Mortgage Deficiency: Experienced Real Estate Attorney Reports His Experiences
Hank Evans, Esq. is one of the smartest real estate attorneys I ever met. Hank has been practicing real estate law for 35 years in Titusville, Florida, where he represents several banks and many large real estate developers. He called me recently to ask me an asset protection question, and I used the opportunity to ask Hank Evans about his experience with mortgage deficiency judgments during the real estate and credit recession. I expected that Hank would be an excellent source of information about bank's practices with regard to foreclosure and deficiency claims.
Hank Evans stated that in his 35 years of real estate law practice he can recall only three instances where a lender sought a deficiency judgment following a foreclosure. Each of these three deficiency actions were brought by private lenders- not banks or mortgage lenders. For whatever reasons- and Hank said he can only speculate as to the reasons- institutional lenders are not, and never have, pursued personal judgments against borrowers after foreclosures.
posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
My spouse and I have an investment home in mortgage default. We have been sent a foreclosure notice. We both signed the mortgage and are on the title. He,however, did not sign the promissory note. Is he legally responsible to repay? Since he signed the mortgage, both of our credit ratings have been affected. If he isn't legally responsible to repay, is there anything we can do about his credit rating. If the investment home goes to foreclosure, I may have to declare bankruptcy, but not him.
Linda:
Generally, the Note is the "Obligation/Debt" and the Mortgage is the "Collateral" for recovery of the "Obligation/Debt."
Where thate is more than one owner of the real property, a Lender will require all of the Owners to execute the Mortgage to perfect the "Secured Interest" in the property/Collateral.
But, only those who actually sign the Note are the only "Debtors" to the lender and are the only ones against whom the Lender can go after for any "deficiency."
The other owners of the property that are not on the note are "pledging" their interest in the real property for the "debt of another" co-owner.
Just think of where a parent may pledge a lien/mortgage on the parent's real property to secure the debt/note of their adult child. The child is not even a co-owner of the real property, but a lender may make the loan with the parent pledging the collateral.
It almost sounds like what happens when the parent has to pledge his/her property to "bind their kid out of jail."
So, in your question, it seems that Hubby is not liable on the Note or any deficiency, as he only "pledged" his interest in the collateral, but was neither a "co-signer" nor a "guarantor" of the Note obligations. But you have to make sure that they didn't have him sign some other document that cane drag him into laibility, other tha losing his interest in the property.
As an aside, many banks and other car lenders make both the husband and the wife go on the title of a vehicle when only one of them plans to be the principal driver of that vehicle. But, in order to qualify for the loan, the bank says that both incomes and credit are necessary to qualify for the loan. The couple will rationalize that if one dies, they "will avoid probate" and like dummies, they both go on the title as well as the loan.
If that happens, tell the couple to go to a different lender that will allow only the principal driver to go on the title, but both of them will sign the Note. Why? Because if the principal driver/owner is in an accident, only that title owner is liable for civil damages that may or may not be covered by the auto insurance. And if they own all their other assets jointly as husband and wife, then the other party can not get to the other joint assets. Study the history of the Florida "dangerous instrumentality" laws for vehicles. This happens too often and is just becuase the lender is stubborn or stupid and it leaves the customer in a very dangerous position.
You can see this is the exact opposite of your situation, but in a different area of liability. Just tell you clients that the other injured party can sue the drive as a driver and the owner. And is the spouse is on the title, he/she can be sued as the owner. But if not on the tile, the co-signor spouse can not be sued by the injured party abd the joint assets of the spouses can not be attached.
My brother has 3 investment condos in S. Florida, that will most likely be foreclosed on in the near future. All three loans have mortgage insurance. Since the mortgage insurance will make the lender whole, can either the lender or the mortgage insurance company come after my brother for the deficient amount ?
Hello all. What about the following situation?
Husband and Wife are both of the mortgage & deed and only Husband is on the note. Husband dies. Does Wife need to refinance to put the note in her name now? Or does she simply keep making the payments? What if she wants to just let the property go b/c it has little, if any, equity?
I'm taking mild issue with the statement that "For whatever reasons- and Hank said he can only speculate as to the reasons- institutional lenders are not, and never have, pursued personal judgments against borrowers after foreclosures."
I believe that's about to change. In the past there has typically been enough equity to make the lender whole, and "upside down" situations were few and far between--not worth the JDBs' interest. Now lenders will have the opportunity to make large bulk sales of portfolios mortgage deficiencies that junk debt buyers like Ocwen, Asset Acceptance, Unifund and LVNV Funding can pursue (whether they will litigate them is another question entirely). The mortgage lenders (or their trustees) will see the chance to squeeze a few more drops of juice out of the lemon. A bank can do this with deniability, but even those banks that choose not to sell because the fig leaf isn't thick enough will be dwarfed by institutions that either needn't care about their reputations or the trustees of defunct institutions.
I expect foreclosed debtors to be hounded for deficiencies, in some cases for decades to come (in Northeastern states where "contracts under seal" have extremely long SOLs).
I also expect many such debtors from the Northeast will want to move to "debtor's havens" in the South and West.
sneaky arent you. you borrowed the money so what makes you think you dont have to pay it back? loosers like you are part of the reason values are on the decline etc. if you dont have the money, DONT BUY IT!
If the ex-husband will not have the Deed recorded with the county until the ex-wife is able to obtain refinancing, but can't because the payments are behind, what can the ex-wife do? The house is in foreclosure and neither one will get anything plus lose the house if the deed is not recorded. What can be done?
Lending your car to a friend could prove costly. If you lend your car to a friend and he or she has an
I am tracking real estate foreclosures in south Florida and even talked to people who are "flippers" in this market and bid on at auction or try to buy foreclosed properties directly from lender. Here is the scenario: a home is foreclosed on and goes to auction. It does not sell at auction. The very next day the foreclosed home is under contract to buy and the buyers are Wachovia Bank, Wells Fargo Bank, the big banks, but all. Just repeated transactions by the same banks in what appears to be a scheme. The acquiring institution buys the real property as well as the judgement for $100. That is not a type-o. Now, follow the money. The selling lender has the bad loan off of his books. His numbers are looking better. The acquiring bank has at least a $150,000 property that he has bought for $100, plus he has an income to book for the amount of the judgement. So the acquiring institution's books are looking better every time he buys one of these homes in this manner. And so the foreclosed properties are going. If you care to verify this information you can go to sunsentinel.com, on the left side click on the foreclosure link. 99% of foreclosed proeperties are going that way now, up from just a couple 6 months ago. I began researching this because one of my sons was caught up in the exotic mortgage/foreclosure issues we have today. It appears that the acquiring institution now has double income ( if they can collect the judgement ) for the same property. And as long as both institutions continue to honor their b2b relationship, they are both in a win/win situation and the tax pay is once more at the mercy of corporate America because no one is looking. I have written to the FDIC about this issue and they say it is not in their venue but did tell me to contact the Comptroller of the Currency, as they do govern this where large and national banks are concerned. While the FDIC with all of their current problems was able to answer me within a 10 day period, the Comptroller of the Currency's consumer alert department has not responded to my inquiries in over a month. I also interviewed a gentleman who followed foreclosed properties at auction, and if they did not sell, found a property that interested him and would follow up by calling the selling institution after the auction trying to purchase the property at that time. He told me that not long ago he was purchasing foreclosed properties in this manner. But today, if he tries to bid on a house at auction, usually the lending institution is on the phone bidding against him up to their ceiling, and usually running him out of the auction. And , following the original scenario, if the property does not get bid on, the property is sold the next day and he cannot buy it. He followed the money trail and found just what I did. That the properties are being controlled. They are not "free market" as the foreclosure law is intended for them to be. I am not in this business, but if the property is being controlled for quick sale at $100 then the person who has a judgement against them is not being treated fairly, and neither the selling institution nor the purchasing institution is negotiating in good faith with the party who lost thier home. Also, these banks will not talk to you at all if you are facing foreclosure. In the case of my son, he had found a buyer for his property adn his lender would not talk to him, a negotiator or the potential buyer who did contact them. Is all of this legal????????
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I am the co-owner of a lot in Fla. which may soon be in foreclosure. As a result of a cash payment, I have been released from the note but lender/bank refuses to give certificate of release/partial release of the mortgage. How can I best protect myself in the event of foreclosure and/or assert any claim I may now have as a result of my payment and corresponding reduction in the security interest as a result of my principal payment as reflected in a modification agreement with the remaining c0-tenant?