Junk Debt Buyer Suing For Mortgage Deficiency
There have been some interesting comments to the blogs concerning deficiency judgments. One comment says that it is unlikely that a junk debt buyer can successfully buy and enforce a mortgage company's rights to a deficiency judgment because the secondary buyer would be reured to produce the original mortgage note. He says that owing to securitization and resalse of mortgages it is difficult for lenders and buyers of their deficiency rights to produce original notes unless they are members of organizations which serve as a repository for original documents. This person says that a debtor who lost property in a foreclosure can easily defend a deficiency suit if the bank sells its deficiency rights to a third party junk debt collector.
However, another reader provided a less optimistic assessment. Larry Kosto, Esq. is one of the best debt collection attorneys in Orlando and represents several buyers of junk debt sold from banks. Mr. Kosto states that in order for a bank to get an underlying foreclosure judgment the lender is required to submit the original note or have the court established the lost instrument. If the note was deposited with the court during the foreclosure or if the court reestablishes the lost note the purchaser of the deficiency claims can step into the shoes of the original lender and proceed without the ability of the debtor to question the existence of the original document. Also, Mr. Kosto, states that the borrower may be estopped from challenging the existence of the note if the issue was not raised in the underlying foreclosure.
posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
If a bank sells a property that has foreclosed, and that property has another mortgage which was the primary mortgage and a person purchases it. can the first mortgage came and foreclose the property? MInd you that the property was bought from the bank after the auction sale. Can any lien holders or debtors come and put a lien on the property. Or do we have to pay those debts that belong to the person that foreclose the property? or those debts will go after the state of the person? Please I need some this information soon.
Thank you so much.
At the risk of getting into a debate by proxy with Larry, it occurs to me that the "show cause" telescoped-procedure foreclosure under s. 702.10 is 'in rem' only ... which would not have a res judicata effect on the borrower. While collateral estoppel is a possibility, a junk debt buyer needs to prove that it owns the instrument ... meaning they should have both a valid assignment (or assignments--many JDBs are the third or fourth owner) and the original instrument in hand, with records custodian witnesses of all owners available to testify. It may be that *someone* is indisputably able to take advantage of collateral estoppel, but can the JDB sufficiently prove that they're the right someone? Meanwhile, deficiency judgments are within the "sound discretion of the court" under. s. 702.06 ... a good enough sob story makes the claim go 'poof'--creditor better hope the debtor doesn't have sense enough to take off the gold chains and track suit and go into widow/orphan mode. And if the court understands what a JDB is and does, that just won't look good for the JDB.
Of course, most of these guys will get easy defaults because that's the way of the world.
2007->Ch0702->Section%2010#0702.10">http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=Ch0702/SEC10.HTM&Title=->2007->Ch0702->Section%2010#0702.10
Banks pursuing deficiencies is becoming a more common scenario, at least in D.C. and the surrounding areas: http://www.washingtonpost.com/wp-dyn/content/article/2010/06/15/AR2010061505428.html
Meanwhile, in Florida I have recently seen a judge refuse to release the original note back to the lender after an in rem foreclosure ... effectively depriving the lender or any JDB later holding the debt from having an airtight case to enforce the note.
The active litigant (at least on the east coast of the U.S.) seems to be Franklin Credit Management Corp. They have hundreds of cases in Florida, but they're very small and their stock trades below 50 cents, so despite their apparent boatloads of experience I don't expect that they will be galloping in to knock Florida debtors' heads in a big way. They seem to be selective...
Another name that comes up as a mortgage JDB is Dyck O'Neal. But not in a big way in Florida.
http://www.dyckoneal.com/
I think the big, bad wolf of mortgage deficiencies nationwide is likely to be Ocwen. They're acquiring and they're vicious.
http://www.shamethebanks.org/jorge/ocwens-solution-to-mortgage-crisis-layoff-americans
No matter what may be the reason, always small fish gets into trouble.
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Monica Boyd