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Fundamental aspects of foreclosures

By: dmc-admin//July 23, 2007//

Fundamental aspects of foreclosures

By: dmc-admin//July 23, 2007//

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A mortgage payment hasn’t been made in months. It’s time to foreclose. Here’s what debtors and creditors can expect, legally speaking.

Wisconsin is a judicial foreclosure state, meaning that a lawsuit must be commenced to foreclose on property. It also means that the process in general is lengthier than the nonjudicial alternative available in some states, says M. Abigail O’Dess, an attorney with O’Dess & Associates S.C. in Wauwatosa, who has concentrated in the area for close to 30 years.

Chapter 846 of the Wisconsin Statutes governs the foreclosure process. The lender’s attorney begins with a title search, to ascertain if there are any issues regarding the title, and to determine if any other parties beside the homeowner need to be involved in the litigation via their interest in the property.

The next step is to prepare a summons and complaint. The petition typically contains allegations regarding nonpayment, along with copies of the note and mortgage. Occasionally, a copy of the payment history is also attached. Contemporan-eous to their filing, a lis pendens or notice of object of action is filed.

Serving Notice

Then the debtor is served, preferably in person, but service via publication is an alternative when someone cannot be located. If the debtor is personally served, he or she has 20 days to file an answer, or 40 days if served via publication.

If no answer is filed within that timeframe, the creditor asks for a hearing date, seeking a default judgment. It varies from county to county, but some venues will give hearing dates over the phone, as in Milwaukee; some allow counsel to file a blank motion to obtain a judgment hearing date along with the initial pleadings; and some courts follow a “five-day rule” process.

In the alternative, an answer might be filed, which contains a defense, such as a claim that payments were not properly credited, a priority dispute with another creditor, or defenses concerning the loan origination. In the event of a payment dispute, copies of the payment history and/or cancelled checks are produced to resolve the dispute.

Sometimes, debtors have has fallen further behind in payments than they realize, O’Dess explains. They may have received a letter in June that a payment hasn’t been made since March; they immediately make a payment for April; but they’re forgetting about May and June, which are past due or due now.

Facts

The number of foreclosure filings statewide* for the first five months rose 21.1 percent from 6,355 in 2006 to 7,697 in 2007.

Washburn County had the greatest percentage increase in foreclosure filings for the first five months going from 12 in 226 to 38 in 2007, a 217 percent increase.

Price County had the greatest percentage decrease in foreclosure filings for the first five months going from 24 in 2006 to 9 in 2007, a 63 percent decrease.

* Statewide information does not include Portage County

Source: ForeclosureWI.com

In Milwaukee, attorneys appear in person for the foreclosure judgment hearing, but in some counties, the appearance can be via telephone or affidavit. These are equity proceedings, and therefore are heard and decided via bench trials, rather than jury trials.

Redemption Period Follows Judgment

The foreclosure judgment starts the running of the redemption period. The redemption period is one year if the property is owner-occupied and the creditor seeks a deficiency judgment. Frequently, plaintiffs/creditors waive their rights to a deficiency judgment, in which case the sheriff sale may take place within six months of obtaining the foreclosure judgment.

However, if the property is greater than 20 acres, the redemption period is one year. If the property has been vacated and abandoned, then the redemption period is two months, with or without a deficiency judgment. And, in the event the property is non-owner occupied, the redemption period would be three months if a deficiency judgment is waived and the loan documents provide for this.

Once the redemption period has run, the property may be sold at a sheriff sale, which usually takes place at the courthouse or justice center for that county. In Milwaukee, it’s the Safety Building. The sheriff or a deputy serves as the auctioneer, and the creditor sets the opening bid. Third-party purchasers must pay 10 percent of their successful bid as a down payment.

Next comes the hearing to confirm the sheriff sale, which takes place about two or three weeks after it. Up until that date, the defendant may pay off the judgment, with interest, and other allowable expenses, to keep the property.

At the confirmation of sheriff sale, the title transfers to the lender if it’s a successful bidder. If a third party made the highest bid, he or she has 10 business days from the confirmation of sale to pay the balance of the bid to obtain the Sheriff’s Deed and the Real Estate Transfer Form.

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