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What Is A Deficiency Judgment?

Foreclosures in Florida are judicial which means that a lender must utilize the court system to foreclose on the property. A lender may obtain a deficiency judgment as part of the foreclosure action if the mortgage lender files a motion for the deficiency in the appropriate Florida court.

A deficiency judgment is a mortgage lender’s judgment against the borrower for the difference between the outstanding balance of the mortgage note, plus costs and attorneys fees, and the value of the property foreclosed. Foreclosed property value is defined as the fair market value on the date of the actual foreclosure sale.

To obtain a deficiency judgment against the borrower after the foreclosure sale in Florida, a lender must file a motion for deficiency containing an allegation of the property’s market value on the date of sale and the amount of the deficiency.

If a mortgage lender pursues a deficiency judgment, an experienced and qualified foreclosure defense attorney may help defend the action. Often, an attorney may be able to negotiate an acceptable settlement for much less than the total deficiency liability.

A homeowner may contest the lender’s valuation which will require that the lender demonstrates proof that the property’s value on the sale date was less than the balance of the underlying promissory note on the property. If the court finds that the foreclosed property was worth more than the note balance on the sale date, the court will not issue a deficiency judgment on the lender's behalf against the borrower.

A Florida statute put into effect July 1, 2013, amended the time that a mortgage lender has to institute a deficiency action from five years to one year after the foreclosure sale. This applies to residential properties with no more than four dwelling units.

Mortgage lenders in Florida may pursue a deficiency judgment following a short sale. However, if the property is owner-occupied and residential, the deficiency is limited to the difference between the outstanding debt and the fair market value of the property.

To avoid a deficiency judgment, homeowners should make sure that the short sale agreement expressly states that the lender waives its right to any deficiency. Otherwise, the lender may seek a deficiency judgment.

Mortgage lenders in Florida may pursue a deficiency judgment if they have received a deed in lieu of foreclosure and there is a deficiency between the fair market value of the property and the total debt. In this case, effective July 1, 2013, a lender has one year to pursue a deficiency judgment after accepting a deed in lieu of foreclosure.

At Loan Lawyers, our South Florida consumer rights and debt defense attorneys help individuals with problems related to the payment of their debts. If you are facing foreclosure and require assistance with this or any aspect of loss mitigation related to your home, contact our office today by calling (888) FIGHT-13 (344-4813) and see how we can help.