Fannie Mae Will Pursue Deficiency Judgments Against Homeowners
Well, according to a recent ABA Journal article, it appears Fannie Mae is going to pursue deficiency judgments against borrowers who walk away from loan obligations without good reason.
A deficiency judgment is a judgment following a foreclosure sale for the difference between the property’s value at the time of the foreclosure sale and the balance owed on the loan obligation. Once the deficiency judgment is obtained, the creditor may be able to garnish wages, seize assets, and take any other action allowed by law. Apparently Fannie Mae will be instructing its servicers to recommend which homeowners should be pursued for deficiencies.
The first question I had when I read this article is what criteria will be used to determine whether a reason for the walk away was a “good reason.” It appears that the Fannie Mae’s goal is to stop people who have the ability and means to pay their mortgages from walking away merely because the property is no longer an economically appealing investment. But with the management of the loans I have seen by the servicers in my clients’ cases I have little doubt that implementation of this program will affect people not intended.
Some states do not allow deficiency judgments but Florida is not one of those states and pursuit of a deficiency judgment is becoming a more frequent occurrence here. While deficiency judgments may be obtained even if there is a valid hardship, it has largely not been pursued against debtors in the past. However, it seems the tides are changing.
In Florida, a deficiency judgment is an equitable remedy and is discretionary with the trial court judge. Following a foreclosure sale, the creditor has one year from the date of the foreclosure judgment to seek a deficiency in the foreclosure case. If one is not sought or requested in the foreclosure case, the creditor has up to five years to bring a new action for a deficiency. Many debtors believe there is no defense to deficiency judgments but in most instances, this couldn’t be farther from the truth. In defending against a deficiency judgment, debtors can fight creditor’s valuation of the property and raise numerous equitable defenses and legal defenses that an experienced attorney can counsel them on.
As with any legal issue, early consultation with an attorney can many times make the issue much easier and cheaper to deal with. With creditors becoming more aggressive in the collection efforts on the loans by seeking deficiencies, it is more important than ever to seek an attorney’s advice and counsel in handling a foreclosure case from its outset as merely “walking away” may put you in more jeopardy than it may have in the past.
This blog was written by David Fineman, Esq. of The Dellutri Law Group, P.A.. Attorney David Fineman handles Bankruptcy, FDCPA, FCRA, UDAP, FCCPA and civil litigation.
