Encumbering the homestead- who must sign?

November 7, 2007 | Erin Herbold

Iowa law requires that both husband and wife sign a mortgage agreement when encumbering homestead property. That requirement was at issue in this case. 

The husband owned property in his name, but the property was the homestead for he and his wife. In 2004, the husband executed a $185,000 loan with a lender, pledging the homestead as collateral. The husband indicated that he was married at the time of the transaction. The mortgage was recorded, but the wife’s signature did not appear on the note or the mortgage. In 2006, the husband defaulted and the lender sought to foreclose the loan. The trial court dismissed the foreclosure action, refusing to establish an equitable mortgage in the lender’s favor, because a homestead was involved and the wife had not been a party to the transaction. 

On appeal, the lender argued that an equitable mortgage should be the established because the lender would not have any remedy if the mortgage was deemed null and void. The court disagreed and dismissed the foreclosure action, noting that homestead rights are “jealously guarded by the law” in Iowa, and that Iowa law was clear that a mortgage is invalid unless the owner’s spouse executes the same instrument. The court noted that the purpose of the rule is to protect the interests of married persons in the homestead. Since the wife did not sign, the mortgage was void as to both parties. 

As to the lender’s argument for the establishment of an equitable mortgage or lien, the court said that there is only limited authority for a mortgage to be deemed equitable, and that authority didn’t apply in this case. The lesson is clear, mortgage instruments must comply with statutory requirements to be held valid, especially when homestead property is encumbered.  Wells Fargo Bank v. Hudson, No. 7-501/06-1941, 2007 Iowa App. LEXIS 1117 (Iowa Ct. App., Oct. 24, 2007)