In an article written by Jessica Silver-Greenberg for the Wall Street Journal and shared at Yahoo! Finance, “”House Is Gone but Debt Lives On,” a big, bright national media spotlight shines on the very issue that has been the subject of many of our posts here: Florida homeowners in trouble with their mortgages oftentimes do not realize that just because they lose the burden of the house itself, they are not free and clear of the debt.
Florida Homeowners Lose Their Homes And Are Shocked to Find Banks Want More: the Deficiency Judgment Surprise
Banks (and in many cases, the investors who have bought judgments from the banks) are mercilessly coming after homeowners even after the homeowner has lost their house. They are sending collection letters and filing lawsuits to get the rest of the money owed on the mortgage: they want a “deficiency judgment” which they can use to execute under Florida law on whatever other assets that the distressed homeowner might have, including garnishing their wages.
Every distressed homeowner in Florida needs to understand that they are vulnerable to a lawsuit for the amount left on their mortgage after the home’s current value has been subtracted from the amount due on the note. Underwater mortgage? Subtract the value of the home from the amount due on the home loan, and that is the amount that they may find someone’s still trying to collect.
Buying Judgments from Banks – It’s Cheap and It’s a Profit Center for Hard-Hearted Investors
What the news coverage does not explain is why this is so popular. Aren’t they trying to get blood out of a turnip?
Banks may or may not consider collecting deficiency judgments on mortgage home loans a smart business move, but many investors still think it’s profitable to buy the judgment and to try and collect from the former homeowner. That investor, who buys the mortgage debt from banks at shockingly low prices (1 or 2 cents per paper), will pay the bank this amount of money in exchange for the judgment being assigned to the investor. Here, the bank gets some money and the bank walks away happy.
The investor then makes its profit by collecting what it can on that judgment. Sitting in the shoes of the lender, as assignee of the lender’s judgment against the mortgage home loan borrower, the investor can undertake whatever collection efforts it deems fit to try and get some assets to pay off that deficiency judgment.
Big Problem: Those Deficiency Judgments Are Often Based on Foreclosure Fraud — Homeowners Need to Fight
The investor who buys the deficiency judgment may or may not investigate how legal that judgment really is … and there’s a very high likelihood that a Florida foreclosure deficiency judgment is flawed because it was obtained by fraud. Robosigning is involved. Maybe fake affidavits. Bad paper in the record. (For details on how varied Florida foreclosure fraud can be read our series on Foreclosure Fraud.)
Florida mortgage holders who are underwater or who are facing foreclosure — or who are already fighting deficiency claims — need to be aware of their legal rights. It is important in these situations to hire a foreclosure defense attorney experienced in deficiency judgments to investigate the facts of their particular case and the legal defenses available to them.
It is possible, if the underlying deficiency judgment is bad, to file a motion in Florida court to set-aside the judgment. If that happens, the judgment is basically void and the homeowner gets a fresh start. Finally.
A deficiency judgment is a judgment ordered by the court granting a bank the authority to collect the amount of money that is still owed by the borrower on a mortgage after the property is sold at a foreclosure auction. Since Florida has the second highest foreclosure rate in the United States, Florida homeowners will be impacted more than most by this issue.
We all know that one affect the recession has had on some Florida residents is that is has reduced property values to a level below many mortgage balances. That reduction in value is the deficiency that banks seek to collect. We also know that the foreclosure mess is being made worse by the acts of banks and their attorneys.
The result of these acts is the rise of valid defenses to many foreclosure cases. These defenses benefit the homeowner by offering them an opportunity to, among other things, to possibly negotiate the waiver of a deficiency judgment.
Therefore, if you have been served with a foreclosure lawsuit or are in the middle of a foreclosure, don’t just walk away from your home. You need to discuss your circumstances with an experienced real estate lawyer. An experienced real estate lawyer should be able to offer you valuable advice on your rights relating to deficiency judgments. Larry Tolchinsky’s 17 years as a real estate lawyer has the experience to provide you with that advice.
You May Also Be Interested In:
- July 2014 Deadline for Older Foreclosure Deficiency Judgments – Small South Florida Banks and Credit Unions Increasingly Aggressive on Deficiency Collection Efforts
- Florida Deficiency Foreclosure Claims: Now, One Year Statute of Limitations Deadline on Banks to Pursue the Deficiency
- Bankers Warned to Think Twice Before Going After Deficiency Judgments After Last Week’s News of Overestimated Number of Strategic Defaults
- Can the Bank Garnish My Wages During a Florida Foreclosure?
- What is HAFA? – Can HAFA Help? – Deficiency Judgment Relief
- Prime Borrowers in Florida are most at risk for a Deficiency Judgment
- Florida Deficiency Judgments – What is Fair Market Value?
- Walking away from your Home Mortgage – Not without Consequences
- Deficiency Judgments in Florida
- Florida Deficiency Judgments – The Rest of the Story
- Estate is Liable for Mortgage Deficiency, Not Heirs
- Can the Bank Garnish my Wages after Foreclosure if they are seeking a Deficiency Judgment against me?
Main Category: Deficiency Judgments