If The Bank Took Your House, Do They Have To Sell It Too? The Answer Is YES!

To compel to sell: new obligations for mortgagee banks

Sara J. MacCarthyAuthor page »

In Bank of New York Mellon v. Carson, 2015 WI 2015 (Feb. 17, 2015), the Wisconsin Supreme Court held that Wis. Stat. § 846.102, the statute governing the foreclosure of abandoned properties, authorizes circuit courts to compel mortgagees to bring an abandoned property to sale after the expiration of the five-week redemption period. The court also held that the court shall order the sale within a “reasonable time” after the redemption period, as determined by the totality of the circumstances. In this case, a home mortgagor, Carson, defaulted on her loan, prompting the bank to initiate a foreclosure action. Carson, however, abandoned the property and it sat vacant for well over a year. During this time, the property was repeatedly vandalized and fell into a state of disrepair. Due to the condition of the property, Carson was fined $1,800 by the city of Milwaukee. Thereafter, Carson filed a motion, pursuant to Wis. Stat. § 846.102, to amend the judgment to include a finding that the property was abandoned and an order to compel its sale. The circuit court denied Carson’s request. She appealed, and the Wisconsin Court of Appeals agreed with Carson, holding that the statute authorized the circuit court to order the property, if determined to have been abandoned, to be “sold without delay.” The bank petitioned the Wisconsin Supreme Court for review. On review, the Wisconsin Supreme Court held that the “plain language” of the abandonment statute authorizes Wisconsin courts to order a lender to sell the property after the expiration of the five-week redemption period. Tracing the legislative history of the statute, the majority observed that the legislature clearly “intended to help municipalities deal with abandoned properties in a timely manner” and that, to effectuate that intent, the court would not permit properties to “languish” for years. Accordingly, the court held that the statute authorized the circuit court, after considering the totality of the circumstances, to compel mortgagees to sell foreclosed properties within a “reasonable time.”

As a result of this decision, foreclosure judgment holders may find it much more difficult to obtain a favorable return on a foreclosed property. As the concurring justices noted in Carson, “sometimes the mortgagee delays the sale of a foreclosed property in the expectation that the circumstances for the sale will improve.” Under the majority’s ruling, mortgagees may have little ability to “minimize or mitigate a loss.”

Mortgagees seeking to obtain a favorable return on a foreclosed property must therefore be careful about the timing of their foreclosure filings as they must be prepared to sell the property at any point after the redemption period, regardless of the market conditions.I

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