This is a question for you, our readers. I was at a party with a Wachovia banker, bored, until he said: “Florida is not like California, you can’t walk away from a foreclosure in Florida.” Now, I was interested. I listened to everything he said and even checked with a real estate lawyer to see if what he said was true. It was.Many banks (such as Deutsche Bank) are holding onto to hundreds of properties for a year or more. We all know, if the price is right, a house can sell. So why are lenders not selling these properties? I thought it was because they would lose too much money. Well, it appears that with a “deficiency judgment” they don’t have to. After the sale, they can go after the owner for the difference between the sale and the mortgage. So people in Florida cannot just walk away from a foreclosure like I thought.
It would be easy for the banks to determine if the foreclosed-on are dirt-bag people. They could look at public records to see if there are other properties (place a judgment on them) or determine if the person has a job (garnish wages), attach bank accounts, etc. I believe you can’t go bankrupt when you have a job with a salary. But if the banks don’t move quickly with a deficiency judgment, can the people go bankrupt ahead of the sale, eliminating the future deficiency?
So here is the question I am left with that readers might be able to answer:
If a bank holds the property they can’t get a deficiency judgment. They must sell the property to prove there is a deficiency. Why aren’t lenders selling the ones where the people have some sort of assets? It costs a lot to hold properties for a year or more. It is pretty insane really.
The bank is obligated to try to get a decent price for a home – for example they can’t just dump them for $1 and get a deficiency judgment for the rest - but they are not required to hold them forever, they could get an appraisal and dump them for that price. Anyone have answers as to why lenders aren’t seeking these judgments?
9 comments:
Good question, I never heard this before.
Many people are walking away from their properties via foreclosure as the value of the property is less than the mortgages. If banks started cracking down on these people with these judgments, then you would see less foreclosures from people with other properties/jobs. They have to bite the bullet and take the loss instead of passing it on.
Readers...you don't have a clue on this do you? Where are all those Deutsche, Countrywide and JP Morgan Bankers?
I think they are just trying to delay the inevitable write offs and resultant damage to their quarterly reports.
If they were all to start selling these foreclosures at the true prices they are worth , the values of surrounding houses and neighborhoods would plummet as well. Comparative market value.
Then the dominos would really start to fall as more and more homeowners become underwater.
There is no quick fix for this market other than letting the chips fall where they may and picking up the pieces and moving forward.But, it is not going to be pretty to watch.jmho
But wouldn't it stop people from walking away from their properties? Anyone would let a property foreclose if it worth less than the mortgage. The only thing to stop this cascade would be the judgment in my view. People would have to hold the property or sell it at a loss. If the flippers take the losses we won't have to bail out all the banks.
Banks don't pursue them because the courts will not permit them - in theory a deficiency judgment exist but that's about - it's an equitable remedy - specifically -the deficiency judgment is not based solely on the proceeds of judicial sale. The lender must show that the market value of the property was less than the amount of the foreclosure judgment and the deficiency judgment is entered for the difference. Proof of market value requires testimony of an expert, such as an appraiser.
thanks readers.
The question remains: WHY DON' T THE BANKS PURSUE THEM? If all they need is an appraiser to testify, that doesn't seem insurmountable.
Here ya go Genius!
http://floridaassetprotection.blogs.com/alperlaw/2007/12/more-on-mortgag.html
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