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Florida’s 2013 Difficiency Law Explained

When the housing market took a turn for the worst, the effects were felt far and wide across our nation. Many of us were directly affected or knew somebody that was. Foreclosure signs were popping up on every street and sadly, many people lost their homes. In the wake of such financial disaster, many laws were amended and changed including Florida’s Deficiency Law in 2013.

If you are familiar with real estate foreclosures and short sales, you may already know the general basis of the Deficiency Law. But for many, terms such as “underwater” meant little more than the location of Atlantis or where one ends up after jumping into a pool. So to ensure that we are all on the same page, let’s look at what Florida’s Deficiency Law meant before the amendment.

Under the old law, if a home was sold as a short sale or under foreclosure for less than the balance of the mortgage, mortgage lenders had five years to ask the courts for a deficiency judgment against the borrower. In other words, mortgage holders could seek to hold the borrower legally responsible for paying the difference between what the bank made from the sell of the home and how much the borrower still owed on the mortgage.

This concept of seeking a money judgment from the courts is still the bulk of the Deficiency Law. What has changed, however, is the amount of time mortgage lenders have to request a judgment against a borrower. Under the amended Deficiency Law, mortgage lenders now only have a year to seek a deficiency judgment on homes sold after July 1st, 2013.

Now, it would seem straightforward if the previous law governed homes sold prior to the July 2013 deadline while the new law pertained to homes sold after this date. But it isn’t that simple. In fact, the new law affects many homes that were sold prior to July 1st, 2013 if the five-year period did not expire prior to July 1st, 2014. So what does this mean?

Let’s say your house was foreclosed on March 28th, 2013. Since that date falls before July 1st, 2013, the old law applies to any deficiency that results from the sale and allows your mortgage broker to seek a judgment until March 28th, 2018. However, this date falls well after July 1st, 2014. With the amendment in place, the new deadline for your mortgage lender becomes July 1st, 2014.

On the other hand, if you sold your house at a short sale on March 28th, 2009, your mortgage lender would have until March 28th, 2014 to seek a deficiency judgment. Although this date is after the amendment date July 1st, 2013, the date falls prior to the July 1st, 2014 deadline so it is unaffected by the change.

In all cases, however, if a mortgage lender seeks a deficiency against you, it is important to consult with an attorney.

Stephen K. Hachey, a Florida real estate attorney, can help your wade through this process and determine a positive solution. Contact him at 866-200-4646.

The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.