More and more calls and emails are coming from people in trouble with investment real estate. The typical person is concerned about his personal liability and vulnerability of assets in the event one or more of his real estate investments is foreclosed by mortgage lenders. A deficiency judgment refers to a lender’s judgment against the borrower for the difference between the outstanding balance of the mortgage note, plus costs and attorneys fees, and the value of the property foreclosed. The property value is determined on the date of the foreclosure sale. In Florida, a foreclosure does not automatically result in a deficient judgment. The mortgage lender has to file a motion for a deficiency after the foreclosure sale, and the court holds a separate hearing on the lender’s request for deficiency liability.
The mortgage lender has to show the court evidence that the property’s value was less than the note balance. The borrower has the opportunity to present his own evidence that the property value was equal to or exceeded property value. If the property was worth more than note balance on sale date the court will not give the mortgage lender a deficiency judgment against the borrower. During the real estate boom deficiency judgments were uncommon because increasing real estate values brought home values above note balances of defaulting mortgages. In the current real estate recession, we may see more lenders pursue deficiency judgments against borrowers who they believe are collectible.