In response to the ongoing foreclosure crisis in this country, many states have implemented mediation programs to assist borrowers in finding ways to avoid foreclosure. In 2009, Iowa implemented a foreclosure mediation program for owner-occupied residential properties, but unfortunately the law’s sunset date was July 1, 2012. However, Iowa’s mediation program for agricultural properties remains in place. Read on to learn more about how the farmer-creditor mediation program works and how you can benefit from the process if you own agricultural property in Iowa.
(To learn about other options for dealing with foreclosure, visit Nolo's Foreclosure section.)
What is Foreclosure Mediation?
Foreclosure mediation is a process that is used to help homeowners avoid foreclosure by coming up with an alternate solution that benefits both the borrowers and the lender. Mediation consists of a meeting between:
- the borrowers
- their lender, and
- an impartial third-party (the mediator).
At the meeting, the parties discuss the borrower's financial situation and try to negotiate a way for the homeowner to keep the home or give up the property without going through a foreclosure. By working together, the parties are often able to reach an agreement.
Potential outcomes of mediation include:
- loan modification
- forbearance agreement
- short sale, or
- deed in lieu of foreclosure.
(To get information about each of these options, see our Alternatives to Foreclosure area.)
Iowa Foreclosure Process
In Iowa, foreclosures are judicial, which means the lender must file a lawsuit in state court. The lender initiates the foreclosure by filing a petition and having it served on the borrower, along with a summons to appear in court. Learn more about the Iowa foreclosure process.
(To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)
Mediation for Agricultural Properties in Iowa
Iowa law provides mediation for agricultural properties (Iowa Code § 654.A1, et seq.)
The lender must attempt mediation in cases where the property is:
- agricultural land that is principally used for farming (as described in Iowa Code § 9H.1), and
- involves a secured debt or security interest in agricultural property of $20,000 or more (Iowa Code § 254.2C).
How to Apply for Farmer-Creditor Mediation
A borrower who owns agricultural property may request mediation by applying to the farm mediation service, which is a nonprofit organization designated by the state (Iowa Code § 654A.5).
A creditor must file a request for mediation with the farm mediation service prior to starting a foreclosure. Unless the borrower signs a mediation release or the court determines that the time delay required for the mediation would cause the creditor to suffer irreparable harm, the foreclosure action cannot proceed until mediation occurs (Iowa Code § 654A.6).
The Farmer-Creditor Mediation Process
After receiving a mediation request, the farm mediation service refers the borrower to a financial analyst. The financial analyst assists the borrower in preparing financial information for the initial mediation meeting (Iowa Code § 654A.7).
Mediation notice. Within 21 days after receiving a mediation request, the farm mediation service sends a mediation meeting notice to the borrower and to all known creditors of the borrower setting a time and place for an initial mediation meeting between:
- the borrower
- the creditors, and
- a mediator.
Initial meeting. The initial mediation meeting is held within 21 days of the issuance of the mediation meeting notice (Iowa Code § 654A.8).
The mediation period. The mediation period, during which time the mediator may hold mediation sessions, lasts up to 42 days after the farm mediation service received the mediation request. However, if all parties consent, mediation may continue after the end of the mediation period (Iowa Code § 654A.10). Moreover, the farm mediation service may extend any deadlines up to 30 days for good cause (Iowa Code § 654A.12).
Should You Participate in the Foreclosure Mediation Program?
Even though participating in a mediation program does not guarantee that a foreclosure will be avoided, it doesn't hurt to participate in the program. The lender may be more likely to agree to a nonforeclosure solution during mediation than if you approach it outside of the program, or you might qualify for a loss mitigation option that you hadn’t previously considered.