Failure To Properly Serve Junior Lienholder Not Fatal To Foreclosure Sale Where 1st Mtg Balance Exceeded Home Value; Court Says "No Harm, No Foul"

The Wisconsin Law Journal reports:

• Last year, the Wisconsin Court of Appeals addressed what remedies were available to a junior lienholder who failed to participate in a foreclosure action. Effectively, the court limited the bank to purchasing the mortgagor’s right of redemption. (JP Morgan Chase Bank, N.A., v. Green, 2008 WI App 78, 753 N.W.2d 536)

• On Dec. 17, it addressed a corollary to that issue – what happens when a junior lienholder did not participate because it was not properly served. Effectively, the court adopted a “no harm, no foul” rule: because the value of the house was insufficient to cover the first mortgage, the junior lienholder suffered no harm from not being served. The court concluded, “the only reasonable inference from the record is that the value of the property at the time of the sheriff’s sale was no more than the amount of the first mortgage. It follows that there is no reason to believe that [the bank] would have benefited from exercising any of the rights of a junior lienholder.”(1)

For more, including the highlights from the case, see Remedy vacated in foreclosure action (Lienholder’s position can’t be improved).

For the court ruling, see Federal National Mortgage Association v. Lewis, No. 2008AP2, 2009 Wisc. App. LEXIS 959 (December 17, 2009).

(1) The issue of whether the first mortgage holder had legal standing to bring the foreclosure action in the first place was not raised by the junior lienholder in this case. If it had, and if it was then determined that the first mortgage holder's legal standing was questionable or lacking, the outcome in this matter may have been different. SewerServiceAlpha sewer service