Well well, something new in property law.  Mr. Gartin, thank you for sharing with us the "Retention Agreement".

Bottom line up front--whatever species of beast this "deed restriction" may be (and I believe it's no mortgage), it probably clouds title.
A restriction appears of record. 
Therefore, says the Iowa Supreme Court, title is unmarketable.
Any grantee of "restricted" real property **where benefitted parties have complained about violation** may end up 'buying a lawsuit'.

Johnston v. State Bank, 195 N.W.2d 126, 10 UCC Rep.Serv. 855 (Iowa 1972):
"Triers selected a lot in a housing development and relied on Johnston to comply with building restrictions and permits. Johnston was familiar with such things, having had difficulty with restrictions on a nearby lot in the same development two years before.
Johnston obtained an abstract of title to the lot. The abstract contained an entry showing this restriction on the lots in the development:
      In any case no dwelling shall be permitted on any lot described herein, having a ground floor square foot area of less than 1,200 square feet in the case of a one structure (sic), nor less than 1,000 square feet in the case of a one and one-half or two story structure, exclusive of porches, porticos, entrance ways, airways or garages.
"Johnston purchased the lot. The deed to him was ‘subject to building restrictions, easements and zoning ordinances of record.’
"Triers entered into a written contract with Johnston for the purchase of the completed house and the lot. Johnston agreed in the contract to furnish ‘abstract showing marketable title.’
...
"II. Effect of Building Restriction Violation. The building restriction was violated as to the size of the ground floor. What was the effect of this on Johnston's rights against the Bank? Three subsidiary questions are involved on this phase of the case: whether breach of the building restriction rendered the title unmarketable, whether Johnston could enforce the letter if he did nor furnish marketable title...
"(a) Johnston's contract with Triers required him to furnish marketable title. The building restriction was violated and one of the neighbors objected to the violation, took counsel, and demanded compliance with the restriction. Was Johnston's title marketable? We think not.
"Restrictions on the use of land in themselves may render a title unmerchantable. Ft. Dodge, D.M. & S. Ry. v. American Community Stores Corp., 256 Iowa 1344, 131 N.W.2d 515; Annot. 57 A.L.R. 1253, 1301. But no objection to the title on that account is made here. The objection is to the breach of the restriction, to the possibility of litigation flowing from that breach, and to the reduced marketability of the title with that cloud hanging over it. We believe these factors rendered the title unmerchantable. As stated in Holliday v. Arthur, 241 Iowa 1193, 1196-1197, 44 N.W.2d 717, 719:
      When called upon to determine whether an abstract of title shows a merchantable title, unless the specific objections urged to the title have been definitely determined by the courts or are so clear as to not generate a doubt, the court need not pass upon the merits thereof. It is sufficient if the court finds the objections urged, present a doubtful question which may submit the objector to good faith litigation regarding same.
"See also Smith v. Huber, 224 Iowa 817, 828, 277 N.W. 557, 563 (‘The circumstances in this case are such that an affirmance of the lower court might compel appellant to ‘buy a law suit’ as well as the land, and this she cannot be required to do.'); Annot. 175 A.L.R. 1055, 1060 (violation of restrictions rendering title unmerchantable); 55 Am.Jur. Vendor & Purchaser s 204 at 666-667 (hazard of litigation rendering title unmerchantable); 92 C.J.S. Vendor and Purchaser s 191c at 30-31 (same).
"(b) The Bank's letter itself did not tell Johnston in so many words that the Bank's loan commitment to Triers was subject to Johnston's providing Triers with merchantable title and with Triers in turn presenting such a title to the Bank. The letter instead spoke of the Bank's requiring ‘a first and paramount lien on this property.’ We will assume without deciding that ‘a first and paramount lien’ does not require a marketable title.
"Still, underlying the Bank's letter, as all parties were fully aware, was Johnston's contract to provide Triers a marketable title and Triers' succeeding responsibility to present such a title to the Bank. Implicit in the Bank's letter was the assumption that Johnston would perform his contract with Triers properly so that they could carry out their responsibility to the Bank. The breakdown occurred at the beginning of the chain when Johnston failed to present marketable title to Triers. Johnston is in no position to urge that the Bank is estopped when his own default caused the breakdown. He was the one who from the start had the abstract showing the building restrictions, and he was the one who was relied on for compliance with restrictions and permits. …"

In years past I have counseled and represented various persons who've gotten involved with the various regional-government bodies that administer federal housing aid.
Before now I've not seen this particular sort of instrument. But the five-year "hold onto your property" condition for loan forgiveness has long been relatively common.

For those interested: here is my understanding of how housing aid works.
The USDA housing improvement grants funnel through the regional, inter-governmental councils or agencies.
The agencies distribute the money by means of direct grant payments to contractors who bid to weatherize/repair/improve old houses of qualifying needy people.
So far as the house owners are concerned they owe the amounts of the grants back to the agency--in form of "forgivable loans".

For every year the house owner keeps his real estate, one-fifth of the money debt is written off the agency's books. 
After five years, it's gone.
Thereafter the agency will neither have nor make any claim against the real estate.  
(Certainly after 21 years from the instrument's date the restriction will be barred from court enforcement: see section 614.24, the Stale Uses and Reversions Act.)

Looks as if the gummint boys have come up with a new leverage to protect their rights to receive repayment *if and when they have not already forgiven all of the grant*.

By its terms the instrument proclaims itself as a "retention agreement" creating "deed restrictions".
Paragraph 1 fixes the life of whatever the 'restrictions' may be, at five years from a date (that is not of record--Major problem #1).
Paragraph 2 burdens the title holder with responsibility to notify the "Lender" (the agency) if he sells the real estate within said five year period.
Paragraph 3 burdens the title holder to pay the "Lender" (the agency) for as many 1/5s of the grant money as may remain "Unforgiven" at time of conveyance.
Paragraph 5 amounts to a debt acceleration clause.
Paragraph 8 explicitly subordinates "[t]his instrument and these restrictions" to "the rights and liens, if any, under any valid outstanding Mortgage or other encumbrance, currently of record."

By implication of Paragraph 8, "[t]his instrument and these restrictions" do not themselves equate to or fall into a class of "Mortgage or other encumbrance."
By the restriction's explicit terms any remaining balance on the grant must be paid if the owner refinances, so the restriction would then expire and no subsequent mortgage could be "junior".

I do not see a promise to retain title to property as being equivalent to either a mortgage or a security interest.
The promise is not a positive grant of a 'stick from the bundle' to some lien holder (unless we read Paragraphs 2 and 3 to impose positive duties, but such are not related to the land).
Rather, the deed language merely contains a negative promise, wherein the title holder promises to do nothing (beyond continuing to hold title, i.e., the status quo).

Major problem #2: What relief might exist, if the property owner violated the restrictions and conveyed the property during the five years?
Dunno.  Worst-case seems to be either:  recission of the conveyance, or constructive trust in favor of the intergovernmental agency. 
(Re the trust possibility, see claim of "oral" promises to not convey farmland, raised in Light v. Ash, 174 Neb. 44, 115 N.W. 903 (1962) but failed due to evidentiary problems.)

Big question--if an Owner did convey then would the agency bother to file suit in district court in equity, to enforce a small claim? 
($4, 712.64 or less--although I've seen grants of five figures.)
An action much more expensive than whatever claim they'd be enforcing.  I just do not see this happening.  
These agencies exist to pass out taxpayers' money. They measure their "success" by how many Owners they aid, and by how much. 
Spending $$$ to squeeze a person who doesn't have the money, and might lose his house due to agency action? A bad look.
Title Standard 1.1?
I'd incline that way, but for the explicit language of the Johnston case indicating abstract-shown 'restrictions' may cloud marketable title.
Although Johnston may have come out as it did because a party benefiting from a deed restriction actually demanded compliance with the breached restriction.

One thing the owner might do to limit the need for a release, and erase (or at least limit) Major Problem #1:
At time of signing the restriction instrument the Owner may also prepare and file an Affidavit Explanatory of Title (AET) under Code section 558.8.
AET can identify for the public record the specific date on which the five year period commences:
"the last date on which the Owner receives financial assistance under the Program." (i.e., the final agency payout).
Ideally the loan officer at the agency would identify himself as such, name the date, and sign that affidavit.
If AET is filed only some time after the payouts, then the agency could also identify, as of the AET date: 
1) how much money remains to forgive, and 
2) what date the agency deems the restrictions to expire.

Hope this helps you Mr. Gartin.

David Hanson
Hofmeyer & Hanson PC
Fayette, Iowa

----- Original Message -----
From: "Timothy L. Gartin" <realestate@iabar.org>
To: realestate@iabar.org
Cc: "Matthew Rousseau" <matthew.rousseau@ifa.iowa.gov>
Sent: Wednesday, June 6, 2018 9:21:12 PM
Subject: [ISBA RealEstate]  Retention agreements as liens

Hi Colleagues,

I would value your insight into how to think about instruments called “Retention Agreements” where the retention period has passed. Should they be treated like mortgages where we are within ten years of the maturity date or like financing statements that legally expire after five years unless renewed? I have attached the instrument in question with the identifying information masked. In this situation, the retention agreement was filed 1/28/11 and provides for a five-year “retention period” beginning on the last date on which the Owner receives financial assistance under the program. The document is silent as to the precise date but let’s assume that it was more than five years ago. My specific question is whether retention agreements filed longer than their retention periods need to be released.

A few observations:

1.	The document does not define itself as a mortgage or a financing statement as defined by the Iowa Code.

2.	Whatever we call it (a mortgage, something else), the retention agreement initially encumbered the real estate in a defined amount, in this case $4,712.54.

3.	The balance of the obligation is reduced by 1/5 for every full year the Owner owns the property. Thus, because more than 5 years have passed since January 2011, it could be presumed that there is no further balance. However, you could make the same presumption with a mortgage beyond its maturity date.

4.	The full amount becomes due and payable if any of the events in section four of the agreement occur: (1) sale of property, (2) the property is surrendered as the principal residence of the Owner, or (3) the property is rented. How would an examining attorney know whether the Owner has moved out or rented the property based on the examination of the abstract? Should we presume compliance with the agreement? If the property was rented in year 2, the balance would then come due. Would the retention agreement continue as a lien against the property beyond the original five years. If so, for how long? 

Thanks,
Tim

Timothy L. Gartin
Hastings Gartin & Boettger LLP
409 Duff
Ames, IA 50010
T: 515-232-2501 / F: 515-232-2525
timothygartin@amesattorneys.com