Mortgage Deficiency Judgments : Bank Executive Gives His Views

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One of my clients this week is a retired bank executive at a national bank. He worked in the bank’s mortgage department in the area of wholesale mortgage purchases. He was the guy who packaged mortgages from different banks into mortgage backed securities for sale to Wall Street. In a typical one week period, my client would buy and sell over $500 million of mortgages.

I asked the client to discuss mortgage lender’s policy about pursuing deficiency judgments on first mortgage foreclosures. My experience has been that lenders rarely sue for deficiency judgments in Florida. My client says that on a national level he finds that mortgage lenders are pursuing deficiency judgments against upside down homeowners after foreclosure. He says they are doing so aggressively.

My client thinks  that banks may be relatively reluctant to go after Florida homeowners because Florida’s exemption laws make collecting deficiency judgments difficult. He notes that banks have limited resources in personnel, attorneys, and money to pursue debtors. He is sure that banks have thoroughly analyzed the varying state exemption and collection laws so that they have a good idea where it is relatively easy, and difficult, to obtain a deficiency claim and to collect a deficiency judgment. Banks are concentrating deficiency claims in those states where the amount of time and money required to get and collect a judgment is relatively low. They are not pursuing deficiency judgments in Florida, he thinks, because Florida’s debtor oriented laws make it difficult to get and collect a deficiency judgment.

My client is sure that bank’s policies toward deficiency claims is driven by one consideration only: bank profits.