House owners beware! The debt collector may come knocking even after the house has been lost to foreclosure to realize dues unpaid. In Lee County such deficiency judgments are increasing. Nationally it is the same picture.

These judgments usually follow a foreclosure sale. In Florida the lenders can legally collect the money that remains due to them after a short sale based on the difference between the money due on the mortgage and the appraised value of the estate on the auction date. Attorney Ronald Webster of Marco Island said, “The bank has to support a deficiency judgment. Obviously banks have a lot of appraisers in their pockets. So at times it can be self serving”.

Last August there was an increase in deficiency judgments in Lee County – the number being 51. It was the highest monthly number in 2010 so far. Last July the number was 32. Charlie Green, Clerk of the Courts in Lee County referred to it as not being a happy situation”.

During the first eight months of this year there were 179 instances of deficiency judgment. Last August 43 such motions were filed. Jeff Tumbarello of Southwest Florida Real Estate Investors Association predicted that this trend would increase. Foreclosure filings are on the rise in Lee County. This is causing the lenders to focus more on deficiency judgments. Tumbarello quipped, “They are supposed to go after these people.That is the way these things work”.

Last August 865 new foreclosures were posted. Last June and July it was 929 and 778 respectively. During the zenith of the foreclosure mayhem the filings in the county crossed 2,600. In 2009 August 1,626 new foreclosures were posted – twice the number of 2010 August.

Right across America the investors as also the debt collectors are purchasing deficiency judgments cheaply – pennies on dollars. Armed with it they are chasing the borrowers.
Tumbarello thinks this is going to be the next wave although many do not agree with him.

Attorney Roy Oppenheim of Florida is representing a good number of house owners who are battling deficiency judgments. There is a law that is trying to put caps on such activities but it is not being effective. Some of the states do not permit such judgments. Generally the banks who are the purchasers at foreclosure auctions follow up deficiency judgment on fewer than 5% of the properties foreclosed upon. But he admitted that the numbers are “creeping up”.