Mortgage Deficiency Judgments: A Different Opinion From Creditors

In response to my statements on this Blog that most lenders do not pursue mortgage deficiency judgments, I received a email from an experienced collection attorney expressing a contrary opinion. The collection attorney stated that he knows that lenders will be pooling mortgage deficiency judgments and selling them to collection companies for pennies on the dollar. Credit card companies have an established practice of selling non-performing credit card debt at seep discount. This same attorney says that many borrowers who walk away from mortgages will be in for a big shock in the future when collectors who have purchased the mortgage companies deficiency rights surprise the borrower with legal action.

Whether or not the attorney’s prediction is correct will be seen in the future. As stated often, my own experience over the past few years is that deficiency judgments are rare, and most attorneys and bankers I have spoken with agree. Yet, if its economically practical to purchase mature deficiency claims then there might develop an industry to pursue some of today’s numerous homeowners walking away from their mortgages. The homeowner needs to be aware of all opinions and predictions in order to make informed financial decisions.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida

Comments

[John]

I had a Florida property foreclosed July 2009. I've recieved no notice of a deficiency judgement. However, I just started recieiving letters from a collection agency. It's my understanding the lender had to file for deficiency judgement within one year of the foreclosure. Is this true?

[dan g]

Deficiency judgements can be relieved through bankruptcy. If you have not nalready received notice of same, include an estimate of the amount of the deficiency from the sale of your foreclosed property as an unsecured debt to the lender.

[Collection Agencies]

Hi,
Your post is really helpful to those, who are being illegally harassed by collection agencies. In my opinion, one should be very calm and professional while speaking with representatives of collection agencies.
At the same time, it is important to be firm, yet polite.
One thing should be kept in mind that they are also abide by rules & regulations. So you may ask them firmly, if you can record the conversation for future legal references. I think this may help you in dealing them. :)

[Jeff]

If the credit card company or mortgage company signs off on a "waiver of deficiency judgement", does this prevent a third party collection company from collecting on this deficiency?

[Tonia]

Is there any way to include the deficiency in the bankruptcy to avoid future collection attempts?