I want to respond to the quote below and suggest that while it may well be true that few lenders move forward with obtaining a "deficiency judgment" against a borrower, in a situation where a 2nd lender is foreclosed out by the actions of the 1st lender in completing the foreclosure process, the 2nd lender is not going after a "deficiency judgment." Instead their action is simply filing a complaint based upon a default in an unsecured loan, just like a credit card company would do if you stop making payments on your Visa or Master Card.
Daniel
Quote:
Originally Posted by ORNV3  Hey Enough Already,
I've been doing a TON of research on deficiency judgements and did run across that article earlier. Take a look at this one by the same author.
I have often written about mortgage deficiency judgments pointing out that up to now few institutional mortgage lenders are pursuing deficiencies in Florida. Borrowers should distinguish between personal liability on first and second mortgages. When either the first or second mortgage holder forecloses the first mortgage will likely take back the property. The first mortgages gets land which eventually can be sold. The second mortgage holder gets nothing at the foreclosure sale. If the first mortgage holder pursues a deficiency judgment (and again, this is usually not the case), the borrow can defend the action in part by arguing that the mortgagee has been satisfied by its repossession of the property. The borrower does not have this defense against the second mortgage. The second mortgage, having received nothing of value in a foreclosure, can sue on the mortgage note. The second mortgage can simply demand repayment of the promissory note underlying the mortgage without going through a foreclosure proceeding. The property value is irrelevant when the lender sues to collect the note.
I have not seen any case to date where a first or a second mortgage lender has sued the homeowner personally. I think the risk of personal liability is significantly higher when there are more than one mortgage obligations. It is also more likely that a second mortgage lender who does not foreclose can wait up to five years to bring suit on the underlying note after the first mortgage lender’s foreclosure action is complete.
posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida
I think we need to worry about the second mortgages. They aren't going to get anything. Hopefully they will settle.
However, for someone like me..... I have hardly any money left now. My second is for $95000. Say they will settle for 10%. That's $9500! I don't have it and won't for a long long time. BK would cost me $1500 at the most. Credit will be ruined either way so I don't know why I would want to settle it. |