Foreclosures Up – What About Deficiencies?

Foreclosure Mortgage • Author Mark Martella, Esq • Sep 12, 2014

A few weeks ago, I was interviewed by a reporter from the Charlotte Sun regarding the increase in foreclosure filings in the month of April in Charlotte County. I told the reporter that while I had been anticipating an increase in the number of foreclosure filings, it was too early to tell whether the dramatic increase was due to just a one-month spike in filings by one of the big foreclosure mills, or if it will be an ongoing trend. We will need a few months to make that determination.

However, I advised him it was my opinion that the decrease in foreclosures was in large part due to the change in the foreclosure law back in July 2013, and the requirement that the Plaintiff/Lenders actually certify that they were in possession of the original note, who was in possession of it and where it was located. That new process dramatically slowed down the filings, because the large banks did not have the necessary processes in place to provide those certifications. Some realtors have also speculated that the lenders have intentionally slowed down the filings in order to help boost real estate prices. I have no basis for knowing whether that hypothesis is true or not.

The other significant issue that is approaching come June 30, 2014, is whether or not the lenders will pursue a deficiency judgment in cases where the property was sold at a public foreclosure sale prior to July 1, 2013. A deficiency judgment is the difference between the fair market value of the property as of the date of the foreclosure sale, and what a party owes to the lender. For example, if a house is worth $150,000, but the owners owe $200,000 on their mortgage, the bank could pursue them for $50,000, plus any additional costs related to the foreclosure. Prior to the new law being enacted and placed into effect on July 1, 2013, a lender had five years after the date of the public sale to pursue a deficiency judgment. This was a long time to have that possibility hanging over a borrower’s head. The Legislature shortened that time period to only one year from the date of the foreclosure sale. However, any foreclosure sales that occurred prior to July 1, 2013 were given one year from July 1, 2013 to file a deficiency action. Therefore, there literally could be tens of thousands of foreclosure cases in the State of Florida, where lenders may have not pursued a deficiency judgment and the bank’s rights will expire at midnight on June 30, 2014. This means either the lenders will be making a business decision not to pursue these deficiencies and issuing 1099-Cs for the forgiveness of debt, or there will be a mass filing of deficiency actions coming before the end of June.

If you have gone through a foreclosure, have not resolved the deficiency issue and the sale of the property occurred prior to July 1, 2013, you may be home free after June 30, 2014 (but for any possible tax consequences for the debt forgiveness).

Contact a Bankruptcy Attorney


If you have a situation as we described in this article and have questions or concerns, please don’t hesitate to contact us to answer your bankruptcy legal questions.
Martella Bankruptcy Firm
18501 Murdock Circle, Suite 304
Port Charlotte, FL 33948

5237 Summerlin Commons, Suite 411
Fort Myers, FL 33907
Phone: 239-243-9934

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