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What Is A Deficiency Judgment and Should I be Concerned?

Andrew Hoek, florida foreclosure attorney

Andrew Hoek

As a legal practitioner who handles foreclosures I have heard it all. The most common scenarios go something like this, the borrower is behind on their mortgage payment and staring down a pending foreclosure; or the borrower has lost their job, has no way to continue to pay their mortgage, and is now receiving threatening letters from the bank. Still others are recently divorced and the marital home is underwater and must be sold as part of the marital settlement agreement. While these tend to be the most common scenarios we see, others are simply investors who made a bad investment and now wish to walk away from a second home.

There are a number of different factors for why individuals are facing a foreclosure, but the one variable that remains the same is that all affected persons should seek to avoid a deficiency judgment. Under Florida law, a lender is entitled to pursue a borrower for any amounts due and owing on the note after the sale of the property (‘the deficiency’). More specifically, if the amount of the note is in excess of what the property is sold for, the lender may seek to recover the difference from the borrower. Many victims of foreclosure simply believe that once the home is foreclosed, they have forever parted ways with the home. However, that is not the case and many unknowing victims find themselves the subject of another lawsuit for the deficiency amount. While some banks are more agreeable to waiving deficiencies, small banks and credit unions can be extremely difficult to persuade.

So what can be done?

First and foremost homeowners should never sit back and do nothing. The worst thing a homeowner can do in a foreclosure action is to throw their hands up and just let their home be foreclosed. Individuals that take such action become ripe for falling victim to a deficiency suit. The best course of action is to seek some form of loss mitigation. The options for loss mitigation come in a variety of forms and include short sales, loan modifications, deeds in lieu, and agreed settlements. In most cases a foreclosure attorney can negotiate a waiver of the deficiency as part of a loss mitigation technique. At the very least, the attorney can attempt to negotiate a consent judgment with waiver of the deficiency from the lender. When the deficiency is waived, the borrower at least knows that they will not have bad debt following them around for years to come.

If you are at any stage in the foreclosure process, call the experienced foreclosure attorneys at DeWitt Law Firm today to discuss your options to avoid a deficiency judgment.