SENATE FILE _____

BY  (PROPOSED COMMITTEE ON JUDICIARY BILL BY CHAIRPERSON FRAISE)

A BILL FOR

An Act relating to the foreclosure of a real estate mortgage.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

   Section 1.  Section 654.5, subsection 2, Code 2011, is amended to read as follows:
   2.
  a.  A special execution shall issue under such conditions as the decree may prescribe, and the sale under the special execution is subject to redemption as in cases of sale under general execution unless the plaintiff has elected foreclosure without redemption under section 654.20.
   b.  A successful bidder at the sale who is not affiliated with the judgment creditor may elect to receive, in lieu of a sheriff’s deed or sheriff’s certificate of sale, an assignment without recourse by operation of law of all of the judgment creditor’s interest in the judgment, the underlying indebtedness, and any policies of title, property, and any other similar insurance or guaranty owned by the judgment creditor relating to the affected property. Except for a sale that is subject to redemption, an assignment under this section shall bar junior interests in the property as if an assignment had not been elected. If the sale is subject to redemption, the period to redeem shall commence on the date of the sale resulting in the assignment.
EXPLANATION
   This bill relates to the foreclosure of a real estate mortgage.
   Current law relating to foreclosure with redemption provides a statutory right of redemption to the debtor of the foreclosed property which allows the debtor to reclaim the debtor’s foreclosed property by making payment in full of the unpaid loan plus costs (Code section 628.3). This right of redemption also applies to creditors, under some circumstances, if the debtor does not exercise the debtor’s right to redeem (Code sections 628.5 and 628.8). Once the redemption period expires (generally, one year from the day of the sale) without a party redeeming the property, the purchaser is entitled to a sheriff’s deed which conveys title only as it existed when the mortgage was executed.
   This bill allows a successful bidder at a sheriff’s sale who is not affiliated with the judgment creditor to elect to receive, in lieu of a sheriff’s deed or sheriff’s certificate of sale, an assignment of all of the judgment creditor’s interest in the judgment, the underlying indebtedness, and any policies of title, property, and any other similar insurance or guaranty owned by the judgment creditor relating to the affected property. Except for a sale that is subject to redemption, an assignment under the bill bars junior interests in the property as if an assignment had not been elected. If the sale is subject to redemption, the period to redeem begins on the date of the sale resulting in the assignment.