A deficiency claim can be made by a mortgage lender against a borrower when there is a foreclosure and the amount owed on the property, including attorney’s fees and court costs, is more than the amount of money that the property is worth. Deficiency claims in Florida were once rare, but with the value of homes deteriorating over the last few years, lenders have been more mindful about making back the money they lose on foreclosures, short sales and deeds in lieu of foreclosure. In order to have any chance at receiving a judgment against borrowers, lenders need to follow the deficiency claim process set forth by Florida law.
A foreclosure does not automatically lead to a deficiency judgment in Florida. A lender will have to file a claim within one year of the foreclosure. There needs to be a motion made that declares the value of the property and the amount of the deficiency. The borrower will have the opportunity to contest the lender’s valuation of the foreclosed property. That will prompt an evidentiary hearing, at which the lender will have to present evidence that the property’s value is what the lender alleges it is.
While Florida statutes give the lender a year after the foreclosure date to file for a deficiency judgment, lenders have up to five years after the foreclosure sale date to initiate a new claim. There are two opportunities for lenders; one year after the foreclosure date and five years after the foreclosure sale date. If you find yourself in the middle of a deficiency claim, consider finding a real estate attorney. Stephen K. Hatchey, a Florida real estate attorney, can guide you through the process. To receive a free consultation, contact our offices at 813-549-0096.