Roy Oppenheim’s commentary was originally published on Yahoo! Homesand is being republished on South Florida Law Blog with their permission.
Deficiency judgments are probably the last thing any homeowner under threat of foreclosure wants to think about.
For the uninitiated, a deficiencyis when the proceeds from a foreclosure sale, or a short sale, don’t cover the balance of the mortgage loan. In a recourse state, such as Florida or 39 other states, it is legal for the lender to go after the homeowner for that deficiency when a deficiency judgement is awarded.
My experience has been that if a bank actually does bother to seek a deficiency judgement, there is a good chance it can either be severely reduced or negotiated, especially if you have an attorney.
But it looks like the pendulum is starting to swing in the other direction, if you have a loan backed by Fannie Mae or Freddie Mac.
A report just released by the inspector generalfor the Federal Housing Finance Agency (FHFA), which oversees both of the government-sponsored enterprises, suggests Fannie and Freddie should be much more aggressive in recovering deficiency judgments, in order to mitigate their losses.
The FHFA stresses their report is not an “encouragement to aggressively pursue borrowers who do not have the ability to pay their mortgages.” (Of course you can’t squeeze blood from a turnip.) Instead it centers on an old and familiar target: the strategic defaulter.
Now the inspector general’s office is just doing their job. They were asked to perform an audit, and they did. But there is a just a whiff of hypocrisy that is both arrogant and outrageous.
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