PURSUIT OF DEFICIENCY JUDGMENTS
Deficiency judgment litigation became more prevalent in Florida around 2009, when many foreclosed properties were “underwater.” This means the indebtedness of the homeowner to the mortgage holder was more than the property’s value. In Florida, the determination of a deficiency judgment is calculated by taking the final judgment of foreclosure amount, less the fair market value of the foreclosed property on the date of the foreclosure sale.
In steady economic times, deficiency judgments should be rare, as presumably banks would underwrite mortgage loans with sufficient loan to value ratios to cover the difference in the event of a foreclosure. However, in 2009, when Florida real estate values saw a precipitous decline combined with an enormous increase in defaulted loans, the table was set for much deficiency judgment litigation.
The statute of limitations to file a deficiency action was recently amended by the Florida legislature concerning notes secured by a mortgage against residential properties that are one-family to four-family dwellings. See Florida Statute §95.11(5)(h). The limitations date begins the day after the certificate of title is issued in the underlying foreclosure or the day after the mortgagee accepts a deed in lieu of foreclosure. For commercial properties not covered by the aforementioned statute, the statute of limitations remains five years. In the residential context, a foreclosing lender must be ready to swiftly act to obtain the necessary appraisal(s) in order to commence deficiency proceedings. The appraisals should be conducted with an effective date of the foreclosure sale.
In the event the deficiency proceedings are contested, an evidentiary hearing will be set by the court. The evidentiary hearing will be a battle of the experts – the lender’s appraiser v. the borrower’s appraiser. Most borrowers who deem themselves “judgment proof” will not fight entry of a deficiency judgment. However, the borrower with assets to protect has every incentive to minimize the amount, if any, of a deficiency judgment. If a deficiency judgment is entered, the case becomes a post-judgment collections matter and collections will commence.
Commercial Litigation Lawyer
At the Law Offices of Paul A. Humbert, P.L., we have extensively litigated foreclosure deficiency judgments (both pre and post-judgment) throughout the state. We understand the unique challenges associated with deficiency judgment litigation and collection and can guide the way forward.