Mortgage Deficiency Update From Lake County
I am often asked whether or not I have seen changes bank policy regarding pursuit of deficiency judgments after first mortgage foreclosures. I am working on an interesting asset protection case as co-counsel with an attorney who is very experienced defending mortgage foreclosure suits. . Because I have not asked permission to used his real name, I’ll refer to him in this post as "Brad." Brad practices in Lake County, Florida, which is part of "central Florida." Brad told me an interesting story last week.
Brad said he attends monthly Bar meetings frequented by most of the civil court judges and most prominent attorneys in Lake County. He says that he has known most of the judges for many years. At the most recent meeting Brad told me he discussed the foreclosure environment with one of the local judges. This is what the judge told him. In Lake County, Florida, from the beginning of 2008 through the first half of 2009 (when statistics were last reported) there were approximately 11,000 first mortgage foreclosures against residential homeowners. The figure does not include foreclosures of commercial loans. Of the 11,000 first mortgage foreclosures, the number of motions for deficiency judgment was zero. No deficiency motions; no deficiency judgements.
Brad told me that in the past two years he defended about 100 lawsuits filed by second mortgage holders. The second mortgage lawsuits were suits based on the underlying promissory note rather than mortgage foreclosures. He said most of these lawsuits were settled, and that none of the settlements exceeded 20% of the second mortgage balance.
Best web site and blog on subject I've seen. Question I cann't seem to get same answer on...after a foreclosure in Florida I understand lender has 1 year to pursue deficiency judgement on foreclosure-correct? If foreclosure is completed and lender takes and sells property and does not pursue deficiency judgement are they precluded from pursuing borrower/guarantor on the promissory note? I've heard yes they are. I've also heard no they aren't and been given they have 4, 5 and even 7 years by 3 different lawyers. Seems like there should be FL statute or case law on point.
Joe, I'm not going to say that I know for sure, but in Florida mortgage notes are written contracts, and written contracts have a 5 year statute of limitations. An interesting question would be what happens when the foreclosure is against the property only (in rem, which is the fast way to do it and the way it's mostly done)? Does the statute begin to run only when the judicial sale fixes the amount of the deficiency, or does it begin running when the homeowner went into default. Since deficiency cases have been so rare, I doubt there's case law on it ... but I bet the clock doesn't start to tick at the sale, rather it starts to click when there's a "cause of action" which is when the note went into default ... so if the sale is, say, 2 years later ... the holder of the note has three more years to sue. Admittedly, I haven't researched it.