Is a Short Sale better than a Foreclosure and why? – Part II

Is a Short Sale better than a Foreclosure and why? – Part II

Florida is considered a “deficiency state”. This means the Mortgagee has a legal right to pursue the Mortgagor and obtain a deficiency judgment against them for the remaining amount of indebtedness existing after the application of the proceeds from the sale of the collateral. The Mortgagee has a time period set forth in the Florida Statutes to pursue the deficiency judgment and this money judgment can not only be good for up to 20 years, but can also attach to other real property owned by the Mortgagor.
Even worse is the concept of domesticating a judgment. This means that if the borrower decides they are going to “walk away” from the home and start a new life by moving to another state, the judgment can be domesticated (converted) into a money judgment in that new state in which the creditor can then collect upon in accordance with that new
state’s laws.
short sale vs foreclosure property guidingMost states are not as friendly to debtors as Florida. For example, if one were to move to California, and a money judgment had been obtained in Florida and then domesticated into a California judgment, the creditor shall then collect on the judgment in accordance with California law. A California attorney explained to me that California is a homestead state. So is Florida, so the new home purchased when the relocation occurred after “walking away” from the Florida home should be protected since it is homestead, right? Wrong! But wait, California was chosen as the new state because it is a homestead state and is not a deficiency judgment state. Two problems here: (1) the homestead protection means creditors can force the sale of the California homestead to collect on the judgment, but the Debtor is permitted to keep the first $50,000.00 and (2) California does not permit deficiency judgments to be obtained as a result of a foreclosure on California property, but that does not provide a California resident with protection against a creditor collecting on a deficiency judgment obtained from another state which was subsequently domesticated into a California money judgment.
This sounds like a really bad nightmare. It gets worse. When the Banks and Lenders became inundated with defaults, they scrambled to put processes and procedures in order to try to handle “saving their collateral” so it could be liquidated as soon as possible by commencing foreclosure proceedings. Remember, Florida is a deficiency state and there is a statutory timeframe. Years ago a Short Sale negotiator had no clue what a deficiency was. Now, they make statements such as, “oh you are in Florida, which is a deficiency state”. Rest assured that many of those people, who chose the “walk away” road, may very likely be caught by surprise when the process to obtain the money judgment is commenced shortly after the foreclosure sale. Won’t they be surprised when wages are being garnished due to the money judgment obtained by their Bank or Lender or even by the debt collector who has been hired by the investor who purchased the Promissory Note for pennies on the dollar after the foreclosure sale.

Stay tuned for part III, next week!

3002 Del Prado Blvd. South, Ste. A

Cape Coral, Florida 33904
Ph.   (239) 549-0900
Fax. (239) 549-0902

Posted on July 24, 2013, in Legal and tagged , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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