Banks Pursuing Deficiency Judgments May Have Something To Fear

By
Real Estate Services with TheHousingGuru.com

foreclosureAn article in the Washington Post describes how banks pursuing deficiency judgments may have something to fear. According to the article, some lenders are taking a more aggressive stance in dealing with distress sales that recoup significantly less than the original loan amount.

 

In the past, the cost/reward ratio caused few lenders to seek deficiency judgments, but the practice has become more widespread as lenders incur greater looses due to increasing numbers of foreclosures and short sales. According to the MBA, banks are not pursuing those who lack the ability to repay; and lenders participating in the government’s HAFA program waive their rights to deficiency judgments. But for homeowners who have chosen “strategic default” who or appear to have the financial resources to make full or partial restitution, many banks are seeking to recoup some of their losses.

 

To counter such actions, a growing number of homeowners are seeking bankruptcy protection as a means of vacating additional liability, and personal bankruptcies have recently soared. Others, however, have discovered a different route. Aware that their lender may have participated in mortgage fraud in qualifying them for a loan, some have successfully presented that as a legal defense. The potential consequences of such actions brings pause to bankers, fearful of being implicated in anything resembling mortgage fraud, and aware that judges may not only rule in the borrower’s favor, but seek further redress from the lender. An interesting post on Calculated Risk  provides an insider’s view.

 

The moral and legal issues that have surfaced during this housing crisis are many, and it is impossible to develop all-encompassing solutions. While some have suffered the loss of their home, the losses for others have been even greater, yet such victims are often ridiculed for imagined behavior and often by those who know nothing of the circumstances. As homeowners struggle with the consequences of their actions, my advice would be to make every effort to seek an amicable resolution with their lender, and if that fails, to make the best choice given their specific financial circumstances. Any who believe their lender may have acted illegally, should consult an attorney.

 

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Re-Bloggged 7 times:

Re-Blogged By Re-Blogged At
  1. Judy Chapman 06/17/2010 06:48 AM
  2. Lenn Harley 06/17/2010 08:37 AM
  3. Harry F. D'Elia 06/17/2010 10:12 AM
  4. John MacArthur 06/17/2010 10:51 AM
  5. Christianne Gordon 06/17/2010 01:20 PM
  6. Rob Arnold 06/19/2010 10:52 PM
  7. Jennifer Dulmaine 06/19/2010 11:29 PM
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Tags:
foreclosure
deficiency judgments
housing crisis
short sales

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Rainmaker
17,477
Gabe Fitzhugh
REALTOR®
Florida Homes Realty & Mortgage

Interesting wide range of views.  This is a very controversial topic and a non winner for the debater on both sides.  This is too much of a mess and there are problems that reach far deeper than a LO or broker qualifying someone for a loan, or someone accepting a loan they could not afford, or a large part of the Florida job market relying heavily on construction and having that market come to a virtual halt, industries leaving Florida, property taxes, insurance, etc.

June 18, 2010 10:06 AM
Rainmaker
453,501
John Mulkey
Housing Guru
TheHousingGuru.com

Terry - I'd guess that many lenders were aware that the borrower was "fudging" the numbers, but since the govt. was encouraging home ownership, they didn't care. Thanks for the feature.

Christine - It will be interesting if nothing else.

Pamela - I agree.

Neal - I doubt we'll see a very high percentage of the lenders pursued.

Gabe - I agree that this is only one factor in the overall economic crisis--and it is still a crisis.  We do need to deal with the core issues, but are far from doing that so far.

 

June 18, 2010 12:33 PM
Rainmaker
649,082
Rob Arnold
Metro Orlando Full Service - Investor Friendly & Foreclosure Realtor
Sand Dollar Realty Group, Inc.

Deficiency judgments are such a slippery slope.  I wouldn't be surprised if a bunch of vulture collectors don't show up 3 or 4 years from now when the economy is hopefully better.  That will catch a lot of the solvent borrowers by surprise.

June 19, 2010 10:51 PM
Rainmaker
453,501
John Mulkey
Housing Guru
TheHousingGuru.com

Rob - I think your'e right, and would advise those negotiating a short sale to insist that the bank agree not to pursue the deficiency. If you ask, some will.

June 20, 2010 09:14 AM
Anonymous #54
Anonymous
Baywatch

If you are a realtor representing a short sale seller and you do not negotiate a deficiency waiver than you are derelict in your duty to represent their interests and you should find another line of work.

You people are coming off pretty holier than thou. Let's just remember you are only a Realtor and are no better or worse than anyone else.

If all the jaded egoists would please leave the building, the profession might begin to gain more respect. I have advanced degrees in finance and math, and I find it amusing the the people at my wife's realtor events are snobbier than those at my employer's (100+ billion hedge fund) events.

Get a grip people, you sit on the toilet just lie everyone else. Until you have walked a mile in someone's shoes, you really have no right to judge. If you have such contempt for the people that you represent, then why do you do it? Oh right for their money. This is the very definition of greed.

 

March 26, 2011 12:10 AM
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Rainmaker
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John Mulkey

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