Agreed, Mr. Winkler raises an interesting and complicated question. 
Lots of cases involve the issuance of mortgages upon life estates.
Usually lenders will insist upon remaindermen joining the mortgage conveyance.

But--what happens when: 
1) the mortgage *does not cover the remainder interests* and then
2) the life tenant/mortgagor dies?

I *think* the answer is: the mortgage dies with the tenancy.
Therefore, the seller's attorney probably is correct.
However--is Medicaid Recovery involved here in some way?
If so then we must always deem the old common law rules to be thrown out by the Collectors.

Iowa law offers no clear guidance on the issue of expiration of mortgage liens upon life tenancies.
So let's see what hornbook law may tell us.

51 Am. Jur. 2d Life Tenants and Remaindermen § 116 (2017)
§ 116. Generally; effect on future interests
A life tenant is empowered to mortgage a life estate,1 and that interest may be sold through foreclosure.2 However, although a life tenant's interest may be mortgaged, unless the life tenant is given the power to convey in the instrument creating the estate, the tenant cannot encumber the entire estate without joinder of the remaindermen.3 Mortgaging the property will not give the mortgagee any legal or equitable rights against the remainderman,4 even though the money borrowed on the mortgage is used by the life tenant in making improvements of a permanent character to the estate.5
Under some circumstances a life tenant may mortgage the entire fee in the property. A life tenant who has an unrestricted power of sale may execute a mortgage affecting all the present and future interests in the property, but when the life tenant has a power of sale limited to one specific purpose, the tenant does not have the power to mortgage.6 A power to sell the property to invest or reinvest the proceeds does not include the power to mortgage entire interests in such property.7
In some jurisdictions statutes permit the holders of present interests or the holders of future interests to mortgage all the interests in estate property upon a proper showing under the terms of the statute, by court proceedings.8 In addition, a court of equity has the inherent power to order the mortgage of real estate conveyed by deed or devised by will to a life tenant with a remainder over if the exercise of such power is necessary to the preservation of the property and to prevent loss to both the life tenants and the remaindermen. This power of a court of equity may be invoked when some exigency exists which makes the action of the court indispensable to the preservation of the interests of all the parties in the real estate, or on the occasion of some other urgent necessity.9 Such a power has been exercised to pay taxes, repairs, or other charges in cases when the property is unproductive.10
Footnotes
1 Hershman-Tcherepnin v. Tcherepnin, 452 Mass. 77, 891 N.E.2d 194 (2008); Root v. Mackey, 486 S.W.2d 449 (Mo. 1972).
2 In re Felker, 211 B.R. 165 (Bankr. M.D. Pa. 1997), subsequently aff'd, 168 F.3d 478 (3d Cir. 1998).
3 Thompson v. Watkins, 285 N.C. 616, 207 S.E.2d 740 (1974).
As to property subject to mortgage generally, see Am. Jur. 2d, Mortgages § 25.
4 Ashbaugh v. Wright, 152 Minn. 57, 188 N.W. 157 (1922); Missouri Central Bldg. & Loan Ass'n v. Eveler, 237 Mo. 679, 141 S.W. 877 (1911); Tscherne v. Crane-Johnson Co., 56 S.D. 101, 227 N.W. 479 (1929).
5 Missouri Central Bldg. & Loan Ass'n v. Eveler, 237 Mo. 679, 141 S.W. 877 (1911).
6 Brunton v. Easthampton Sav. Bank, 336 Mass. 345, 145 N.E.2d 696 (1957).
7 McMillan v. Cox, 109 Ga. 42, 34 S.E. 341 (1899); Chenault's Guardian v. Metropolitan Life Ins. Co., 245 Ky. 482, 53 S.W.2d 720 (1932); Norris v. Woods, 89 Va. 873, 17 S.E. 552 (1893).
8 Brunton v. Easthampton Sav. Bank, 336 Mass. 345, 145 N.E.2d 696 (1957); In re Gaffers' Estate, 254 A.D. 448, 5 N.Y.S.2d 671 (3d Dep't 1938).
9 McDavid v. McDavid, 187 S.C. 127, 197 S.E. 204, 116 A.L.R. 1412 (1938).
10 § 117.
...

Closest Iowa cases I can find on point appear to presume the relevant law to be what first paragraph of section 116 recites.
*Lytle v. Guillams, 241 Iowa 523, 41 N.W.2d 668, 16 A.L.R.2d 1377 (1950).
Lytle involved a life tenant and the principal remainderman granting a mortgage upon land where two other, lesser remaindermen (grantees of cash bequests to be paid from the land) did not join in the mortgage grant.
Mortgagee later foreclosed, had the land sold, and took a sheriff's deed--all without naming the other two remaindermen as owners of any interest.
Purchaser taking under the sheriff's deed claimed that the remaindermen were cut off by the statute of limitations found in Code section 614.17.
The Iowa Supreme Court disagreed:
"In the case at bar the sheriff's deed did not issue until 1942. The mortgage was made by testator's widow and his son Harry. The widow had a life estate only, in the land. Each daughter had a $2,700 interest in the remainder. The interest of Harry in the remainder, assuming his acceptance of it, was subject to these prior interests. These matters were shown of record in the probate proceedings. Hence the widow and Harry never had the record title to the land, within the meaning of the statute. It follows appellants did not possess such title as qualified them to invoke the bar of Code section 614.17 against the successors in interest of testator's two daughters."

Patent implication of the Lytle ruling supports the hornbook statement at footnote 4.

*Whitley v. Johnson, 135 Iowa 620, 113 N.W. 550 (1907):
District Court "took the view--and so decreed--that, under the peculiar circumstances of the case, all rights of plaintiff under his mortgage ceased upon the termination of the life estate; that the lien of such mortgage was not extended by operation of law to cover the fee title when that came to be cast upon Mrs. Johnson on the death of her daughter." 
The Supreme Court did not take this conclusion to be an incorrect statement of law as recited. 
Instead it reversed on ground that the life tenant survived her intestate daughter, the remainderman, who left no heirs.
Therefore the life tenant's inherited the remainder interest belonging to the daughter, merging the remainder (as after-acquired property) with the mortgaged life tenancy so the fee title was united in the life tenant.

Seems to me that the mortgagee's mortgage lien must necessarily expire when the mortgagor expires, absent a special situation as in Whitley.

To same effect see the explicit exception given by:

59 C.J.S. Mortgages § 211, p.277 (1949):
"The lien of the mortgage, once attached to land, continues in force ...until the property covered by the mortgage ceases to exist....  The lien of the mortgage is not divested...by the death of the mortgagor, unless the death extinguishes the interest of the mortgagor."

Snippets of some other states' cases Westlaw offers, seeming to support expiration of mortgage given by life tenant upon expiration of the life tenancy:

*Citizens National Bank of Alton v. Glassbrenner, 36 N.E.2d 364, 377 Ill. 270 (1941)(dismissal of foreclosure action; "the only interest covered was the life estate which terminated on the death of the mortgagor, and the appellees now own the land free from the mortgage.") 
*L'Etourneau v. Henquenet, 89 Mich. 428, 50 N.W. 1077 (1891)(partly overruled on other grounds by In re Jamieson's Estate, 132 N.W.2d 1 (Mich. 1965))(mortgages granted by one holding during her life an undivided share of real estate "have no claim upon" the life tenant's share of said real property after it passed to others at her death)
*Townshend v. Chase Mortgage Corp., 657 N.W.2d 741 (Mich. App. 2002)(surviving joint tenant not a party to deceased joint tenant's grant of mortgage lien held "not liable on the mortgage because he was not a party to the mortgage, therefore the mortgage was effectively terminated by Mrs. Townshend's death because her interest in the property was extinguished by her death. Simply put, while the debt became an obligation of the estate, the property did not become an asset of the estate.")
*Ashbaugh v. Wright, 152 Minn. 57, 188 N.W. 157 (1922)(where life tenant attempts to convey premises in fee, grantee's possession is not adverse to remaindermen "until the termination of the life estate"; foreclosure of a mortgage given by life tenant cannot affect rights of remaindermen)
*In re North's Estate, 320 S.W.2d 597 (Mo.App. 1959)(should life tenant mortgage his tenancy, "rights of his transferee will terminate contemporaneously with termination of the life estate.") 

Hope this offers some perspective.



David Hanson
Hofmeyer & Hanson PC
Fayette, Iowa



----- Original Message -----
From: "Jamie Splinter" <realestate@iabar.org>
To: realestate@iabar.org
Sent: Wednesday, October 4, 2017 10:41:42 AM
Subject: RE: [ISBA RealEstate]  Life estate mortgage

Don,

What an interesting issue.  I note Glenn's thoughts below.  However, I would
think you are correct. Her life estate from the time she ran out of money to
her death had value. Determining that value will be necessary. It is that
reservation of the life estate that hurt her. Otherwise, the look-back
period of 5 years would have prevented the nursing home/State from going
after her. Then again, the nursing home likely would not have kept her. Also
interesting is that the POA signed a mortgage, so that most likely waives
her homestead protection, but would check the language.  

Without any legal authority, I think the value of her life estate from when
she ran out of money until her death is subject to this mortgage/debt.  I do
agree with Glenn that your client is buying into litigation regardless. So
requiring it is paid or in escrow is good, but make sure interest hasn't
accrued so that the escrow is not large enough and certainly hold harmless
language.
 

Blessings,

Jamie

Jamie A. Splinter
Splinter Law Office
1660 Embassy W. Dr. Ste. 125
Dubuque, IA 52002
Phone: 563.556.0512
Fax: 563.556.0513


From: realestate-owner@iabar.org [mailto:realestate-owner@iabar.org] On
Behalf Of Glenn Bartelt
Sent: Wednesday, October 04, 2017 10:36 AM
To: realestate@iabar.org
Subject: RE: [ISBA RealEstate] Life estate mortgage

Mr. Winkler:  I think that you are wrong to require the debt to be paid and
the mortgage released, but you are right to not have your client buy into
litigation with the nursing home. I would suggest closing on the purchase
with 125% of the debt escrowed until the remaindermen obtain a declaratory
judgment that there is no lien against the real estate.

Glenn Bartelt


From: realestate-owner@iabar.org <mailto:realestate-owner@iabar.org>
[mailto:realestate-owner@iabar.org] On Behalf Of Don Winkler
Sent: Wednesday, October 04, 2017 8:47 AM
To: Iowa Bar Association Real Estate Blog
Subject: [ISBA RealEstate] Life estate mortgage


Listmates:   Mother transfers 80 acre farm in 2001 to her two sons,
reserving a life estate to herself.  She enters nursing home in 2009 and
eventually runs out of money, nursing home debt accrues to $80,000.00 plus.
Nursing home demands a promissory note and open-end mortgage on the farm as
the nursing home debt continues to accrue.  The one son who holds power of
attorney signs the mortgage on behalf of Mother as her agent.  The legal
description given in the mortgage states:  "Reserved Life Estate Interest in
the (legal inserted).." .  Mother has died and affidavit terminating life
estate interest filed of record.  Sons are now selling farm to my client.
Sons attorney asserts that there is no mortgage lien anymore since only a
life estate interest was mortgaged and now that life estate is terminated.
I have objected to the title stating that the mortgage must now be paid off
and released of record.    Am I wrong?  Appreciate your thoughts.  Thanks.
Don
 

Donald M. Winkler
Attorney at Law
130 S 3rd Street
P.O. Box 91
Laurens, IA 50554-0091
Tele:  712-841-4523
Fax:    712-841-2050
Email:  don@laurens-law.com <mailto:don@laurens-law.com>