Posted By Larry on February 9, 2010

I have written several blog posts relating to foreclosure and deficiency judgments. Generally, most of the people who are in foreclosure have very little assets outside of their home and most are unemployed, which makes the possibility of a deficiency judgment unlikely.

Practically speaking, the downside risk for these homeowners is limited by their lack of any assets and by their lack of any real financial stake in their homes because of negative equity (they owe more than the home is worth). The lack of equity is due in part to the fact that they put very little or no down payment when they bought their home.

Recently, this has changed. Now, many people that I speak with have or had well paying jobs and some savings.  These are the homeowner’s who are at the biggest risk of a deficiency judgment; so called prime borrowers.  While it is true that many lenders have not sought deficiency judgments except in limited circumstances, it does not mean these borrowers are off the hook.  If history is any guide, what will happen in Florida is this: within the next 5 years, (5 years from the date of the foreclosure sale), lenders will sell their deficiency judgment rights to collection companies. These companies will in turn begin to track down these prime borrowers to collect on those debts.

Collection agencies exist for times like these.  They know that prime borrowers are the ones who are most likely to have assets and income to collect against at some time in the future. This is why prime borrowers should consult with a real estate attorney about the risks of walking away from their mortgages/home.  I always advise my clients that it’s always better to help out the bank, by short selling their property in order to bargain for either a release of the deficiency or a payoff arrangement with the bank, than to just walk away.  This way, they won’t have to look over their shoulder for the next 5 years and possibly longer.

If you would like more information about this topic or would like to discuss your matter with a real estate attorney, either post to this blog or contact me, Larry Tolchinsky, by email, or call me at (954) 458-8655 and I will be happy to answer your questions. I offer a free initial consultation.

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Tags: Broward Real Estate, Deficiency Judgments, Florida Real Estate, Florida Real Estate Foreclosures

Posted By admin on January 30, 2010

Insight from attorney Larry Tolchinsky contributed to a recent article on Bloomberg.com entitled “Lenders Pursue Mortgage Payoffs Long After Homeowners Default.”  The article, written by Kathleen M. Howley, summarizes the concept of deficiency judgments and raises the question whether this issue will be the next big crisis for consumers.

If you are interested in learning more about deficiency judgments, click here to read several articles Larry has written on the topic.  If after reviewing this information, you still would like more information, you may either post a comment to this blog, contact him by email, or call him at (954) 458-8655 and he will be happy to answer your questions. He offers a free initial consultation.

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Tags: Broward Real Estate, Deficiency Judgments, Florida Real Estate

Posted By Larry on January 13, 2010

In South Florida, especially, the law is particularly sensitive to the many distinct abuses that may be perpetrated against the elderly, including physical mistreatment, neglect and undue influence.

To be sure, undue influence is much harder to spot than physical mistreatment and neglect, and is even harder to prove in a court of law. The most common form of exertion of undue influence over elderly persons is perpetrated within the realm of probate law, and was recognized by the Supreme Court of Florida in the seminal case, In Re Estate of Carpenter (1971). The Testator in Carpenter prepared and executed her Last Will and Testament four days before her death, in which she left her entire estate to her daughter and nothing to her three surviving sons, who challenged the Will on the ground that it had been procured by their sister by undue influence. In its Opinion, the Supreme Court pointed to seven factors, the existence of which create a presumption of undue influence:

1. The presence of the beneficiary when the Will is signed;
2. The presence of the beneficiary when the Testator expresses a desire to make a Will;
3. The beneficiary recommends an attorney to draft the Will;
4. The beneficiary has knowledge of the Will’s contents before the Testator signs it;
5. The beneficiary gives instructions to the attorney drafting the Will;
6. The beneficiary obtains witnesses to sign the Will;
7. The beneficiary has possession of the Will for safekeeping after it is signed.

But undue influence can be exerted outside of probate law as well. Oftentimes, elderly persons are coaxed into writing large checks or gifting valuables to family members, friends, caretakers or even strangers, or are encouraged to engage in business transactions without fully comprehending their implications. This may be undue influence, even if a court has not rendered the elderly person legally incompetent. If you suspect that your loved one is (or was) a victim of undue influence, you should immediately contact an experienced Florida elder law attorney to discuss your options.

If you would like more information about this topic, you may either post a comment to this blog, contact me, Larry Tolchinsky, by email, or call me at (954) 458-8655 and I will be happy to answer your questions. I offer a free initial consultation.

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Posted By Larry on January 4, 2010

If you are appointed a Florida Personal Representative to administer a deceased person’s estate, you may have to deal with creditors’ claims against the estate, which can be tricky. If possible, you should engage a licensed Florida probate attorney to represent you. Doing so will ensure that the estate’s assets are adequately protected from illegitimate creditors and that you won’t be held personally liable for the estate’s debts. Here’s a basic rundown on how it all works.

If the decedent’s creditor filed a “caveat” with a court before the probate proceedings were commenced, the court will notify the creditor of the administration of the estate. If the Florida Personal Representative knows of the existence of a particular creditor (i.e. if he receives a bill from the decedent’s credit card company), the Personal Representative must “serve” a “Notice to Creditors” on the creditor. If not, the Personal Representative’s publication of the Notice to Creditors in a widely circulated newspaper as required by law will alert potential creditors to the fact that the decedent’s estate is being administered.

The creditor has 30 days from the date on which he was served with the Notice to Creditors or three months from the date of first publication of the Notice to Creditors (whichever is later) to file his “Statement of Claim” with the court that is overseeing the administration of the estate. If the creditor does not file his claim within the allotted time period, he loses his right to repayment unless the court specifically determines otherwise.

If, however, the creditor appropriately files his claim against the estate, the Personal Representative or any other interested person (i.e. named beneficiary or intestate heir) has 30 days from the date on which the Statement of Claim was filed or four months from the date of first publication of the Notice to Creditors (whichever is later) to file his “Objection to Claim” with the court. The person who objects must also officially serve the claimant with his Objection; the claimant has 30 days from the date of service to bring an action (i.e. file suit against the estate) on the claim. If the claimant fails to do so, the claim is lost and the creditor again loses his right to repayment.

If you are interested in learning more about this topic, you can either post a comment to this blog, contact me, a Broward County Probate Attorney, by email, or call me at (954) 458-8655 and I will be happy to answer your questions. I offer a free initial consultation.

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Tags: Broward County Probate, Florida Probate

Posted By Larry on December 11, 2009

A deficiency in the Florida mortgage foreclosure setting is the difference between the value of a lien on real property (the amount due to fully satisfy a debt) and the price obtained by the creditor-mortgagee after foreclosing on the property. For example, if you owe $150,000.00 on your mortgage and your home is foreclosed and sold for $100,000.00, your lender may be entitled to a $50,000.00 deficiency judgment against you – in other words, you may be required to pay him $50,000.00 from your own pocket. But what if your home is foreclosed and sold to your lender for a nominal amount of $100.00? Can you then be required to pay the $149,900.00 deficiency from your own pocket?

If your home is foreclosed in Florida because, for example, you failed to make your past four mortgage payments, chances are that it will be auctioned off to the general public, the proceeds of which will be used to pay your mortgage. Oftentimes, your home will sell for its fair market value. But if the housing market is down, or if your property is for some other reason particularly undesirable, your lender may be the only party who bids on your property – and it may buy your home for just $100.00. Why so cheap? In every real estate transfer, the buyer must pay document stamp taxes, etc. on every $100.00 exchanged for the property. If the property is sold for $100.00, the taxes are obviously much lower and the buyer benefits. But, where does this leave you in terms of your personal liability for the deficiency?

The presence of a deficiency after your home has been foreclosed does not automatically result in a deficiency judgment being entered against you. Your lender will have to file a motion with the court seeking a deficiency judgment, and the court will hold a separate hearing to determine your deficiency liability. The extent to which you can be held personally liable for the deficiency turns on your property’s fair market value as of the date of its foreclosure sale. Your lender will have to prove to the court that when your property was sold, it was worth less than the balance on your mortgage. You will, at this point, be permitted to present your own evidence as to whether your home was worth more (or was equal to) the balance you owe to your lender. If you succeed in this regard, the court will not issue a deficiency judgment against you.

Because in Florida your lender can bring a deficiency action against you for up to five years after your home is foreclosed, you should obtain an assessment of your home’s reasonable value at the time it was foreclosed as soon as possible. If your home is sold for $100.00 or another price that is obviously not reflective of its worth, the court will in most cases issue a deficiency judgment against you for the difference between the value of your mortgage and your property’s fair market value at the time of its sale. So if you owe $150,000.00 on your mortgage and your home is valued at $120,000.00 but is sold for $100.00, you will likely be held personally liable for $30,000.00. If your home is actually bargained for in the auction but still sells for less than its fair market value, it will be presumed that the price at which it sold was indeed its fair market value – and you will be liable for the full deficiency – unless you can prove otherwise. Here, the appraisal of your home’s fair market value will really come in handy. And remember, once the amount of deficiency is determined and a judgment is issued, you are stuck with it.

If you would like more information about this topic, you may either post a comment to this blog, contact me, Larry Tolchinsky, by email, or call me at (954) 458-8655 and I will be happy to answer your questions. I offer a free initial consultation.

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Tags: Broward Real Estate, Deficiency Judgments, Florida Real Estate, Florida Real Estate Foreclosures

Posted By Larry on December 3, 2009

A client contacted me the other day with a very interesting situation. His father was a citizen of Canada and maintained a winter home in South Florida. His father had named him on the deed to the property so that it would pass to him upon his father’s death. And while this kind gesture might have proved beneficial to my client in any other economy, it is now a source of aggravation.

My client’s father had taken out a mortgage to finance the Florida property, and the dip in the housing market has resulted in the property’s being worth less than the amount that is due on its mortgage (this is referred to as a “deficiency”). My client’s father is now dead, and the bank is looking to collect on the mortgage. While my client is not named on the mortgage itself, and thus is not a party to it, he is the legal owner of the property and so is confused as to what he should do. If he continues to make the mortgage payments, he will essentially be paying two or three times the worth of the property. If he does nothing, the bank will likely foreclose on the property and may secure a “deficiency judgment” against him for the difference between the foreclosure sale price and the amount that is due on the mortgage.

So, what is my client to do? Ultimately, my client can only be made to pay his father’s obligations concerning the Florida property to the extent that there is money left in his father’s estate. If there is no money in the estate with which to satisfy his father’s mortgage debt, my client cannot be forced to do so from his own funds. However, if he lets the property fall to foreclosure, the bank will likely name him as a defendant in the deficiency suit, which will compromise his credit. If, on the other hand, he arranges a “short sale” and negotiates a “waiver” of the deficiency with the bank, he can avoid such a predicament. In a short sale, the property owner undertakes to sell the property on his own and turns over all of the proceeds of the sale to the bank that issued its mortgage. As with foreclosure sales, it is unlikely, in this economy, that the property will be sold for an amount that exceeds the value of its mortgage. However, in proposing a short sale, a property owner is in a better position to bargain with the bank and can usually obtain from it a promise that it will not look to the owner to satisfy the deficiency. The recent influx of foreclosures (and layoffs of bank employees) has left them overburdened and thus more willing to offer concessions to property owners who assume the responsibility/ expenses of selling their property, without forcing the bank to initiate the time-consuming and expensive foreclosure process.

Whether my client chooses to negotiate a waiver of deficiency with the bank and sell the mortgaged property on his own, or whether he instead chooses to do nothing and allow the property to be foreclosed upon, my client will need me (or another lawyer) to ensure that he is adequately protected from being held personally liable for his father’s. In the former situation, my client’s actions (and those of his lawyer) will be proactive and, thus, likely more effective. In the latter situation, my client will have to clear his name after it has already been marred. It seems unfair that my client should be made to bear the expenses of legal representation regarding a mortgage into which he never entered, especially given that his father had tried to do a nice thing for him by deeding the property to him. Unfortunately, under these circumstances, my client has no other option.

If you would like more information about this topic, you may either post a comment to this blog, contact me, Larry Tolchinsky, by email, or call me at (954) 458-8655 and I will be happy to answer your questions. I offer a free initial consultation.

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Tags: Broward County Probate, Deficiency Judgments, Florida Probate, Florida Real Estate

Posted By Larry on November 19, 2009

If a Testator was last seen in possession of his Will and, after his death, the Will cannot be found, Florida law presumes that the Testator destroyed it during his lifetime and thus “revoked” it. A proponent of the Florida Will, likely a beneficiary, may rebut this presumption by establishing that the Will was destroyed or lost without the Testator’s consent, i.e. by someone other than the Testator, or when he lacked the legal capacity to revoke it. The Probate court will consider all potentially relevant factors in determining whether the proponent of the Will has carried his burden, such as if persons who had been disinherited in the Will had access to where the missing Will was presumably located, etc.

If the Florida probate court finds in favor of the proponent of the Will, the proponent must then present two disinterested witnesses to attest to the contents of the Will. A carbon copy of the Will counts only as ONE witness, and a partial copy of the Will is likely useless. If the proponent satisfies this burden as well, he must, further, formally notify and, likely, fight legal claims brought by persons who would have taken the Testator’s estate as intestate heirs if the Will not been admitted to probate.

What’s my point? Only engage an experienced Florida estate-planning attorney to prepare your Will, and make sure that you place your original Florida Will in a safe place, including in your safety deposit bank.  You should retain a copy in your home, with your attorney, and possibly with your designated personal representative, so that your last wishes are honored even if the Will is inadvertently lost or destroyed.

If you would like more information about this topic, you may either post a comment to this blog, contact me, Larry Tolchinsky, by email, or call me at (954) 458-8655 and I will be happy to answer your questions. I offer a free initial consultation.

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Tags: Florida Probate, Florida Will

Posted By Larry on November 5, 2009

As the value of real estate is continuously depreciating, more and more people are resorting to “self-help” measures to get out of sky-high mortgages – except that such measures are not only harmful to their own interests, but are also further devastating the economy.

A recent article in USA Today entitled “More walk away from homes, mortgages,” noted that homeowners are increasingly engaging in “strategic defaults” or voluntary foreclosures, whereby they simply walk away from their mortgages. When they realize that their mortgage is worth more than the value of their home, they just stop paying and let the bank take their home. Many homeowners would prefer instead to rent a small apartment for less than half their monthly mortgage payment.

But however attractive its benefits are, strategic default is a BAD idea! Among other things, including a deficiency judgment, walking away from your mortgage will knock 100 points off your credit score and make your ineligible for a new mortgage for seven years – not to mention, less likely to be approved for credit in any other capacity. According to USA Today, almost 600,000 borrowers walked away from their homes last year, slowing the recovery of the housing market and, thus, the overall economy.

If you are considering strategic default, or feel it’s only a matter of time before your lender gets around to foreclosing on your home, you should contact an experienced Florida real estate attorney, who can help you determine a more constructive course of action. For example, your attorney may help you negotiate more affordable terms into your mortgage, or, alternatively, cause your lender to discharge what is left on your mortgage (deficiency) after you turn over to it the proceeds of a short sale (i.e. where your home is sold for an amount that is less than the value of your mortgage). All in all, your attorney may help you avoid the dire consequences of strategic default.

If you would like more information about this topic, you may either post a comment to this blog, contact me, a Florida Real Estate Attorney, by email, or call me at (954) 458-8655 and I will be happy to answer your questions. I offer a free initial consultation.

Category: Deficiency Judgments, Florida Foreclosures, Florida Real Estate | 2 Comments »
Tags: Broward Real Estate, Deficiency Judgments, Florida Real Estate, Florida Real Estate Foreclosures

Posted By Larry on October 28, 2009

As of late, it’s become quite common for renters to suffer the consequences of foreclosure. Many of my clients, for example, are renting homes from landlords who are being foreclosed upon. But a law passed by the Obama Administration in May 2009 may provide some relief to renters in this predicament. The law, entitled the “Helping Families Save Their Homes Act,” provides that a formal lease will survive foreclosure, except that a purchaser of the foreclosed property who seeks to occupy it as his primary residence may prematurely terminate the lease upon 90-days notice to the tenant.

In Florida, residential properties are being foreclosed almost daily. The process is often long and drawn out, and months may pass between a lender’s initiation of a foreclosure action against your landlord and the sale and/ or reoccupation of the property that you are renting. If you’re in this position, you may be wondering what to do in the meantime. I usually advise my clients to remain on the property but use the extra time to find a new home and, further, to continue to pay rent. Chances are that even if you pay your rent on time, you will be evicted upon the completion of the foreclosure proceeding. But if you do not pay your rent, your landlord may file an eviction action against you. And while the eviction process will be rendered moot if the property is foreclosed and sold before you are evicted, just the fact that such an action was filed will negatively affect your credit and thus make it harder to find a new home.

If you would like more information about this topic, you may either post a comment to this blog, contact me, a Florida Real Estate Attorney, by email, or call me at (954) 458-8655 and I will be happy to answer your questions. I offer a free initial consultation.

Category: Florida Foreclosures, Florida Real Estate | No Comments »
Tags: Broward Real Estate, Florida Real Estate, Florida Real Estate Foreclosures

Posted By Larry on October 15, 2009

As a follow-up to my earlier post on deficiency judgments, I wanted to discuss some elements that I did not previously cover and which I have been asked by clients. A bank/lender that obtains a deficiency judgment, also known as a judgment creditor, has many avenues to collect on its judgment. For example, it may obtain a court order directing your bank to debit funds directly from your bank accounts. The creditor may also obtain a court order directing the sheriff to seize and auction off your personal property (i.e. some automobiles, household furnishings and goods, etc.) to satisfy your debt. Further, the bank may obtain a “continuing writ of garnishment” from the court, ordering your employer to deduct money directly from your paycheck until you have paid the deficiency in full. Clients always ask if there is anything they can do to protect their assets from the bank once they obtain a deficiency judgment. There are some assets (i.e. retirement accounts, homestead, life insurance policies and annuity contracts, pension and profit sharing plans, IRAs, disability income and prepaid college plans) that are protected from creditor claims in Florida. However, even those items that are protected have limits as to the amount of protection you may have against claims of judgment creditors.

As of recent, I have found that banks are preserving their rights to pursue deficiency judgments at a later date. You should not take for granted that a deficiency will not be collected from you; many lenders may later sell their judgments to third party collection companies (or hire collection agencies themselves) for pennies on the dollar, whose sole purpose then is to aggressively try to collect money from you. Also, you should not assume that because a bank forecloses on your property and later sells it, somehow insulates you from a deficiency judgment being collected against you. That is a defense that you may raise, but one that will probably be a difficult argument to win.

My suggestion is if a bank(s) is likely to foreclose against your property, or has already initiated proceedings to do so, you should immediately consult with an experienced Florida real estate attorney, who may be able to negotiate an acceptable settlement, including a reduction in any deficiency, with your lender(s). Just because you have been served with a foreclosure lawsuit, does not mean there is nothing that you can do. However, you should note, that the longer you wait, the more difficult it will be to either obtain a waiver of the bank’s right to seek a deficiency judgment or reduction in the amount of the deficiency. Hiring a foreclosure lawyer can assist in many ways, including arranging a short sale or a deed in lieu of foreclosure. Once a deficiency judgment has been entered, any leverage you may have had to negotiate with the lender regarding the amount owed is all but lost.

If you would like more information about this topic, you may either post a comment to this blog, contact me, a Florida Real Estate Attorney, by email, or call me at (954) 458-8655 and I will be happy to answer your questions. I offer a free initial consultation.

Category: Deficiency Judgments, Florida Real Estate | 1 Comment »
Tags: Deficiency Judgments, Florida Real Estate, Florida Real Estate Foreclosures