In a time where people are losing their homes to foreclosure daily, what can possibly add more insult to injury? The answer – deficiency judgments.
A deficiency judgment is a money judgment entered against former homeowners who lost their property to foreclosure. The amount of the judgment is the difference between what was owed on the loan and the price the home sold for on the sale date.
In the majority of these scenarios, homeowners are left paying thousands of dollars due to the nature of the current-underwater market. This judgment follows the homeowner for up to twenty years, if not longer. Florida, a state that allows deficiency judgments, has had the most foreclosures since 2007. Making deficiency judgments an issue that hits really close to home.
In other words, if pushing you to attain an unaffordable mortgage during the go-go heyday of the real estate housing market was not enough many banks today are pushing for deficiency judgment. Many banks are today chasing depleted borrowers to pay for the deficiency to improve the bank’s bottom line, while further pushing the borrower to the brink of economic collapse.
What about unpaid homeowner’s association dues? Unfortunately, they are also subject to deficiency judgments, which allows condo associations to go after former owners for unpaid fees.
Another potential problem is that many of the banks are selling these deficiency judgments to investors who are in turn pouring the judgments into hedge funds and selling them off as securities, or selling them to collection firms who ramp up their collection efforts. And the collection agency may have this judgment for at least 20 years. Which means that the collection agency would be within their right to use all legal tactics necessary to collect.
Until the economy rebounds, we will continue to see courts around the country enter deficiency judgments against homeowners. And even if these same homeowners are fortunate enough to find themselves in new homes, some might not be able to pay off the judgment.
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