846.40 Regulation of foreclosure reconveyances.
(1) Definitions. In this section:
(a) “Closing" means an in-person meeting to complete final documents incident to the sale of real property or the creation of a mortgage on real property that is conducted by a closing agent who is not employed by, an affiliate of, or employed by an affiliate of, any foreclosure purchaser involved in the closing, and who does not have a business or personal relationship with any foreclosure purchaser involved in the closing other than the provision of real estate settlement services.
(b) “Foreclosed homeowner" means an owner of a residence in foreclosure.
(c) “Foreclosure purchaser" means a person that has acted as the acquirer in a foreclosure reconveyance. “Foreclosure purchaser" also includes a person that has acted in joint venture or joint enterprise with one or more acquirers in a foreclosure reconveyance. “Foreclosure purchaser" does not include any of the following:
1. A natural person who shows that he or she is not in the business of foreclosure purchasing and who has a prior personal relationship with the foreclosed homeowner.
2. A federal or state chartered bank, savings bank, savings and loan association, or credit union.
(d) “Foreclosure reconveyance" means a transaction involving all of the following:
1. The transfer of title to real property by a foreclosed homeowner during a foreclosure proceeding, either by a transfer of interest from the foreclosed homeowner or by the creation of a mortgage or other lien or encumbrance during the foreclosure process.
2. The subsequent conveyance, or promise of a subsequent conveyance, of an interest back to the foreclosed homeowner by the acquirer or a person acting in participation with the acquirer that allows the foreclosed homeowner to possess either the residence in foreclosure or other real property, which interest includes an interest in a land contract, purchase agreement, option to purchase, or lease.
(e) “Primary housing expenses" means the sum of payments for regular principal, interest, rent, utilities, fire and casualty insurance, real estate taxes, and association dues.
(f) “Resale" means a bona fide market sale of the property subject to the foreclosure reconveyance by the foreclosure purchaser to an unaffiliated 3rd party.
(g) “Resale price" means the gross sale price of the property on resale.
(h) “Residence in foreclosure" means residential real property located in this state that consists of one to 4 family dwelling units and with respect to which real property there is a delinquency or default on any loan payment or debt secured by or attached to the residential real property, including land contract payments. The owner of the residential real property may, but is not required to, occupy the residential real property as the owner's principal place of residence.
(2) Contract requirement; form and language. A foreclosure purchaser that enters into any foreclosure reconveyance shall do so by a written contract. Every contract must be written in letters of not less than 12-point boldface type, both in English and in the same language principally used by the foreclosure purchaser and foreclosed homeowner to negotiate the sale of the residence in foreclosure if other than English, and must be fully completed, signed, and dated by the foreclosed homeowner and foreclosure purchaser before the execution of any instrument of conveyance of the residence in foreclosure.
(3) Contract terms.
(a) Every contract required by sub. (2) must contain the entire agreement of the parties and must include all of the following terms:
1. The name, business address, and telephone number of the foreclosure purchaser.
2. The address of the residence in foreclosure.
3. The total consideration to be given by the foreclosure purchaser in connection with or incident to the sale.
4. A complete description of the terms of payment or other consideration, including any services of any nature that the foreclosure purchaser represents he or she will perform for the foreclosed homeowner before or after the sale.
5. The time at which possession is to be transferred to the foreclosure purchaser.
6. A complete description of the terms of any related agreement designed to allow the foreclosed homeowner to remain in possession of the home, such as a rental agreement, repurchase agreement, land contract, or lease with option to purchase.
7. The time for determining the fair market value of the property, as provided under sub. (8) (b) 2. b.
8. A notice of cancellation as provided in sub. (5) (b).
9. Immediately above the statement required by sub. (5) (a), in not less than 14-point boldface type if the contract is printed or in capital letters if the contract is typed, and completed with the name of the foreclosure purchaser, the following notice:
NOTICE REQUIRED BY WISCONSIN LAW
Until your right to cancel this contract has ended, .... (Name of foreclosure purchaser) or anyone working for .... (Name of foreclosure purchaser) CANNOT ask you to sign or have you sign any deed or any other document.
(b) The contract required by this subsection survives delivery of any instrument of conveyance of the residence in foreclosure and has no effect on persons other than the parties to the contract.
(4) Contract cancellation.
(a) In addition to any other right of rescission, the foreclosed homeowner has the right to cancel any contract with a foreclosure purchaser until midnight of the 5th business day following the day on which the foreclosed homeowner signs a contract that complies with subs. (2) to (6) or until 8:00 a.m. on the last day of the period during which the foreclosed homeowner has a right of redemption, whichever occurs first.
(b) Cancellation occurs when the foreclosed homeowner delivers to the foreclosure purchaser, personally or by certified mail, a signed and dated written notice of cancellation. The contract and notice of cancellation form under sub. (5) (b) must contain a street or physical address to which notice of cancellation may be mailed by certified mail or personally delivered. A post office box may be designated for delivery by certified mail only if it is accompanied by a street or physical address at which the notice may be personally delivered. If the notice of cancellation is personally delivered, the foreclosure purchaser must provide a receipt to the foreclosed homeowner. If cancellation is mailed by certified mail, delivery is effective when the notice of cancellation is deposited in the U.S. mail. If cancellation is personally delivered, delivery is effective when the notice of cancellation is handed to the foreclosure purchaser.
(c) A notice of cancellation given by the foreclosed homeowner need not take the particular form provided under sub. (5) (b).
(d) Within 10 days following receipt of a notice of cancellation given in accordance with this subsection, the foreclosure purchaser shall return without condition any original contract and any other documents signed by the foreclosed homeowner.
(5) Notice of cancellation.
(a)
1. The contract must contain conspicuously and in immediate proximity to the space reserved for the foreclosed homeowner's signature, in not less than 14-point boldface type if the contract is printed or in capital letters if the contract is typed, the following statement: “You may cancel this contract for the sale of your house without any penalty or obligation at any time before .... (date and time of day). See the attached notice of cancellation form for an explanation of this right."
2. The foreclosure purchaser shall accurately enter the date and time of day on which the cancellation right ends.
(b) The contract must be accompanied by a completed form in duplicate, captioned “Notice of cancellation" in 12-point boldface type if the contract is printed or in capital letters if the contract is typed, followed by a space in which the foreclosure purchaser shall enter the date on which the foreclosed homeowner executes the contract. This form must be attached to the contract, must be easily detachable, and must contain, in not less than 10-point type if the contract is printed or in capital letters if the contract is typed, the following statement:
NOTICE OF CANCELLATION
(Enter date contract signed)
1. You may cancel this contract for the sale of your house, without any penalty or obligation, at any time before .... (date and time of day).
2. To cancel this transaction, you may mail by certified mail or personally deliver a signed and dated copy of this notice of cancellation to .... (name of purchaser) at .... (street or physical address of purchaser's place of business) NOT LATER THAN .... (date and time of day). If you personally deliver this notice of cancellation, .... (name of purchaser) must give you a receipt.
3. I hereby cancel this transaction.
(Date) ....
(Seller's signature) ....
(c) The foreclosure purchaser shall provide the foreclosed homeowner with a copy of the contract and the attached notice of cancellation form at the time the contract is executed by all parties.
(d) The 5-day period under sub. (4) (a) during which the foreclosed homeowner may cancel the contract does not begin to run until all parties to the contract have executed the contract and the foreclosure purchaser has complied with this subsection.
(6) Waiver. Any waiver of the provisions of this section is void and unenforceable as contrary to public policy, except that a foreclosed homeowner may waive the 5-day right to cancel under sub. (4) (a) if the property is subject to a foreclosure sale within the 5 business days and the foreclosed homeowner agrees to waive his or her right to cancel in a handwritten statement signed by all parties holding title to the foreclosed property.
(7) Liability. Any provision in a contract entered into on or after March 6, 2009, that attempts or purports to require arbitration of any dispute arising under this section is void at the option of the foreclosed homeowner.
(8) General prohibitions and requirements.
(a) A foreclosure purchaser may not enter into, or attempt to enter into, a foreclosure reconveyance with a foreclosed homeowner unless all of the following are satisfied:
1. The foreclosure purchaser verifies and can demonstrate that the foreclosed homeowner has a reasonable ability to pay for the subsequent conveyance of an interest back to the foreclosed homeowner. In the case of a lease with an option to purchase, payment ability also includes the reasonable ability to make the lease payments and purchase the property within the term of the option to purchase. There is a rebuttable presumption that a foreclosed homeowner is reasonably able to pay for the subsequent conveyance if the foreclosed homeowner's payments for primary housing expenses and regular principal and interest payments on other personal debt, on a monthly basis, do not exceed 60 percent of the foreclosed homeowner's monthly gross income. There is a rebuttable presumption that the foreclosure purchaser has not verified reasonable payment ability if the foreclosure purchaser has not obtained documents other than a statement by the foreclosed homeowner of assets, liabilities, and income.
2. The foreclosure purchaser and the foreclosed homeowner complete a closing for any foreclosure reconveyance in which the foreclosure purchaser obtains a deed or mortgage from a foreclosed homeowner.
3. The foreclosure purchaser obtains the written consent of the foreclosed homeowner to a grant by the foreclosure purchaser of any interest in the property during such times as the foreclosed homeowner maintains any interest in the property.
(b) A foreclosure purchaser shall do either of the following:
1. Ensure that title to the subject dwelling has been reconveyed to the foreclosed homeowner.
2. Make a payment to the foreclosed homeowner such that the foreclosed homeowner has received consideration in an amount of at least 82 percent of the fair market value of the property within 150 days after either the eviction of, or voluntary relinquishment of possession of the dwelling by, the foreclosed homeowner. The foreclosure purchaser shall make a detailed accounting of the basis for the payment amount, or a detailed accounting of the reasons for failure to make a payment, including providing written documentation of expenses, within this 150-day period. The accounting shall be on a form prescribed by the attorney general, in consultation with the secretary of agriculture, trade and consumer protection. For purposes of this subdivision, all of the following apply:
a. There is a rebuttable presumption that an appraisal by a person licensed or certified by an agency of the federal government or this state to appraise real estate constitutes the fair market value of the property.
b. The time for determining the fair market value amount shall be specified in the foreclosure reconveyance contract as either at the time of the execution of the foreclosure reconveyance contract or at resale. If the contract states that the fair market value shall be determined at the time of resale, the fair market value shall be the resale price if it is sold within 120 days after the eviction of, or voluntary relinquishment of the property by, the foreclosed homeowner. If the contract states that the fair market value shall be determined at the time of resale, and the resale is not completed within 120 days after the eviction of, or voluntary relinquishment of the property by, the foreclosed homeowner, the fair market value shall be determined by an appraisal conducted during this 120-day period and payment, if required, shall be made to the foreclosed homeowner, but the fair market value shall be recalculated as the resale price on resale and an additional payment amount, if appropriate based on the resale price, shall be made to the foreclosed homeowner within 15 days after resale, and a detailed accounting of the basis for the payment amount, or a detailed accounting of the reasons for failure to make additional payment, shall be made within 15 days after resale, including providing written documentation of expenses. The accounting shall be on a form prescribed by the attorney general, in consultation with the secretary of agriculture, trade and consumer protection.
c. “Consideration" means any payment or thing of value provided to the foreclosed homeowner, including unpaid rent or land contract payments owed by the foreclosed homeowner prior to the date of eviction or voluntary relinquishment of the property, reasonable costs paid to 3rd parties necessary to complete the foreclosure reconveyance transaction, payment of money to satisfy a debt or legal obligation of the foreclosed homeowner, the reasonable cost of repairs for damage to the dwelling caused by the foreclosed homeowner, or a penalty imposed by a court for the filing of a frivolous claim in an eviction action under sub. (9). “Consideration" does not include amounts imputed as a down payment or fee to the foreclosure purchaser, or a person acting in participation with the foreclosure purchaser, incident to a land contract, lease, or option to purchase entered into as part of the foreclosure reconveyance, except for reasonable costs paid to 3rd parties necessary to complete the foreclosure reconveyance.
(c) A foreclosure purchaser may not enter into repurchase or lease terms as part of the subsequent conveyance that are unfair or commercially unreasonable, or engage in any other unfair conduct.
(d) A foreclosure purchaser may not represent, directly or indirectly, any of the following:
1. That the foreclosure purchaser is acting as an advisor or consultant, or in any other manner represent that the foreclosure purchaser is acting on behalf of the foreclosed homeowner.
2. That the foreclosure purchaser has certification or licensure that the foreclosure purchaser does not have, or that the foreclosure purchaser is not a member of a licensed profession if that is untrue.
3. That the foreclosure purchaser is assisting the foreclosed homeowner to save the house, or a substantially similar phrase.
4. That the foreclosure purchaser is assisting the foreclosed homeowner in preventing a completed foreclosure if the result of the transaction is that the foreclosed homeowner will not complete a redemption of the property.
(e) A foreclosure purchaser may not make any other statements, directly or by implication, or engage in any other conduct that is false, deceptive, or misleading, or that has the likelihood to cause confusion or misunderstanding, including statements regarding the value of the residence in foreclosure, the amount of proceeds the foreclosed homeowner will receive after a foreclosure sale, any contract term, or the foreclosed homeowner's rights or obligations incident to or arising out of the foreclosure reconveyance.
(f) Until the time during which the foreclosed homeowner may cancel the transaction has fully elapsed, a foreclosure purchaser may not do any of the following:
1. Accept from the foreclosed homeowner an execution of, or induce the foreclosed homeowner to execute, any instrument of conveyance of any interest in the residence in foreclosure.
2. Record or file with the register of deeds any document, including any instrument of conveyance, signed by the foreclosed homeowner.
3. Transfer or encumber or purport to transfer or encumber any interest in the residence in foreclosure to any 3rd party, provided no grant of any interest or encumbrance is defeated or affected as against a bona fide purchaser or encumbrance for value and without notice of a violation of this subdivision. Knowledge on the part of any such person or entity that the property was residential real property in foreclosure does not constitute notice of a violation of this subdivision. This subdivision does not abrogate any duty of inquiry that exists as to rights or interests of persons in possession of the residence in foreclosure.
4. Pay the foreclosed homeowner any consideration.
(g) If a foreclosure purchaser extends credit to, or arranges for credit to be extended to, the foreclosed homeowner, the foreclosure purchaser or other person with whom the foreclosure purchaser has arranged for the extension of credit shall comply with all requirements specified in Regulation Z under the federal Truth in Lending Act, 12 CFR 226, that apply to a creditor, as defined in 12 CFR 226.2 (a) (17) (i), in a residential mortgage transaction, as defined in 12 CFR 226.2 (24), regardless of whether the foreclosure purchaser or other person extending credit actually meets the definition of a creditor under 12 CFR 226.2 (a) (17) (i).
(9) Stay of proceedings in eviction actions.
(a) A court hearing an eviction action against a foreclosed homeowner shall stay the proceedings, without the imposition of a bond, if a defendant makes a prima facie showing of all of the following:
1. That any of the following applies to the defendant:
a. The defendant has commenced an action concerning a foreclosure reconveyance with respect to the property that is the subject of the eviction action.
b. The defendant asserts, in connection with a foreclosure reconveyance, any violation of this section or a claim or affirmative defense of fraud, false pretense, false promise, misrepresentation, misleading statement, or deceptive practice.
2. That the defendant owned the foreclosed residence.
3. That the defendant conveyed title to the foreclosed residence to a 3rd party upon a promise that the defendant would be allowed to occupy the foreclosed residence or other real property in which the foreclosure purchaser or a person acting in participation with the foreclosure purchaser has an interest and that the foreclosed residence or other real property would be the subject of a foreclosure reconveyance.
4. That since the conveyance to the 3rd party, the defendant has continuously occupied the foreclosed residence or other real property in which the foreclosure purchaser or a person acting in participation with the foreclosure purchaser has an interest.
(b) For purposes of par. (a), notarized affidavits are acceptable means of proof for meeting the defendant's burden of proof. A defendant may request, and upon a showing of good cause the court may grant, up to an additional 2 weeks to produce evidence to make the prima facie showing required under par. (a).
(c) The stay under this subsection shall remain in effect for 90 days if the defendant has not yet commenced and does not commence, within 90 days from the issuance of the stay, an action in connection with a foreclosure reconveyance transaction. If the defendant has commenced, or commences within 90 days from the issuance of the stay, an action in connection with a foreclosure reconveyance transaction, the stay shall remain in effect until the court hearing the action related to the foreclosure reconveyance renders a final decision in the matter.
(10) Enforcement.
(a) A violation of this section shall be considered a fraud.
(b) A foreclosed homeowner against whom a violation of this section is committed may bring an action for damages.
(c) A court may order punitive damages under s. 895.043 for a violation of this section.
(d)
1. A foreclosure purchaser who violates this section by engaging in any practice that would operate as a fraud or deceit upon a foreclosed homeowner may be fined not more than $50,000 or imprisoned for not more than one year in the county jail or both.
2. In the absence of additional misconduct, a failure of the parties to complete a foreclosure reconveyance transaction shall not subject a foreclosure purchaser to the criminal penalties under subd. 1.
History: 2009 a. 2.