In a very weird Iowa case, a couple going through foreclosure got to keep their house. For free. Matt and Jamie Danielson were both employed in the housing industry - he was a builder and she was a loan officer. They made plenty of money and never saw the downturn coming.

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When Matt met with the mortgage lender (no reason was given why Jamie didn't just originate the loan herself since she was in the business), he was told that she did not need to be present. He tried to call her but couldn't reach her. The mortgage was approved without Jamie Danielson's signature, and the couple with their young son moved into the house.

When the real estate industry fell apart Matt lost his business and Jamie's income was severely curtailed. They couldn't keep up with the payments. Expecting the lender to foreclose, they boxed up their life and prepared to move into a rental. "We had our bags packed," Jamie Danielson, 29, said. "We know if you can't pay, you can't stay."

Lawyer finds a mortgage loophole

They went to a lawyer to file for bankruptcy protection, and that's when things got strange. Jerry Wanek, their lawyer, was the first to notice that Jamie hadn't signed the mortgage and to recognize the significance of that omission. "He found the loophole," Matt Danielson said. "You couldn't have planned that." The Iowa law cited by Wanek in the Danielson case was enacted back in 1888, and has its roots in a law passed in 1851. Its purpose was to prevent one spouse from involving the other unknowingly in a transaction against his or her interest or one that he or she hasn't agreed to. It invalidates sales of--or loans taken against--a home unless both spouses sign the documents. The idea is to prevent one spouse from refinancing the home, taking off with the cash, and leaving the other holding the bag.

Mortgage companies have been criticized for sloppy handling of mortgage documents in the lead-up to the financial crisis, which was driven by reckless home lending. Several of the nation's largest lenders stopped foreclosing on homeowners in the fall after widespread reports of flawed paperwork, and 50 state attorneys general led by Iowa's Tom Miller are investigating whether lenders broke the law.

"It's dumb luck that we're in this house," said Matt Danielson, 33.

The banking lobby is embarrassed. The Iowa Bankers Association backed legislation that would change the law so this never happens again. It passed.

Unfortunately, very few will get free houses if they don't read and sign their mortgage documentation.

Whether you take out home loans for people with bad credit, an FHA home loan, read everything and make sure you understand the terms of what you're signing.