Deficiency Judgments After Foreclosure Not A Hollow Threat, Say Foreclosure Defense Attorneys, Mortgage Industry Experts

The Palm Beach Post reports:

• He once lived just steps from the ocean in a home valued last decade at more than $500,000. But John Ericksen has fallen - far - and the bank that took away his Juno Beach home last year isn't done with him yet.


• In November, Riverside National Bank won a $151,461 claim against the down-and-out handyman who now resides in a one-bedroom trailer in Riviera Beach's scruffy Ocean Tide mobile home park.


• Called a "deficiency judgment," the claim is what Ericksen, 59, still owes on the loan for a home he's already lost. "They are actually trying to get money from me?" said a surprised Ericksen when contacted by The Palm Beach Post. "Good luck with that one. I'm pretty much out."


• In Florida, banks have five years to file for a deficiency judgment and up to 20 years to collect. But nearly six years into the state's foreclosure onslaught and with more than 100,000 foreclosures filed in Palm Beach County since the real estate bust, the number of deficiency claims sought by the banks is minuscule.


• A review of thousands of Palm Beach County court records by The Palm Beach Post found just 133 deficiency claims filed between April 2006 and November 2010 on foreclosed residential properties. They were made by 88 servicers or lenders, with 68 resulting in a judge granting the right to pursue the deficiency. Most of the lenders that have obtained deficiency judgments in Palm Beach County are small community banks.


• Foreclosure defense attorneys and mortgage industry experts say that despite the lack of claims, the deficiency judgment is not a hollow threat. Banks are just too overwhelmed right now processing the foreclosures to switch gears and pursue the money they've been shorted.

For more, see Foreclosures' hidden risk: Debt that haunts for two decades.

In a related story, see St. Petersburg Times: Deficiency judgments let creditors haunt borrowers for up to 20 years.