Future of Florida Deficiency Judgments on Florida Home Mortgages – Will New Laws Limit or End Bank’s Ability to Sue for Unpaid Mortgage Balance?

Posted By on February 23, 2012

This week, the proposed Florida Fair Foreclosure Act got one step closer to becoming law when the Florida State Senate Judiciary Committee okayed the foreclosure bill.  In the near future, the Florida Legislature should be voting on this proposal and you can track the progress of  this bill (SB 1890) online here.

This is a very, very controversial piece of legislation and it’s seeing busloads of Floridians showing up in Tallahassee in protest of this legislation and what they believe it will do to Florida home owner’s legal rights under state real estate law as well as their federal constitutional right to due process.

For example, as written, this bill would change things so that a Florida victim of wrongful foreclosure would no longer be able to get their home returned to them but instead, they would only be able to legally receive money damages in a wrongful foreclosure lawsuit against their lender.  That doesn’t seem like justice, does it?

Nevertheless, there is some good news in this proposed Florida Senate bill: it addresses the harsh reality of deficiency lawsuits and deficiency judgments in this state. The proposed legislation does not block deficiency lawsuits, but it does go a long way towards protecting Florida homeowners in these situations.

As we have discussed in detail in earlier posts (read them here), homeowners in Florida that have gone through the stress of a foreclosure or short sale and then believe that they are ready to begin a fresh start and to move forward from their financial crisis.  Unfortunately, they are all too often blindsided by a new lawsuit filed against them by their lender that seeks to collect the unpaid balance left on their mortgage after the sales price of the home is deducted (the “deficiency”).

Five Years to One Year for a Bank to Sue on a Deficiency is Better for Florida Home Owners

As currently written, the new state law would change the deadline that a bank has to file that deficiency proceeding from the current five years down to just one year.  Five years cut back to one year, that is helpful to the Florida home owner.

Sounds great, doesn’t it?  And it is a good deal better than the current situation, where a Florida home owner has to wait five years for the other shoe to drop unless they are savvy enough to negotiate that deficiency as part of their short sale or mortgage loan modification.

Larry’s Tip

There is already a proposal up in Washington that would do the same thing as a widespread federal law, impacting all the states not just Florida.  For details, read our earlier post on the Fairness in Foreclosures Act of 2011, and track its progress online here.  (As of the date of this post, the federal bill was before the Committee on the Judiciary’s subcommittee on Courts, Commercial, and Administrative Law.)

So, the Florida Legislature is really doing nothing more than the U.S. Congress is already considering doing – assuming that both pieces of legislation pass. Duplicate laws on the federal and state level would both be effective and valid, but they would not be granting a Florida homeowner any additional benefit.  A man only needs one tie to wear at a time, if you get the drift.

The bigger news would be if Florida were to go ahead and follow the lead of states like Texas and California, that have outlawed banks from seeking deficiency judgments by holding home mortgages as nonrecourse debts.  In these states, the banks do not get the chance to go after the homeowner after the house is short sold or foreclosed: they had to take the value of the home and write off the balance.

Considering what the Florida Fair Foreclosure Act is offering to do for banks and against Florida home owners, you’d think that including a non-recourse provision wouldn’t be too much to ask.

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Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655. If you have a specific situation, please call or email Larry because he can’t answer specific fact questions in general comments. He’s happy to take your call.

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7 Responses to “Future of Florida Deficiency Judgments on Florida Home Mortgages – Will New Laws Limit or End Bank’s Ability to Sue for Unpaid Mortgage Balance?”

  1. omar says:

    i did a short sake on 06 now a collection agency is trying to collect
    the difference abut 44k and i dont haved what i can do

  2. Harry says:

    We had a short sale in March 2011. This year when I checked with the Bank of America for a 1099C, the Bank informed me that the Bank will not issue the 1099C and reserve their right and option for a deficiency judgement. What legal action I can take to avoid this judgment?

  3. Maureen says:

    Is it true that the lender has to personally serve you to collect a foreclosure deficiency judgment in FLorida

  4. Manuel Goncalves says:

    Hello, Lary. I sold my primary home in Florida on short sale with bank of america and want to know if I ma protected from paying the deficiency. Thanks.


  5. kimberli Wilson says:

    Regons had me sign an agreement making payments on the balance after my short sale until I am way over 100 years old. In other words the legisators do not realize your bank can set up any length of payment by saying sign this agreement and we will release the mortgage but not the note. They don’t need a deficiency judgment as that just limits the length of their collection time. The banks are running circles around the legislators and they don’t get it! With a 1 or 5 year deficiency limit the banks can still set you up on a payment plan into your next life and make you sign the agreement before they will let your short sale go through. I know because it happened to me.

  6. Simon says:

    What’s the point of putting these blogs out when your office rudely shuffles around the answers and throws you into long hold cues. Your staff needs to learn how to be a bit more compassionate over the phone especially when people have been jerked around by banks for as long as they have and simply looking for someone to take their side. Don’t put someone on hold and transfer them to someone who has no clue why we’re being transferred. 1st impression=unprofessional.

  7. akemi delgado says:

    Do you have any idea when the 1 year limitation will be passed?