Wanezek, Jaekels, Daul & Babcock, S.C. Attorneys at Law — Founded 1908

RIGHT OF REDEMPTION IN FORECLOSURE ACTION

A foreclosing party can reduce a mortgagors’ right to redeem property from twelve months to six months if the foreclosing party waives the right to receive a deficiency judgment. When two mortgages exist, foreclosing on one mortgage and seeking money on the other mortgage will not impact the foreclosing party’s right to a six month redemption period.

 This is what the Wisconsin Court of Appeals, District III, held in Harbor Credit Union v. Samp, 2010AP974(Feb. 17, 2011). In that case, Harbor Credit Union held two mortgages on the same property. The first mortgage was the result of a loan in the approximate amount of $275,000.00. The second mortgage was the result of a loan in the approximate amount of $125,000.00. The mortgagor defaulted on his obligations on the loans and in March 2009 Harbor Credit Union brought a foreclosure action on the first mortgage. Harbor Credit Union elected to waive the right to receive a deficiency judgment on the first mortgage and the redemption period was shortened from twelve months to six months. In June 2009, the circuit court granted Harbor Credit Union a judgment of foreclosure, with a redemption period of six months and no deficiency judgment. The circuit court did not say anything about the second mortgage other than it was junior to the first mortgage.

In December 2009, Harbor Credit Union initiated a seperate action seeking a money judgment only on the second mortgage. Two weeks later, more than six months after the foreclosure judgment on the first mortgage was entered, a sheriff’s sale was conducted and Harbor Credit Union submitted the only bid on the property for $411,000.00 and thereafter moved the court for confirmation of the sale. Harbor Credit Union submitted that there was no deficiency on the first mortgage and the money judgment on the second mortgage would also be satisfied from the proceeds of the sale. The circuit court confirmed the sale but the mortgagor wished to redeem the property the same day by paying the sale amount. The court held open the mortgagors’ right to redeem until the end of that day and then confirmed the judgment.

The mortgagor did not redeem that same day but later filed a motion to vacate the order confirming the sale claiming that the money judgment that Harbor Credit Union received on the second mortgage amounted to a deficiency judgment and therefore Harbor Credit Union was not allowed a six month redemption period. The cicuit court denied the mortgagors’ motion and he appealed. The Court of Appeals affirmed by concluding that a money judgment obtained on a second mortgage does not amount to a deficiency judgment for purposes of the foreclosure action.