The Strange Case of Iowa Code 561.13

A couple of recent newspaper articles here detailed the story of Matthew Danielson et ux, who figured out how to get a $320,000 house for free. It also demonstrates that as always, attention to detail is the sine qua non of any profession where money is involved.

It also indicates the truth of Tony Hillerman's fictional detective Joe Leaphorn's maxim: If you believe in coincidence you aren't looking close enough.

How's that, you say? Read on.

It seems that there's a section in the Iowa Code, 561.13, hoary with age, that provides that if there's a conveyance or encumbrance of a homestead, and the owner is married, the conveyance or encumbrance is not valid unless signed by both husband and wife. The reasons are simple-the intent was to prevent one half of a marriage to encumber or mortgage the homestead without the other's knowledge and consent.

Danielson, a convicted felon, applied for a mortgage using a broker named Jason Larson, employed by Once Source Mortgage who fronted the entire mess to Citibank, and the application did not include his wife's signature as has been required since the first Code of 1851. Danielson made one payment and then defaulted.

Citibank attempted to foreclose the mortgage, and Danielson raised the failure to obtain a signature of his spouse as an affirmative defense. The trial court heard the matter and denied Citi's claim that the mortgage had been fraudulently obtained. It also held that the mortgage was void as between Danielson, his wife, and the bank. The end result was that Danielson took the home free and clear and Citi was left with nothing.

Justice? Read on.

Two years previously, Troy Hudson treated Wells Fargo Bank to some of the same medicine and obtained his home free and clear because the mortgage application did not include his wife's signature.

Here's where the plot thickens, as disclosed by the Register's inquiring reporter Lee Rood.

Troy Hudson is Jamie Danielson's cousin.

Both couples obtained refinancing through a firm, First Horizon, where Danielson's wife worked and where her mother, Rita van Zee, was the branch manager.

The Danielsons refinanced through First Horizon for double the price of the original mortgage (far more than the assessed value of the property) and lost the home in foreclosure to First Horizon, having obtained $625,000 more or less in the process. They'd sold some of the property for far more cash than it was worth to dear old Mom a year later. Dear old Mom and her husband are doing pretty well in the property ownership business if the Polk County Assessor can be believed.

Matt Danielson also obtained a mortgage in 2007 to buy a home and it appears from the article that he may have misrepresented his finances and assets on the mortgage application he made.

The mortgage broker in all of this, Jason Larson, has a checkered history as well if court records are reasonably accurate.

All of this has dodgy dealings written all over it, and we expect the U.S. Attorney to take an interest in these matters.