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A Wave of Deficiency Judgments

So the tide is coming in. Hundreds of South Florida residents are experiencing a wave of new foreclosure deficiency judgments as banks seek to collect on the unpaid mortgage debt from homes that were foreclosed on many years before.

A deficiency judgment refers to 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.

This week alone, I have met with four individuals, who have had deficiency lawsuits filed against them. It appears that these lawsuits will increase as lenders resolve foreclosure backlogs and as they sell their deficiency rights to third party investors and collection firms.

According to a recent article in the Sun-Sentinel, in a month-long period beginning June 1, about 110 deficiency judgments were filed against Palm Beach County homeowners by a Texas-based debt collection company called Dyck O'Neal. The same firm filed more than 300 cases in Broward County and nearly 200 in Miami-Dade County.

It was very uncommon for a lender to seek a deficiency judgment in previous years. However, due to the declining market the number of new deficiency cases is on the rise. Mortgage companies have begun to pursue deficiency judgments more vigorously than ever before. There was recently a change in Florida law that set a one-year deadline to file to collect an unpaid debt. The previous deadline was five years.

If a mortgage lender pursues a deficiency judgment you should hire a seasoned attorney to defend the deficiency. Our firm is experienced in using certain defenses to defeat a deficiency claim and possibly negotiating an acceptable settlement for much less than what the bank is claiming that you owe.