house."

If they stole a house, where are the charges?
posted by wierdo at 8:11 PM on April 21, 2011

gjc: "Because they are fucking grifters who exploited a loophole to steal a house."

If they stole a house, where are the charges?

Besides, if banks are too stupid to write mortgages in accordance with the law, they deserve what's coming to them. They clearly have plenty of attorneys, given my credit card agreement. Perhaps they should have one in each state draw up a checklist so this sort of thing can't happen.

Without evidence of misrepresentation on the part of the homeowner, I can't work up any sympathy for the bank, any more than I can work up sympathy for people who chose exotic loan products that blew up in their faces. (unless they were misled by the bank, of course)
posted by wierdo at 8:16 PM on April 21, 2011

That was weird...
posted by wierdo at 8:17 PM on April 21, 2011

I'm having a little trouble understanding how this could happen. Wouldn't the bank have to look at some kind of title document at some stage in the process? And wouldn't the title have had both of their names on it? And is it normal to sign mortgage documents in a mall food court?
posted by A Thousand Baited Hooks at 4:19 AM on April 22, 2011

is it normal to sign mortgage documents in a mall food court?

During the peak of the mortgage boom, mortgage people were doing anything and everything to get people to sign. Including meeting them at convenient locations like mall food courts. Is it normal? I have no idea. But it certainly isn't unheard of. A friend of mine bought a house with a mortgage signed at a Denny's.
posted by hippybear at 8:02 AM on April 22, 2011

If a bank doesn't do the basic minimum due diligence in the underwriting process, then fuck the bank
This.
After all, we are continually being lectured by our libertarian pals that consumers have only themselves to blame if they don't perform similar due diligence. Goose-gander, folks.
posted by Thorzdad at 8:38 AM on April 22, 2011

And is it normal to sign mortgage documents in a mall food court?

It is if you are a grifter who is trying to exploit a loophole to steal a house.
posted by Rock Steady at 9:52 AM on April 22, 2011