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For those who live outside of the State of Florida but who own or owned Florida real estate subject to foreclosure, the possibility of that foreclosure’s deficiency judgment being collected in your resident state is real.

Florida Deficiency Judgments Have Five Year Statute of Limitations Deadline

Deficiency judgments?  We’ve written a lot about deficiency judgments in Florida foreclosure lawsuits: to recap, when the foreclosure sale proceeds don’t cover the balance on the home loan, then the amount left due and owing to the bank is called the “deficiency.”  Unless there are specific laws in place, or negotiated agreements between the parties, the bank has a certain number of years to collect that remaining balance on its home loan.

The pursuit of a mortgage deficiency can be a big surprise to Florida and out of state homeowners  who have assumed that once the bank took their home, the horrible event of foreclosure was behind them.  In Florida, the statute of limitations (deadline) for banks to sue for deficiencies is five years.  Which means that borrowers may be waiting 5 years for the other shoe to drop: the bank collection of the deficiency amount left on the mortgage.

And banks are feeling the pressure to go after these balances: last fall, for example, the Federal Housing Finance Agency (FHFA) formally notified Fannie Mae and Freddie Mac that a more aggressive stance on collecting deficiencies on home foreclosures was being required on their home loans.

For more, read the October 2012 FHFA Report:  FHFA’s Oversight of the Enterprises’ Efforts to Recover Losses from Foreclosure Sales.

Once the lender has a judgment from a court confirming that the deficiency amount is due and owing, the bank can pursue all sorts of collection avenues to get paid.  Just like other kinds of judgments, deficiency judgments can give the bank power to grab other assets from its borrower in order to clear the judgment debt.

It’s trouble enough when the borrower and the bank both hail from Florida. However, banks are now becoming more and more interested in collecting deficiency judgments on foreclosures where the real estate owner isn’t someone who lives in the Sunshine State.  More and more, lenders are taking the time and expense to pursue deficiencies against owners of Florida property who live in another state or even another country.

When The Florida Property Owner Doesn’t Live In Florida – But Resides in Another Part of the United States: Out of State Domesticating Judgments

When a Florida bank forecloses on a Florida property under Florida state law, but the borrower resides in another state, the bank has a decision to make: is it worth the time and expense to try and pursue that deficiency in the other state?  More and more, that decision has been “yes.”

It’s allowed under the Full Faith and Credit Clause of the United States Constitution, and the other state will recognize and respect the Florida deficiency judgment as a “sister state judgment.”

Once the lender goes through the necessary steps to get that other state’s respect, called “domesticating the judgment“, then the bank is free to institute collection efforts in that state against its borrower who resides there.

What if the state (say California, for example) has an “anti-deficiency” statute?  That may not protect the borrower who has been foreclosed upon in Florida on a Florida property: it’s a situation with lots of loopholes and the bank may be able to get around “anti-deficiency” laws when domesticated deficiency judgments are involved.

Many courts are ruling on deficiency judgments based upon where the property is located, not where the borrower lives, for what state law applies.  So Florida deficiency judgments that are “domesticated”  can have banks willing and able to cross state lines or national borders to get that deficiency amount collected.

Larry Tolchinsky’s Tip:

We saw the outbreak in deficiency lawsuits a couple of years ago, and along with it there was the legislative response: bills have been offered, for example, to change the limitations deadline to one year – among other things.  If similar legislation passes in Tallahassee this year, then that will be good news for borrowers who are dealing with a deficiency on their home loan and a lender amenable to going after that money.

For those facing a deficiency in Florida. the banks with a deficiency judgment can mess with someone’s life for a long time:  there is the possibility of wages being garnished, etc.  However, these Florida laws only apply to Florida residents.

Whether or not the bank can do the same type of collection efforts in another state or country, even after they have gone to the trouble of domesticating the judgment there, is a complicated matter.  Some states (and countries) may be more bank-friendly than others, and that’s something that foreign borrowers and borrowers from out of state who have purchased Florida real estate need to consider when facing foreclosure on their Florida real estate.

Borrowers facing a deficiency collection effort, either in another state or another country, might be wise to consider hiring a local Florida foreclosure lawyer to help them defend themselves against these often intrusive and stressful collection matters.  Florida foreclosure attorneys may be able to help with defending the deficiency proceeding itself (for example, arguing against domestication or arguing against the validity of the deficiency, etc.) or help by negotiating a deal with the bank, as well as working to stop harassing efforts by debt collectors who are known for their disruptive and sometimes abusive contacts and communications with borrowers at their homes, places of employment, etc.


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

“I’m happy to take your call.”

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