CURP Brief: How will proposed changes to Wisconsin Foreclosure law affect the Real Estate Market?
Assembly Bill 720 passed in both houses of the Wisconsin State Legislature by concurrence, and proposes to drastically change foreclosure law in Wisconsin. AB 720 awaits passage by Governor Scott Walker. The bill is set to become law by legislative procedure on April 27, 2016 even if the Governor does not sign the bill. The bill affects Wisconsin State Statute Chapter 846.
The bill was passed by strict partisan Republican majority vote. The bill proposes to allow lenders to speed up the foreclosure process and also extends the period of time property can legally be abandoned. The bill also significantly curtails, and in the case of commercial property prevents, any local government or party to the foreclosure other than the lender from being able to seek remedy in the court.
Contextual considerations relating to Mortgage Foreclosure
The Great Recession of 2008 revealed many vulnerabilities of the US economy. The real estate industry was tremendously affected by the loss of productivity and consumer income, which contributed heavily to widespread residential mortgage foreclosure in the years following the recession. Mortgage foreclosure and its effects on regional economies remains a prominent issue for State and local decision-makers, as the delicate balance between industry, consumers and government is tested when foreclosures happen in greater frequency than in periods of economic stability. Regional economies and their stake-holders are tested further when real estate market recovery lags, and mortgage foreclosure turns into long-term unoccupied property.
In Wisconsin, the combination of uneven real estate market strength, lending practices, and consumer behavior, created a unique and problematic condition in the State's local economies, know as "Zombie Mortgages". In plain language, a Zombie Mortgage describes the situation of an incomplete foreclosure: when a property has been abandoned by the owner, however the owner still legal owns the property as the title holder. In weak real estate markets, a property can stay in this perpetual abandonment cycle for years.
Wisconsin lawmakers historically have upheld strong consumer protections. With regard to consumer protections that apply to the real estate market, homeowners under current law can quickly exit foreclosure by voluntarily abandoning their property or alternatively, homeowners can, if they so choose, continue to occupy their homes a minimum of one year, before a sale can occur. Another issue as it pertains to current law, relates to lenders and the limitations that they face in their ability to sell foreclosed properties quickly without having consent of the borrower.
After reviewing AB 720, Current Public Policy determined the following primary impacts of the bill:
Read the full analysis here in pdf format.
The bill was passed by strict partisan Republican majority vote. The bill proposes to allow lenders to speed up the foreclosure process and also extends the period of time property can legally be abandoned. The bill also significantly curtails, and in the case of commercial property prevents, any local government or party to the foreclosure other than the lender from being able to seek remedy in the court.
Contextual considerations relating to Mortgage Foreclosure
The Great Recession of 2008 revealed many vulnerabilities of the US economy. The real estate industry was tremendously affected by the loss of productivity and consumer income, which contributed heavily to widespread residential mortgage foreclosure in the years following the recession. Mortgage foreclosure and its effects on regional economies remains a prominent issue for State and local decision-makers, as the delicate balance between industry, consumers and government is tested when foreclosures happen in greater frequency than in periods of economic stability. Regional economies and their stake-holders are tested further when real estate market recovery lags, and mortgage foreclosure turns into long-term unoccupied property.
In Wisconsin, the combination of uneven real estate market strength, lending practices, and consumer behavior, created a unique and problematic condition in the State's local economies, know as "Zombie Mortgages". In plain language, a Zombie Mortgage describes the situation of an incomplete foreclosure: when a property has been abandoned by the owner, however the owner still legal owns the property as the title holder. In weak real estate markets, a property can stay in this perpetual abandonment cycle for years.
Wisconsin lawmakers historically have upheld strong consumer protections. With regard to consumer protections that apply to the real estate market, homeowners under current law can quickly exit foreclosure by voluntarily abandoning their property or alternatively, homeowners can, if they so choose, continue to occupy their homes a minimum of one year, before a sale can occur. Another issue as it pertains to current law, relates to lenders and the limitations that they face in their ability to sell foreclosed properties quickly without having consent of the borrower.
After reviewing AB 720, Current Public Policy determined the following primary impacts of the bill:
- Mortgage lenders will have increased leverage over borrowers
- Prohibits borrowers from escaping foreclosure by abandoning their property
- Lenders are allowed to hold residential property abandoned for longer periods of time, significantly delaying borrowers financial recovery
- Local governments are prohibited from redeveloping abandoned commercial property
- The bill allows lenders to hold private sales of property
Read the full analysis here in pdf format.
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