It’s hard enough for homeowners to go through foreclosure and lose their home. To make matters worse, in Florida, after a borrower has lost their home and is trying to piece their life back together, they can face deficiency judgments. There are many ways lenders can obtain deficiency judgments against borrowers after foreclosure. There are also several ways borrowers can fight these judgments against them, or avoid them altogether. A Fort Lauderdale foreclosure defense lawyer can help homeowners before, and even after, they lose their home.
What Is a Deficiency Judgment?
If a lender forecloses on your home, they will sell it in a foreclosure sale. Often, once the sale is complete, the proceeds are still not enough to make up for the total amount you owe. The remaining debt is known as a deficiency.
For example, a lender forecloses on the home you still owe $250,000 on. At the foreclosure sale, the house sells for $200,000. You will still owe $50,000, which is the deficiency. In Florida, lenders can take action to recover this deficiency from you. Lenders can register this deficiency with the courts and seek a deficiency judgment. If that happens, you will be forced to repay the amount of the deficiency.
Not all deficiencies end in deficiency judgments. This is why it’s so important to speak to a foreclosure defense lawyer if you have a deficiency after foreclosure.
Deficiency Judgments in Florida
Foreclosures in Florida are judicial, meaning lenders must file a lawsuit in order to foreclose on a property. This is different than in other states that have nonjudicial systems, in which lenders are not required to file a lawsuit.
Florida law also allows lenders to seek deficiency judgments. To do so, they must first personally serve the borrower with a foreclosure complaint. Lenders may also file separate lawsuits against borrowers to recover a deficiency instead of going through the court that granted the foreclosure action.
When a deficiency judgment is issued, the judge will determine the amount. Generally speaking, that amount cannot exceed the difference between the judgment amount and the fair market value at the time of the foreclosure sale. This is particularly true for residential properties, especially if the new owner has already moved in.
Lenders once had up to five years to seek a deficiency judgment against borrowers. Today, if the property is residential and has no more than four housing units, lenders are limited to one year to seek a deficiency judgment.
Deficiency Judgments and Junior Liens
Junior liens are the loans you have on your home that are not your primary mortgage. These include second mortgages and HELOCs (home equity lines of credit). When the primary lender forecloses on the home, the junior liens are also foreclosed. The lien holders no longer have a security interest in the property. However, this doesn’t mean that you don’t have to ever worry about repaying those loans.
Florida law allows junior lien holders to file a personal lawsuit against you on the promissory note. If there isn’t enough equity in your home to cover those junior liens, you could face civil action from the lenders that gave you the loans.
Deficiency Judgments After a Short Sale
In a short sale, you sell your home for less than the total amount of debt you owe on the mortgage. The proceeds from the sale are put towards your mortgage debt, but a balance will still remain.
Lenders can seek a deficiency judgment for this amount. Often, this amount is smaller than the overall balance if people are living in the home and it’s a residential property.
The only way to avoid a deficiency judgment after a short sale is to include a waiver within the short sale agreement. If the lender agrees within the contract to waive their right to a deficiency judgment, they are barred from pursuing it. A foreclosure defense lawyer can advise on this strategy, as there are often significant tax consequences when a lender forgives a deficiency.
Deficiency After a Deed in Lieu of Foreclosure
Instead of foreclosing, your lender may agree to take the title from you instead of foreclosing. This is known as a deed in lieu of foreclosure. Just like other types of actions, the deficiency amount in a deed in lieu of foreclosure is the difference between the total debt and the fair market value of the property.
Deeds in lieu of foreclosures work a bit differently than foreclosures and short sales. After you’ve given the deed of the property to the lender, most often the debt is considered forgiven. However, there is no law in Florida preventing lenders from filing a lawsuit in the future to recover their losses.
As such, like with a short sale agreement, you must include provisions in the deed in lieu agreement that the debt is completely forgiven. Also just like in a short sale, this could have tax consequences, so it’s best to speak to an attorney to determine what your best options are.
After a Deficiency Judgment Has Been Issued
Deficiency judgments are very harmful to those that have already lost their home to foreclosure. Typically, borrowers are already in a bad financial situation and can’t handle any more debt. That’s just what a deficiency judgment is, though, and there are a number of ways lenders can collect on that debt.
Once the lender receives a deficiency judgment against you, they can go after just about anything you own. They can seize your assets, garnish your wages, and even levy your bank accounts. A judgment will affect your life for several years, but there are ways to stop it.
Contact Our Florida Foreclosure Defense Lawyers Today
If you’re facing foreclosure or the lender has already started proceedings, you need to speak with a Fort Lauderdale foreclosure lawyer today. At Loan Lawyers, our attorneys can defend a deficiency and possibly negotiate with the lender to reduce the amount. In the best case scenario, we will help you avoid foreclosure and a deficiency judgment altogether. Learn more about how we can help and call us at (954) 523-HELP (4357) or contact us online for your free consultation. It’s easier to stop a judgment than to take action once it’s been issued. Contact us today before it’s too late.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation to see how we may be able to help you.