The LA Times recently reported that Frannie Mae and Freddie Mac are going after more strategic defaulters.
While the LA Times article points out that there were 102,652 foreclosures Frannie Mae and Freddie Mac did not refer or collect the deficiency, the bigger story is that half of all foreclosures were sent to vendors, or should have been, to pursue post foreclosure collections and/or deficiency judgments.
The reports also point out the fact that Fannie Mae and Freddie Mac want to focus more on strategic defaulters for the following reasons:
For the purpose of the LA Times article, strategic default is defined as when someone who can pay for their mortgage walks away, especially when the home has become an upside-down property.
However, I like to say that all defaults are strategic defaults. Being upside-down in a property is a financial hardship, especially for clients that are getting close to retirement. Even if you can pay your mortgage today, an upside-down property may put your financial future at risk.
In the wake of the financial crisis, banks in general were just focused on processing foreclosures – and keeping themselves from going bankrupt. Historically, foreclosures would be processed after 90 days of being delinquent. After the financial crisis banks took up to 2 years before filling the foreclosure lawsuit – with an average time of approximately 6-7 months.
Most of this timing has to do with banks doing balance sheet management, since they did not want too many foreclosures hitting their books at once.
Since there was so much focus on balance sheet management, the lenders have not pursued many deficiency judgments in Florida – and also because they had, until recently, up to 5-years from the sale date to pursue a deficiency judgment.
However, in Florida this past July the rules changed. As of July 1, 2013, lenders seeking a deficiency judgment must file a Motion for Deficiency Judgment within 1-year of the foreclosure sale date. Additionally, any foreclosure sale date that occurred prior to July 1, 2013, must also initiate a deficiency action prior to July 1, 2014 to pursue the deficiency, provided that July 1, 2014 is still within the original 5-year statute of limitations window.
Of course, this is still more time than 10 states that have only 30 to 180 days to pursue a deficiency judgments.
So now 5 years after the financial crisis, banks are turning their attention to deficiency judgments. In the article it points out Fannie and Freddie have done a poor job pursuing deficiency judgments, and I would argue other banks have done a poor job as well. However, as more banks turn their attention to pursuing deficiency judgments and following a process like the one pictured above, having a lawyer to help with your case will be important.
The post Fannie Mae, Freddie Mac to go After More Strategic Defaulters appeared first on Castle Law Group.
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