Wall Street Journal Reports Florida Deficiency Judgments on the Rise
As the pipeline of defaulted mortgages work their way through the short sale or foreclosure processes, there has been increased speculation as to whether lenders will eventually enforce their legal right to collect the full amount of the debt. This is because even after a short sale or a foreclosure, the borrower can still be on the hook for the difference between the lender’s recovery and the original amount of the debt, plus interest and collection costs. The lenders generally have 5 years to pursue this “deficiency”, and it seems most of them have been taking their time to ponder their options.
We have already seen lenders pursue borrowers after a short sale or foreclosure in cases of commercial loans, second mortgages or in actions by private lenders. Now, other lenders are waking up and pursuing or selling their rights to entrepreneurial collections firms that are betting on the borrower eventually being “collectible”.
Some borrowers avoid all these issues by filing bankruptcy, but our clients usually have too many other assets to lose and/or earn too much money to avoid paying a lot of it back in bankruptcy anyway. In fact, we more often represent bargain hunting investors. Since the Great Recession, we have also been helping numerous business and property owners understand what legal rights they have to protect their other assets in the event that one defaulted mortgage winds up eventually becoming a personal judgment against them.
As always, please feel free to contact me if you or someone you know wants confidential legal advice with respect to business, tax, asset protection or trust and estate planning.