New Florida Law Shortens Deadlines For Mortgage Deficiency Lawsuits

In a mortgage foreclosure deficiency lawsuit, the bank sues the homeowner for the amount due on the mortgage loan after the foreclosure ends. A new Florida law relating to deadlines for mortgage foreclosure deficiency judgments brings good news to Florida homeowners who have lost their home in foreclosure in recent years. A mortgage foreclosure deficiency judgment is a major threat to a home owner’s financial well-being, even forcing a homeowner into bankruptcy. Under Florida law, the deficiency judgment is the difference between the total mortgage debt and the fair market value of the house when it is sold.  Even after the homeowner loses their house in foreclosure, they still owe the bank for the balance of the mortgage loan debt, if the value of the house was not enough to pay off the debt.  For many “underwater” homeowners in Florida, this difference can be significant.

Until last summer, banks had five years after the foreclosure sale date to ask the court to enter a deficiency judgment. Five years is a long time to wonder if the bank is going to pursue you! Many clients seeking my advice on what to do after a mortgage foreclosure had to make difficult decisions to file bankruptcy immediately and begin a fresh start, or wait out the five year period and hope the bank would not seek a deficiency judgment for the remaining mortgage debt. During that long period, the foreclosure judgment depresses credit scores and delays the time for applying for a new mortgage loan.

A new Florida law shortens the deadline for banks to seek a deficiency to one year. The one year period starts on the day after the certificate of sale is issued by the clerk. This is great news for homeowners who need closure on their financial obligation to the bank. The one year deadline applies to all foreclosure lawsuits that are filed after July 1, 2013. However, for any foreclosures lawsuits filed before July 1, 2013, the bank has what time is left on the old five year deadline, or until July 1, 2014, which ever comes first. What this means is that the deadline has been shortened for foreclosure sales that occurred before July 1, 2013, giving banks that have already foreclosed and sold the property a new deadline of July 1, 2014 to bring a deficiency judgment lawsuit against the homeowner. So, if your house was sold on January 1, 2013, instead of having to wait five years from that date to know if the bank will seek a deficiency judgment, bank has only until July 1, 2014, or they will be barred from doing so.

This new law only applies to owner occupied homes that are one to four units.

I predict that this new shortened deadline will lead to a sharp increase in lawsuits for deficiency judgments before this summer. My office is already seeing increased activity in this area in our new case intakes. Anyone getting sued for a deficiency should contact an experienced attorney for advice regarding their options for resolving that serious legal problem.

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