There have been some interesting comments to the blogs concerning deficiency judgments. One comment says that it is unlikely that a junk debt buyer can successfully buy and enforce a mortgage company’s rights to a deficiency judgment because the secondary buyer would be presured to produce the original mortgage note. He says that owing to securitization of mortgages it is difficult for lenders and buyers of their deficiency rights to produce original notes unless they are members of organizations which serve as a repository for original documents. This person says that a debtor who lost property in a foreclosure can easily defend a deficiency suit if the bank sells its deficiency rights to a third party junk debt collector.
However, another reader provided a less optimistic assessment. Larry Kosto, Esq. is one of the best debt collection attorneys in Orlando and represents several buyers of junk debt sold from banks. Mr. Kosto states that in order for a bank to get an underlying foreclosure judgment the lender is required to submit the original note or have the court established the lost instrument.
If the note was deposited with the court during the foreclosure or if the court reestablishes the lost note the purchaser of the deficiency claims can step into the shoes of the original lender and proceed without the ability of the debtor to question the existence of the original document. Also, Mr. Kosto, states that the borrower may be estopped from challenging the existence of the note if the issue was not raised in the underlying foreclosure.