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Two Mortgages Mean Money And Short Redemption Period

A mortgage-holder who holds two mortgages on a property can reduce the mortgagor’s redemption period but still obtain a money judgment against the debtor by foreclosing on one mortgage, waiving the deficiency judgment (creating a shortened redemption period), and seeking a money judgment on the second mortgage in a separate action.  

On February 17, 2011, the Court of Appeals released an opinion in the case Harbor Credit Union v. Samp, 2010AP974.  The Court held that a foreclosing party who elects the shortened redemption period by waiving the right to a deficiency judgment for one mortgage may still pursue debtor for a money judgment in a separate action based on a second, separate mortgage on the same property.  The Court stated that “in the context” of ch. 846 (the chapter governing foreclosures), “a deficiency judgment is associated with an identified foreclosure complaint” based on a specific debt secured by a specific mortgage and a money judgment resulting from a second, separate mortgage is not associated with the foreclosure complaint and does not amount to a deficiency judgment in the foreclosure proceeding.  Thus, a mortgage-holder who waives a deficiency judgment in a foreclosure action has waived a money judgment only as far as the debt and mortgage associated with the foreclosure action and is not prohibited from obtaining a money judgment based on a separate debt and mortgage.  The trial court also determined that in order to redeem the property after the sheriff’s sale, the debtor needed to pay the combined values of the amount due on the first mortgage foreclosure judgment and the amount due on the second mortgage money judgment. 

The Court of Appeals also affirmed the trial court’s refusal to vacate its confirmation order on the grounds that the debtor was not prevented from exercising his right to redeem on the date of sale and rejected debtor’s argument on the grounds of harmless error that a new sheriff’s sale was required because creditor failed to timely pay the clerk the mortgage balance after confirmation of the sale. 

In a dissent, one judge indicated that it was error to require debtor to pay the amounts due on both mortgages to redeem the property because creditor had not sought to foreclose the second mortgage.

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