Update: Governor Signs Bill Shortening Residential Redemption Periods

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By Norman D. Farnam

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By Douglas C. Scriver

April 26, 2016

Yesterday Governor Walker signed 2015 Assembly Bill 720, enacting 2015 Wisconsin Act 376 and shortening the redemption periods in residential foreclosure actions.  The Act became effective April 26, 2016.

Under the new law, the redemption period for residential properties is shortened from 12 months to six months if the lender does not waive its right to a deficiency judgment.  If the lender elects to waive its right to a deficiency judgment, the redemption period is shortened from six months to three months.

In either case, the homeowner may extend the redemption period by two months by listing the property in good faith with a licensed real estate broker.  In order to get the benefit of the extended redemption period, the homeowner must list the property before foreclosure judgment is entered and must make a motion to the court requesting the additional time to sell the property.  It is not clear whether the homeowner must answer the foreclosure complaint to be entitled to move the court to extend the redemption period.

The shortened redemption periods apply only to mortgages executed on or after April 26, 2016.  Homeowners with mortgages executed before April 26, 2016 are entitled to the longer redemption periods under the previous law.

Lenders should take steps to revise their standard mortgage language to account for the new, shortened redemption periods.  The authors anticipate that homeowners with mortgages executed on or after April 26, 2016 that recite the old redemption period language will be entitled to the longer redemption periods.

The upshot of the new law is that the redemption period will be reduced by 50% in most residential cases.  Homeowners who are making a genuine effort to sell their homes may get additional time.

The new law does not affect the redemption periods for commercial property.

If you have any questions about how the information in this article may affect you or your business, please contact Norm Farnam at nfarnam@stroudlaw.com or Doug Scriver at dscriver@stroudlaw.com or (608) 257-2281 or your Stroud attorney.

DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice.  This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship.  You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.