By now, all financial institutions should be aware that state and federal agencies are urging cooperation and flexibility with borrowers (residential and commercial) affected in some way by COVID-19. For instance, see the March 22nd Proclamation and the March 22nd Federal Guidance.
A new law, enacted on March 12, 2020, makes it even easier for financial institutions to record modifications to loans secured by mortgages on real estate. Historically, in order to record a document showing an extension of the maturity date for a loan secured by a mortgage, the borrower had to sign and notarize the document reflecting the extension. Now, under the new § 614.21, financial institutions can record the document without the borrower’s signature.
The new law is meant to provide a similar mechanism for extending mortgages that is available for extending security interests subject to the UCC. Now, once an extension on the applicable note is negotiated and agreed to by and between the financial institution and the borrower, the financial institution can simply draft a document summarizing the extension (noting the new maturity date), and the financial institution can record this summary without any signature (or notarization) from the borrower.
Iowa law still appears to require that the summary of the extension be notarized, but the notarization does not need to be of the borrower’s signature. Instead, as long as an employee of the financial institution signs and notarizes the summary of the extension, the document should be accepted for recording.
Best practice still is to obtain a signature from the borrower on the extension /modification of the underlying note. However, this can be obtained by electronic means and does not require notarization. Thus, financial institutions are now able to complete a modification extending a note secured by a mortgage 100% remotely.
For questions, contact the attorneys at Dickinson, Mackaman, Tyler & Hagen P.C.