Newspaper Article Predicts Surge In Collection Of Strategic Mortgage Default Claims
I did an interview with a reported from the Palm Beach Post about personal liability for deficiency judgments. The interview was part of an article published on Saturday, June 12, 2010, about debt collection firms which buy claims against homeowner’s who defaulted on home mortgages.
The article features a New York based company called Deficiency Judgment Recovery Network ("DJRN"). DJRN that is buying pools of deficiency claims from mortgage lenders for pennies on the dollar. The article states that this collection company is going after people who could afford their mortgage but who stopped payments because their property was upside down in value: the so-called strategic defaults.
I have not heard from any of my clients that they had been pursued by a third-party collection firm to pay a claim related to their strategic mortgage default. I have not heard from any other attorney that DJRN has sued or threatened to sue their clients. The article says that entrepreneurs will start buying up mortgage delinquencies and that "it’s going to be a blood bath." That’s possible, but it’s also possible that these collection speculators may find that their rate of collection does not justify going to court to prove the amount of a deficiency claim.
Anybody with access to a computer keyboard or to a newspaper reporter can publish their opinions about deficiency collection, but no one knows for certain what other people will do in the future. The fact that I have not seen large amounts of deficiency collection by third-party investors leads me to believe that investment in deficiency claims may not be profitable.
The Washington Post says it's happening in and around D.C. It may be significant that the area was one of the ones least affected by the recession, so many of the foreclosures and short sales there are by sellers whose income hasn't changed much, rather they have just decided not to accept a tremendous loss of equity and hence they walked and left the lender holding the bag (the definition of "Strategic Default"). Whether these pursuits are the result of an effort to discourage others from following the same path or of sound business judgments in and of themselves, they ARE happening.
http://www.washingtonpost.com/wp-dyn/content/article/2010/06/15/AR2010061505428.html
Jonathan,
I'm curious if the article said that Deficiency Judgment Recovery Network was purchasing deficiency judgments (court ordered) or if they are buying them before the legal judgment is in place? I haven't been able to identify the article online so maybe you can recall. I think there is probably a difference between the two, quite a big difference actually.