Court of Appeals reminds debtors that mortgage rights automatically transfer with the debt

It has long been the law in Iowa that assignment of a debt automatically transfers with the debt the rights under a corresponding mortgage.  The right of the mortgagee is a mere chattel interest, inseparable from the debt it is intended to secure, and transferable by a mere assignment of the debt, without deed or writing.   The Court of Appeals recently affirmed its willingness to apply this longstanding position in U.S. Bank, N.A. v. Lederman Bonding.

At the time that the foreclosure petition was filed, U.S. Bank held the original note; after the case was filed, the mortgage was assigned to U.S. Bank.  The debtors raised numerous arguments against foreclosure of the mortgage, including that there was no delivery of a mortgage assignment by the original mortgagee to U.S. Bank before the original mortgagee was dissolved; that there was no evidence that the note was delivered to U.S. Bank before the suit was filed; and that U.S. Bank failed to produce proof of an unbroken chain of title to the mortgage.

The Court of Appeals rejected all of the debtors’ arguments and summarily affirmed the trial court’s entry of summary judgment.  In addition to the failure to raise many of the arguments before the trial court, the debtors’ arguments that were preserved for appeal were contrary to the well-recognized legal principle in Iowa that the rights under the mortgage automatically travel with the note.

In foreclosures filed since 2008, where debtors have become increasingly likely to raise numerous defenses alleging document deficiencies, Lederman Bonding confirms that the Iowa appellate courts remain willing to apply well-developed precedent, even if the current day debtors suggest that financial institutions should be held to a different standard.  For questions regarding U.S. Bank, N.A. v. Lederman Bonding, or regarding estate mortgage foreclosure, contact Mollie Pawlosky.