If you default on your mortgage payments in Wisconsin, the servicer (on behalf of the loan owner, called the "lender" in this article) will eventually begin a foreclosure. Approximately half of the states, including Wisconsin, require the lender to file a lawsuit in court to foreclose. State law specifies how foreclosures work, and both federal and state laws give you rights and protections throughout the process.
If you get a loan to buy residential real estate in Wisconsin, you'll likely sign two documents: a promissory note and a mortgage. The promissory note is the document that contains your promise to repay the loan along with the repayment terms. The mortgage is the document that gives the lender a security interest in the property. If you fail to make the payments, the mortgage provides the lender with the right to sell the home at a foreclosure sale to recoup the money it loaned you.
If you miss a payment, the servicer can usually charge a late fee after the grace period expires. Most mortgage loans give a grace period of ten to fifteen days, for example, before you’ll incur late charges. To find out the grace period in your situation and the amount of the late fee, review the promissory note or your monthly billing statement.
If you miss a few mortgage payments, the servicer will probably send letters and call you to try to collect. In most cases, federal mortgage servicing laws require the servicer to contact you (or attempt to contact you) by phone to discuss foreclosure alternatives—called "loss mitigation" options—no later than 36 days after a missed payment and again within 36 days after each following missed payment. No more than 45 days after a missed payment, the servicer must let you know in writing about loss mitigation options that could be available, and assign personnel to help you. Some exceptions to a few of these requirements exist, like if you file for bankruptcy or tell the servicer not to contact you under the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.39).
Many Wisconsin mortgages have a provision that requires the lender to send a breach letter if you fall behind in payments. This notice tells you that the loan is in default. If you don’t cure the default, the lender can accelerate the loan (call it due) and go ahead with the foreclosure.
Federal law generally requires the servicer to wait until the loan is over 120 days delinquent before officially starting a foreclosure. But in a few situations, like if you violate a due-on-sale clause or if the servicer is joining the foreclosure action of a superior or subordinate lienholder, the foreclosure can begin sooner. (12 C.F.R. § 1024.41).
Again, Wisconsin requires the lender to file a lawsuit in court to foreclose. The lender gives notice of the suit by serving you a summons and complaint. You generally have 20 days to file an answer with the court.
If you fail to answer the court action, the lender can get a default judgment from the court. The judgment will give the lender permission to hold a foreclosure sale. But if you respond to the lawsuit by filing an answer, the case will go through the litigation process. The lender might then request the court to grant summary judgment. A summary judgment motion asks that the court grant judgment in favor of the lender because the case’s critical aspects aren’t in dispute.
If the court grants summary judgment for the lender—or you lose at trial—the judge will order the home sold at a foreclosure sale. A notice of the sale must be published in a newspaper once a week for three weeks. The notice also has to be advertised in a public place and posted on the county website (if the county has one) at least three weeks before the foreclosure sale date. (Wis. Stat. § 815.31).
At the sale, the lender usually makes a bid on the property using a "credit bid" rather than bidding cash. With a credit bid, the lender gets a credit up to the amount of the borrower’s debt. Sometimes the lender bids the full amount of the debt; sometimes, it bids less. The highest bidder at the sale becomes the new owner of the property.
“Reinstating” is when the borrower brings the loan current by paying the missed payments of principal and interest, plus fees and costs. Completing a reinstatement will stop the foreclosure.
Under Wisconsin law, you have the right to reinstate before the judgment. The court will then dismiss the foreclosure. You can reinstate after judgment, which will stay (postpone) the case; but the foreclosure can proceed if you miss another payment. (Wis. Stat. § 846.05).
Some states have a law that gives a foreclosed homeowner time after the foreclosure sale to redeem the property. But in Wisconsin, the redemption period takes place before the sale. (Wis. Stat. § 846.13).
The redemption period ranges from five weeks to one year, depending on the circumstances, like whether the lender is seeking a deficiency judgment and when you signed the mortgage. (Wisconsin’s redemption laws are complicated and changed significantly on April 27, 2016. To learn more, see Nolo's article Can You Get Your Home Back After a Wisconsin Foreclosure? If you need more personalized information, consider consulting with a foreclosure attorney.)
Once the redemption period expires, the sale takes place. Wisconsin law doesn’t provide a post-sale right of redemption.
Sometimes, a foreclosure sale doesn’t bring in enough money to pay off the full amount owed on the loan. The difference between the sale price and the total debt is called a "deficiency balance." Many states, including Wisconsin, allow the lender to get a personal judgment, called a "deficiency judgment," for this amount against the borrower.
Deficiency judgments are allowed in Wisconsin if the lender requests one in the complaint. (Wis. Stat. § 846.04). Lenders often waive the right to the deficiency, though, to shorten the redemption period. (Wis. Stat. § 846.101).
You can stay in the home throughout the redemption period up until the court confirms the sale. If you don’t leave at that time, you'll be evicted. The order confirming the sale may also include a writ of assistance, an order from the court directing the sheriff to remove you from the property.
Foreclosure laws are complicated. Servicers and lenders sometimes make errors or forget steps. If you think your servicer or lender failed to complete a required step, made a mistake, or violated state or federal foreclosure laws, you might have a defense that could force a restart to the foreclosure, or you might have leverage to work out an alternative.
Consider talking to a local foreclosure attorney or legal aid office to learn about your rights. A lawyer can also tell you about different ways to avoid foreclosure. Likewise, a HUD-approved housing counselor can provide helpful information (at no cost) about various alternatives to foreclosure.