Although a foreclosure may seem like one of the worst events you can face as a homeowner, the nightmare may not end with the lender’s sale of your home. In the aftermath of many foreclosures, many borrowers learn that a discrepancy exists between the home’s sale price and the amount owed by the borrower to the lender. This is called deficiency exposure.
Deficiency exposure is computed by deducting the value of the collateral property at the time of the sale from the total debt owed by the borrower to the lender, calculated by including all costs, advances (such as for taxes and insurance), attorneys’ fees, etc., which the creditor expended. Under current Florida law, the creditor has one year from the finalization of the sale (the statute is unclear as to whether that counts from the issuance of the certificate of sale, or the certificate of title, which comes later) to pursue a deficiency judgment against the borrower when there remains a deficiency exposure after the sale of the home.
A lender can pursue collecting the deficiency exposure through a deficiency judgment granted by the court. This can happen simply by the lender filing a motion in the current foreclosure case, which would only need to be served to you by mail at your last known address. The lender can also try to collect a deficiency exposure by obtaining a deficiency judgment through filing a new lawsuit against you. This seems to be a popular trend in the real estate market right now, as there are many cases being filed in order for lenders to collect deficiencies. In a majority of these cases, infamous lender Fannie Mae has sold its deficiency claim rights to debt buyers, who are pursuing the borrowers for payments, treating it as part of the vicious debt collection process.
If you are undergoing a foreclosure or are concerned about foreclosure, it may be possible that your lender is able to continue to come after you if money is still owed after the sale of the home. If you end up with a deficiency exposure, you do have options available to you. First, you can defend yourself against the lender’s claim. Certain events, such as a creditor’s refusal to mitigate damages via a short sale, modification or deed in lieu of foreclosure, would be material to that defense and may assist you in fighting the claim for a deficiency judgment. Another option may be for you to file bankruptcy in order to discharge the deficiency exposure. In many cases, bankruptcy might be the cheapest and most definitive solution in the right situation, but comes with another set of issues.
Before taking any action, it is best to consult an experienced attorney who can analyze your specific case and suggest alternative defenses or plans of action. The foreclosure process is one governed by a strict timeline, so the sooner you consult with an attorney, the easier it will be to set a course of action. Do not wait for your creditor to make the first move against you. Prepare yourself for any possible attack against you and your home by having an attorney on your side.
Stephen K. Hachey, a Florida foreclosure attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.
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.