The Iowa Attorney General's office is reviewing the case of a couple who paid virtually nothing for their home because of a century-old Iowa law.
The $320,000 mortgage of Matthew and Jamie Danielson was voided on their home in a suburb of Des Moines because of the "Spousal Homestead" statute, as first reported by the Des Moines Register. That statute, which dates back to the 1880s, requires that both spouses sign a mortgage agreement.
Only Matthew Danielson signed the mortgage in May 2007 in what he described as a "rushed" meeting with his mortgage broker, Jason Larson, in the food court of a shopping mall, according to the Iowa Appeals Court decision in May 2009 that voided their mortgage.
Geoff Greenwood, communications director for the Attorney General's office, said the Danielsons' case is "currently being reviewed" and is not a full-fledged investigation. He said the office first began reviewing the case late last month.
At the meeting that finalized the mortgage, Matthew asked if his wife needed to be present and Larson said no, according to a court document. Matthew tried to call Jamie anyway because she handled the couple's finances and worked as a loan originator for a mortgage banker, the court document states.
The loan applications refer to Matthew as "unmarried," according to the court document, and the promissory note he signed was payable to CitiMortgage, the plaintiff in the Appeals Court case.
When the economy soured, Matthew's home-building business took a turn for the worse. Around the summer of 2007, the Danielsons anticipated a foreclosure and went to their attorney, Jerry Wanek, to file for bankruptcy. Wanek was the one who first noticed that Jamie hadn't signed and recognized the loophole, according to the Register.
When CitiMortgage initiated foreclosure proceedings in December 2007 against Matthew, he used that discrepancy for his defense and ultimately won in the Appeals Court in 2009.
"There are media implications that this was planned," Wanek told ABC News. "The fact is that this was due to the shoddiness of the mortgage company."
The Danielsons did not immediately return requests for comments.
Rodney Reed, finance bureau chief of the Iowa Division of Banking, told ABC News that Larson withdrew his application to renew his broker's license in February 2011.
Larson had no comment.
Reed also said Jamie Danielson's application for a broker's license was denied in February, in part, after the Iowa Finance Authority submitted a complaint with the Iowa Division of Banking in December. The complaint was filed in part because Jamie had about $1.43 million in unsecured debt and she and her husband were involved in two previously foreclosed houses.
The complaint also mentioned that Jamie's cousin, Troy Hudson, also had his mortgage voided in 2006 because his wife did not sign the loan, according to the Register.
"It absolutely positively wasn't planned," Hudson told ABC News. "I wasn't trying to exploit the law. It's not what I set out to do and intended to do."
The complaint indicated that Jamie was the loan officer who made mortgage to Hudson.
"At best she is not an honorable industry representative or worse she has committed mortgage fraud against the industry in which she wants to be employed," the complaint stated about Jamie.
Jamie appealed the license denial on Feb. 25 and the Iowa Division of Banking set a hearing date of April 6, but Jamie withdrew her request for a hearing in a letter dated March 29.
On April 1, Hudson filed a suit against the Danielsons' contracting company, Time Saver Home Solutions, for $9,695. Hudson, who owns construction business, Modern Renovation, claims that his company performed "multiple subcontractor contracts" for the defendants, but they "failed to perform their responsibilities under the contract."
The Danielsons had not responded to the suit as of April 22, according to the Polk County district court clerk's office. The Danielsons have 20 days to respond to the suit from the time the suit has been served.
Though the Danielsons own their home because of the courts' decision, there has been renewed interest in their story since Iowa Gov. Terry Branstad signed an amendment three weeks ago to the Spousal Homestead statute.
"There are some allegations that borrowers have intentionally misrepresented their marital status," said Bob Hartwig, legal counsel for the Iowa Bankers Association, who would not comment specifically about the Danielsons' situation.
Intent of Original Law to Protect Spouses
Hartwig said the original intent of the law was to protect one spouse from the other.
"It was to prevent a spouse from unilaterally transferring a home out from under the other spouse," said Hartwig, who has been legal counsel for the Iowa Bankers Association for 14 years.
He said he is aware of at least six disputes between lenders and homeowners in Iowa related to the statute.
"It's not enough to be an avalanche, but it's enough to be a nuisance and we wanted to fix it," he said.
He said he is not aware of similar laws in other states.
"We err in Iowa to have protective homestead rights laws compared to other states," he said.
He said the new amendment would apply to future cases and not the Danielsons' case.
The newly signed amendment gives new defenses to lenders and allows judges to have some leeway if there is "unjust enrichment."
"That's where someone shouldn't get something for nothing. It allows judge more discretion to do what's fair. And that's all it is," Hartwig said.