Deficiency judgements after foreclosure on the rise

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Deficiency judgements after foreclosure on the rise

Ben and Lori had already been through a hard couple of years.  They lost their home to foreclosure in a long process that began when the engineering firm where Ben works cut his hours.  By the time Ben and Lori had moved themselves and their two young children from their old home in Star to a rental in Meridian, they thought they had seen the worst of it.  Then they learned the bank was suing them for the money it lost on their loan.  It’s called a deficiency judgment.  Lawyers who represent Idaho homeowners say more of them are being filed.  One of those attorneys is Brian Webb, of Angstman Johnson.  “My practice definitely has seen an increase from 2010 to 2011,” he says.

The National Consumer Law Center, a nonprofit consumer advocacy group, confirms that deficiency judgments appear to be going up across the country, but how that plays out depends on state law.   (Idaho) requires lenders to act within 90 days of the foreclosure sale.  Elsewhere, the statute of limitations can be much longer.  “In many other states around the country, homeowners find themselves subject to deficiency actions one, two, three, four or five years after they’ve been foreclosed,” Walsh says.

That means former homeowners can think they’ve moved on, only to find that the debt is still there.  “They’ve definitely been under the impression that they walked away from a situation, or it’s over,” says Walsh, “and then this deficiency claim in court just comes back and hits them.”
What’s more, Pickens says there is an additional unnerving trend that former homeowners should consider.  Lenders are selling deficiency claims.  “I do know some private investors who are coming in and purchasing up bank loan packages and have been paying literally pennies on the dollar, ” she says.  “Just sitting on the paper, waiting for the right time to collect on it.”

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