A nice article appeared in Reuters this week entitled, “What Happens When You Walk Away From Your Home?” that includes a brief discussion of things we post about here regularly: underwater mortgages in Florida and elsewhere and the various issues that go into deciding whether or not to stop making mortgage payments on a home that is valued so much less than the amount left due on the home loan. Issues like the ethics of walking away; the pain of leaving the home; the impact on your taxes and your credit rating.
There’s Lots to Consider When Florida Home Owners Decide On Whether or Not To Default on Their Mortgage
We’ve also discussed the reality that here in the State of Florida, there is the real chance that the bank (especially if it is a small bank or a credit union) will file a lawsuit against the person who defaulted on their Florida home loan for the amount left hanging on the note: the deficiency lawsuit is a real possibility for many here in Florida. And deficiency judgments can be used to take personal assets to pay off that old home loan amount for years into the future.
Which is why we discuss the importance of negotiation on the deficiency before things get to the courthouse and a final judgment or order is issued by the judge. Read about those issues in more detail here.
One issue that isn’t discussed as often, either in the national news coverage or here on our blog, is one very big reality that impacts almost every Florida home owner who decides to default on their mortgage. That’s the ugly truth that collection efforts will be a real part of your life once you stop making those payments.
Collection Efforts Are Legal – If They Are Done Right
It’s legal for the lender to take steps to try and get you to make those loan payments. For many Florida home owners, this is a new experience. They’ve never had a bill collector contact them before.
And it’s an emotional and stressful situation. The collection efforts include mailing letters, making phone calls. Collectors who are trying to get you to pay up: to bring things current. Collectors who spend their workdays, day after day and week and week, doing this for a living.
It can be irritating at best for the home owner, devastating and draining at worst. And this is when the collection activities are done within the bounds of the law.
Collection Efforts Are Controlled by the Fair Debt Collection Practices Act
Congress has passed the Fair Debt Collection Practices Act (FDCPA) which controls how collection efforts can be done in this country. The federal law has specific guidelines that the collector should be very, very aware to abide by, including the times of day when they can call you; how many times they can contact you each day; whether they can contact you at work; etc.
The State of Florida also has its own laws to protect against unfair collection practices, the Florida Fair Debt Collection Practices Act. This law protects Florida mortgage holders when the federal law does not — if there is a conflict between the two laws, then the federal law controls.
If a collector violates the FDCPA in his or her collection efforts on your unpaid mortage, then you can file a lawsuit in either federal court or Florida state court for the violation. You have one year to file this suit from the time that the collector violated the FDCPA.
If you sue for a FDCPA violation and you win, then:
- the collector can be forced to pay you a damage award for any damages you have sustained because of his or her collection efforts, including for example lost wages and doctor bills/medical expenses.
- the collector can be forced to pay you $1000 on the barrel head, even if you don’t have any damages to prove up (no lost job time, no medical costs)
- the judge can also make the collector pay for your expenses in pursuing the lawsuit, including paying you back for all your court costs and reimbursing you for your attorney’s fees.
Remember, however, that even if it is proven that a mortgage debt collector violated the FDCPA, the mortgage debt or deficiency does not go away: you still legally owe that debt until it is resolved under state mortgage law.
If you have questions or comments, please feel free to Chat with Larry in the comments below, at firstname.lastname@example.org or (954) 458-8655.