Significant changes have been made to redemption periods for Wisconsin non-commercial mortgages executed on or after April 27, 2016, in addition to modifications to the procedures for the sale of abandoned properties. The impacted area of state law went into effect on the same date in 2016 through the enactment of 2015 Wisconsin Act 376.
Chapter 846 of the Wisconsin Statutes governs redemption periods following the entry of judgment of foreclosure. Those periods depend on a building’s occupancy status and whether the lender is pursuing collection from the borrower for the difference owed on a loan following completion of the foreclosure.
Changes to Redemption Periods Where Deficiency is Sought
Under the revised version of the statute, redemption periods where a deficiency is sought depend on the mortgage execution date, as follows:
- If the mortgage was executed before April 27, 2016, the sale cannot occur until 12 months after judgment of foreclosure is entered;1
- If the mortgage was executed on or after April 27, 2016, the sale cannot occur until six months after judgment of foreclosure is entered.2
In the second timeframe, the mortgagor may request that the court extend the redemption period to eight months, but only if "the mortgagor is attempting in good faith to sell the mortgaged premises and has entered into a listing agreement with a licensed real estate broker."3
Changes to Redemption Periods Where Deficiency is Waived
Under the revised version of the statute, redemption periods where the lender has waived its right to a judgment for any deficiency remaining due after the sale of the mortgaged premises, are as follows:
- If the mortgage was executed before April 27, 2016, the sale cannot occur until six months after judgment of foreclosure is entered;4
- If the mortgage was executed on or after April 27, 2016, the sale cannot occur until three months after judgment of foreclosure is entered.5
The mortgagor may ask to extend this redemption period in the second timeframe to five months, if the court determines that the mortgagor is making a good faith effort to sell the mortgaged property and has listed the property for sale.6
Changes to Procedures for Abandoned Properties
Changes were also made to the procedures for the sale of abandoned properties. Under the revised statute, the redemption period remains five weeks from the foreclosure judgment entry for abandoned properties, regardless of whether a deficiency is sought.7 The courts will look at the totality of circumstances in determining whether a property was abandoned by the mortgagor.8 The updated law does not have a provision that changes the five-week redemption period for abandoned properties based on date the mortgage was executed.
The specific modifications that were made to Wis. Stat. § 846.102 concern the timing of the judicial sale following the entry of judgment. These changes were made in response to the Wisconsin Supreme Court's decision in Bank of New York v. Carson, 2015 WI 15. Carson held that "when the court determines that a property is abandoned, Wis. Stat. § 846.102 authorizes the circuit court to order a mortgagee to bring the property to sale after the redemption period."9 The Wisconsin Supreme Court further held that "the circuit court shall order the property to be brought to sale within a reasonable time after the redemption period."10
The updated law nullifies the decision in Carson by requiring the foreclosing lender, within 12 months of the foreclosure judgment entry to:
- Sell the mortgaged property and have the sale confirmed, or
- Release or satisfy the mortgage lien and vacate the judgment of foreclosure with prejudice.11
Under the revised law, the lender may put a property up for sale any time after the five-week redemption period ends, but must do so within 12 months after judgment is entered.12
Impact on Wisconsin Mortgage Lenders
Overall, these changes are beneficial to mortgage lenders because they shorten foreclosure timelines for mortgages executed on or after April 27, 2016. Mortgage lenders previously typically opted to waive their right to deficiency given the longer redemption period under the previous form of the statute.
The changes to the law regarding the sale of abandoned properties are also beneficial because a mortgage lender is no longer forced to bring the property to sale exactly five weeks following judgment. These modifications and the nullification of the Carson decision give mortgage lenders additional time to perform a cost-benefit analysis in determining whether to complete the foreclosure and come into title of an abandoned property that may have structural issues and other forms of damage.
Mortgage lenders in Wisconsin should take note of these changes in the law. Consulting with an Attorney in the Real Estate Default Group at Weltman, Weinberg & Reis Co., L.P.A. can aid in determining whether or not to waive rights to a deficiency judgment following the sale of a non-commercial mortgaged property.
1 Wis. Stat. § 846.10(2)(a)(1)
2 Wis. Stat. § 846.10(2)(a)(2)(a)
3 Wis. Stat. § 846.10(2)(a)(2)(b)
4 Wis. Stat. § 846.101(2)(b)
5 Wis. Stat. § 846.101(2)(c)(1)
6 Wis. Stat. § 846.101(2)(c)(2)
7 Wis. Stat. § 846.102(3)(a)(1)
8 Wis. Stat. § 846.102(2)(a)-(f)
9 2015 WI 15, ¶ 3.
11 Wis. Stat. § 846.102(3)(a)(1)-(2)