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Salvation byHomestead?Released by AJ STEPHENS AND ASSOCIATES, INC.

This article has been snatched directly from the front page of AOL Real Estate News.We are republishing in its entirety without any editing except for this disclaimer.

Facing foreclosure and fed up with the banks trying to take back your home? Well, aforeclosure loophole that helped an Ankeny, Ia., home construction worker and hismortgage loan originator wife win a 2009 court judgment against CitiMortgage, givingthem title to their $278,000 house free and clear after only one mortgage payment, justmight apply to you, too, even if you live in Arizona, Florida, Nevada or one of several other

states.

The Iowa couple, Matt and Jamie Rae Danielson, are now under scrutiny from skeptics whoare wondering if perhaps the couple devised a "win-a-free-home" scheme from the get-go.

There was no pre-planning, the couple told AOL Real Estate during a phone interviewMonday night, but they wish they can convince their bashers who "are spreading gossipand making accusations" after they became aware of this nearly three-year-old issue whenthe Des Moines Registerwrote about the couple twice last week.

"People are threatening to burn our house down. There are nasty blogs going around

where people are outraged," a distraught-sounding Matt, 33, said as a baby cried softly inthe background. He says he and his wife didn't seek this loophole when they purchasedtheir house (pictured) in May 2007. "You don't make this kind of thing happen. It happensto you."It all started when Matt Danielson and his broker, Jason Larson, arranged an impromptumeeting at a mall food court to sign the CitiMortgage financing documents for their newconstruction 3-bedroom, 2-bath home that they had been negotiating for a while. Mattdialed his wife's cell

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See photos of homes for sale in your area and across the country on AOL Real Estatephone, but didn't reach her; so in a rushed session he signed the papers without her,finalizing a $320,000 mortgage for 100 percent of the sale price, which included anadditional $50,000 to finish the basement.

It was that circumstance that got them off the hook for a defaulted mortgageloan; and youmight just be surprised at how that led to them now owning the home outright withouthaving paid but one mortgage payment. In Iowa, if only one spouse signs a mortgagedocument, creditors have little recourse of coming after the home. The state's homestead

lawdating back nearly 125 years to 1888 -- a law which might soon get rewritten -- saysmortgages are not valid until they are signed by both spouses.

Iowa's law, which is meant to protect an innocent spouse from hidden assets related torefinancing a mortgage to hide the cash, or selling the home out from under one's spouse'snose, has the inadvertent affect of also not allowing mortgage lenders to collect on a loan ifthe signature of an applicant's spouse is never obtained, but they've taken possession ofsaid home. (Investment property tends not to be homesteaded, just primary residences.)

Surprised? If not, maybe you will be to learn that a similar law exists in Alaska, Arizona,Arkansas, California, Colorado, Georgia, Hawaii, and Illinois, among others. States where it

doesn't apply: Delaware, New Jersey, Pennsylvania and Rhode Island.

There are slight differences to each state's law, and precedence from case law can alsomake a difference, butcheck out this list from Law Checkto see where your state standsand to find applicable state codes. Then be sure to consult with an attorney before you tryto sue your lender based on the homestead code.

Matt acknowledges that at the time they bought a larger, previous house in 2003 "wecouldn't afford the property." But like many Americans, they say they were a product of themortgage industry, which at the time was handing outloans to almost anyone with a pulse.And also like many Americans, they used their home like an ATM, refinancing into a larger

mortgage as equity climbed with rising home prices (and the extensive remodeling theydid) just so that they could have money to pay for the upgrades as well as purchase thevacant adjoining lot.

Eventually the couple was forced to put their 6,000-square-foot dream home up for sale, aswell as the vacant adjoining lakefront lot they had acquired subsequently. The vacant landsold, reportedly to relatives, but the lake home was ultimately lost to foreclosure whenthey couldn't find a buyer before the bank swooped in. First Horizon sold the REO property

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in June 2008 for $339,500, about a year after the Danielsons had last made a payment.

Not only did the foreclosure take its toll on Jamie's credit, but it also strained her workenvironment, since the loan was obtained through her employer, First Horizon. "I had aconversation with HR about it," Jamie told me during our phone conversation. It didn't

affect her employmentstatus, as she continued on there, but it was awkward.

"I owed them money and I defaulted, so I didn't want to pursue another loan through themagain." The 32-year-old was also embarrassed and decided it would be better to keep herpersonal finances separate from her workplace.

The new home -- the one at the center of the court case -- was a reasonable size at areasonable price, especially for a couple who had been used to pulling in an annual jointhousehold income in the six figures.

"We went from a position of high income to like no income," says Jamie. "We didn't

anticipate the sharp decline in income we have. If we would've known that five years laterour income would've been cut by 75 percent, we wouldn't have done all that."

The couple then moved into the 1,800-square-foot house, but only had time to make onemortgage payment before Matt Danielson's business went under. Knowing they'd be facedwith yet another foreclosure, the couple said they made plans to downsize even further.

"My boxes were packed and we were ready to move to an apartment," said Jamie. Mattadded, "We had moved a lot of stuff to a rental because foreclosure was coming down uponus."

During this same time, the couple consulted with a bankruptcy attorney who pointed outthe loop hole in the documents that were not signed by Jamie. Attorney Jerrold Wanek ofGarten & Wanek believed as a result he could save their home, and advised the couple tomove back home, so they did.

The lower court, and subsequently the appellate court, ruled that the mortgage was"invalid-that is, void-without the signature of both spouses, not merely voidable by thespouse who did not sign."

Even though this means the Danielsons can remain in their home without paying back theirmortgage, Citimortgage, if it wanted, could pursue a lien against the property in the event it

ever sells. But since the May 29, 2009 judgment, Citimortgage hasn't said anything, and theDanielsons have their home free and clear.

"I don't like people saying we won a 'free' house," says Matt. "It's not like we entered araffle and won. We lost practically everything we ever worked for."

Jamie, who lost her job about a year after MetLife purchased the company in 2008 and thenshut their branch down, said she had been looking for another job in the industry, but the

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negative media attention from the court case changed all that.

And then there is how Matt's income has fallen to zero from the original loan applicationthat indicated his monthly income at the time was $13,000, coming from his CarWholesalers company at "1234 Fifth Street," an address that the Registersays doesn't exist

in Ankeny for a business that the Registerreports has never been registered with the Iowasecretary of state. But, there are several home-grown businesses that don't register withthe state when they should (although something requiring a license, such as contracthandyman work, you think they would. But not all do.) And when you're practicallybetween homes and your home is your office, as it has been with Matt and his "Time SaverHome Solutions" company, one just might put in a filler address and forget to update it.

Some may view this as a case of "sticking it to the banks," but given Jamie Danielson's priorposition as a mortgage loan originator and how these "predicaments" of theirs started longbefore the housing market took a nose dive, perhaps it is just another case of homeownersoverextending themselves, and feeling over confident in the market and infallible because

they had seen so much growth first hand.

It's not just the Danielsons who have learned a lesson. For its part, Iowa is working onmodifying language in that law so this can't happen again. The bill has passed the Senateand now awaits House approval. Other states just may follow, if homeowners there startcatching on to the loop hole, that is.

Sheree R. Curry, who rented for two years in Iowa, and has since owned three homes, is athree-time award-winning journalist who has coveredreal estate for six years. During her 20-

year career, her articles have appeared regularly in the Wall Street Journal, TV Week, andFortune. She's been writing forAOL Real Estate since 2009 from a Minneapolis-area rental.She seeks a book publisher -- or at least a lender who'll give a reasonable mortgage rate to a

self-employedmom.