Any mortgage lender that has foreclosed on a property from the beginning of the housing recession through June 30, 2012, has until July 1, 2014 to move for a deficiency claim or their deficiency claim is forever barred. Are we about to see an avalanche of backlogged deficiency claims in the next two months?
I’ve stated many times that throughout the real estate recession very few first mortgage lenders pursued deficiency claims following residential first mortgage foreclosures. Predictions that lenders were waiting to chase their borrowers for deficiency judgments until the economy and borrowers recovered financially, or until the lenders caught up with their foreclosure backlog turned out to be incorrect.
Just recently, I’ve seen a slight increase in first mortgage deficiencies in central Florida. The increase seems due to one collection agency, Dyck O’Neal, purchasing a large block of contingent deficiency claims from first mortgage deficiencies. Dyke O’Neal hired a large collection firm, headed by attorney Daniel C. Consuegra of Tampa, Florida, to file deficiency actions. It is possible that Consuegra has invested in the purchase of the claims and is working on contingency. For example, in recent months Dyck O’Neal has filed over 50 deficiency actions in Orange County, Florida.
I’ve seen no first mortgage deficiency actions filed by any other collection agency and collection law firm. I expect Dyke O’Neal will file many more claims before the June 30, 2014, deadline, and maybe some other firms are preparing “last minute” deficiency claims. Even accounting for the Dyke O’Neal actions, when the deficiency claim state of limitations expires in two months the vast majority of homeowners who lost their homes during the recession will no longer have to worry about deficiency liability.
The more significant problem is that if the mortgage lender chooses not to pursue a deficiency before the deadline and instead forgives he debt the homeowner may have to recognize income for the debt forgiveness. The tax exemption for mortgage debt forgiveness expired this past January.