Undergoing a foreclosure can be both traumatic and saddening, but it’s important to know what may or may not take place in the process. In the state of Wisconsin, for example, a foreclosure may result in a deficiency judgment, but the likelihood of that occurring is rather low.
Understanding Deficiency Judgments
To acquire a better understanding of Wisconsin’s foreclosure process, what is meant by deficiency judgment, the deficiency judgments Wisconsin rules and why it’s rarely an issue in the state, review the following points:
- There are two types of foreclosures in the state of Wisconsin—judicial and non-judicial.
- The judicial method occurs when there is neither a deed of trust nor a power of sale clause within the mortgage, thereby requiring the lender to file suit with the court to move forward with the foreclosure. While the borrower has a specific time frame within which he may pay the amount that he owes, the property is sold by auction if he fails to do so.
- The non-judicial method occurs when the power of sale clause in the mortgage explicitly states how the foreclosure is to be processed. The power of sale gives the lender the right to sell the property without going through the court system so that the balance of the loan may be paid in the instance of default.
- The foreclosure process in Wisconsin typically takes three months.
- The lender has the right to file for a deficiency judgement, which is a mandate that the borrower (generally, the property owner) pay the difference between the amount of the mortgage and the price for which the property sold at foreclosure. Nevertheless, the state requires that the lender limit the difference to the fair market value of the property at the time of its foreclosure sale and the loan balance that the borrower owes.
- Despite the state’s allowance for deficiency judgments, most lenders do not pursue this option. Why? Because a lender in Wisconsin that decides to file a deficiency judgment must wait 12 months from the time a foreclosure begins to the time that the sale of the property is finalized. Alternatively, if he opts not to file a deficiency judgment, then he can complete the foreclosure process in as few as six months. Given the option to sell sooner rather than later, a lender usually gives up his rights to demand that the borrower pay the difference between the foreclosure price and what is owed on the loan. This may at least prevent the borrower from having to file bankruptcy if his home is his only large debt.
Getting Help
When dealing with foreclosure, it is always a good idea to get legal help. Your lawyer can not only explain all the possible consequences of foreclosure to you, but can also help you to explore any and all options for avoiding foreclosure and coming to an agreement that is better for both you and the mortgage lender.
