SHARE

By of the

A bill that would strip the City of Milwaukee of its ability to force financial institutions to quickly sell abandoned, foreclosed properties known as zombie homes is headed toward the Senate floor.

"This would worsen the zombie property problem in Milwaukee and other communities considerably," Mayor Tom Barrett said. "I don't know why someone would want to worsen that problem."

Assembly Bill 720 would undo some of the powers to battle zombie homes that the city gained from a 2015 Wisconsin Supreme Court decision.

The bill passed a hurdle last week when it narrowly cleared a Senate committee. The Committee on Insurance, Housing and Trade passed the bill Thursday on a 3-2 vote, which was taken by a paper ballot rather than at a public meeting.

The move angered opponents of the bill, who said the committee's chairman, state Sen. Frank Lasee (R-De Pere), who is also the measure's lead sponsor in that house, had recently expressed concerns that the proposal needed work.

"At the public hearing on February 10th, Chairman Lasee was quite clear in his comments that this bill 'wasn't soup yet' and 'needed work,'" Vicky Selkowe, a lobbyist for Legal Action of Wisconsin, wrote in a Thursday email to the committee.

"Yet the bill before you today contains no new amendments or changes to address the concerns raised at that public hearing."

Lasee did not return calls for comment.

The 2015 unanimous Supreme Court decision upheld a 2012 law that strengthened Milwaukee's hand in dealing with zombie homes.

The justices said that when a court declares a foreclosed property to be abandoned, the lender must offer it for sale.

Foreclosed properties are auctioned off at sheriff's sales and lenders often buy the properties themselves.

The suit was brought by Legal Action on behalf of Shirley Carson, an elderly Milwaukee woman who had erroneously assumed she lost her home after a foreclosure suit, only to later learn she still owned the home and was responsible for the taxes and all the other costs of homeownership.

A homeowner keeps title to the property until a foreclosure action is complete and the home is sold at a sheriff's sale.

Many homeowners, however, assume they lost title when the foreclosure action begins and they abandon their property.

"This is why its referred to as a zombie" property, Barrett said, explaining the property sits vacant and is an attractive target for vandals. "Grandma is no longer around, grandma has moved on, grandma has zero economic incentive to improve the property."

Current law requires a lender to sell an abandoned foreclosed property after a five-week "redemption" period, during which the homeowner has an opportunity to pay the mortgage.

Assembly Bill 720 would give the lender one year to decide what to do with the property.

At the end of that period, the lender could sell the property or opt to walk away from it, leaving it in the original owner's hands — even if that person erroneously assumed they lost title and is long gone.

In the Carson case, the court did not set a time limit for when a lender must sell an abandoned property, said Rose Oswald Poels, president of the Wisconsin Bankers Association.

The trade group is backing the bill so that "a clear line" is established for when a lender must act.

But April Hartman, the Legal Action attorney who successfully argued the Carson case, said the bill would also allow lenders to release the mortgage and walk away from the property — an action that would keep the abandoned home in its zombie state.

The original owner would retain title and responsibility for the property even if they were long gone.

"If all they were trying to do is set the one-year limit, the bill would be less problematic," Hartman said. "Nothing in the Carson decision, or the current law, allows (lenders) to walk away" from an abandoned property.

For a commercial property, the bill would allow a lender to opt to do nothing, leaving the property in limbo, Milwaukee officials warn. And they warn the bill would make it easier for lenders to create zombie homes.

The bill's lead Assembly sponsor, state Rep. Terry Katsma (R-Oostburg), has said the proposal would help address the lingering foreclosure crisis — an argument city officials strongly dispute.

Katsma, a freshman legislator and former bank president, has acknowledged that he met with Milwaukee officials and knows they are opposed to the bill, but said he believes the measure would benefit the city.

The measure has already passed the Assembly, so if it wins the support of the Senate it would head to the desk of Gov. Scott Walker for his signature.

The proposal comes amid a crush of bills at the end of the legislative session, as lawmakers scramble to finish their work before heading out on the campaign trail.

It remains unclear whether the bill will make it to the Senate on March 15, which is the only remaining floor debate of the session.

"It's on the agenda for caucus discussion ... and then it will be under consideration for the floor on March 15," said Myranda Tanck, a spokeswoman for Senate Majority Leader Scott Fitzgerald (R-Juneau).