[WSBARP] Judgment for Deed

[Bickel, Dwight]

It is not true that the entry of the "judgment already extinguished the DOT and other items on record below it"

The entry of the Decree of Foreclosure, and the Judgment determining the amount owed, do not affect junior liens at that point in time. The junior liens and rights of successors are not extinguished until a judicial sale, followed by redemption rights, leading to a Sheriff's Deed. At that point, the rights of junior lienholders and successors to the borrower are terminated in favor of the holder of the Sheriff's Certificate of Purchase leading to the Sheriff's Deed conveying to that purchaser.

It would be most helpful to distinguish the deed is not given in satisfaction of the indebtedness. Lenders should preserve the right to collect indebtedness against the land. If the lender agrees to extinguish the debt, then it cannot foreclose against junior liens or successors. In this scenario, the value to the owner received in exchange for title is probably the lender's agreement not to pursue collection against the borrower, but without altering the the lender's rights to pursue collection against the land using either the mortgage or the judgment. A DIL in this instance would be given as part of an agreement that the lender will accept the transfer of the land, in its encumbered present condition, and the lender will agree not to pursue the judgment debtor for any payment in addition to the transfer of title.

The lender could also agree not to proceed with the foreclosure [or execution of the judgment.] Sometimes the value of the land is sufficient for the lender even though those junior liens are also entitled to payment at the time of resale.

That will not affect the rights, or the lien priorities, of any junior lien or successor in ownership. The lender should preserve its mortgage and probably should proceed with the Decree of Foreclosure if the lender needs to extinguish junior liens or interests.

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