Wednesday, January 01, 2014
Maryland will reduce time lenders can seek deficiency judgments from upsidedown borrowers
The Maryland legislature will consider a bill reducing the time a foreclosure note holder has to pursue a borrower for a deficiency judgment after evicting the owner during the foreclosure. It would reduce the time from 12 years to just six months, making Maryland one of the stricter states on lenders. A number of states limit this time, and three states (Kansas, South Carolina and Illinois) require deficiency judgments to be brought at the time of foreclosure.
The Washington Post has a story by Kimbriell Kelly and Steven Rich Dec. 31 here.
It wasn’t clear whether this could apply to a foreclosure brought by an association over dues.
But it is true that homeowners can still accrue interest owed after foreclosure, and be shocked to get a call from a debt collector over the matter. They would have to be served, however, and know that a deficiency had been sought.
Deficiency judgments became an issue in the 1990s on some parts of the country, like Texas, after the savings and loan crisis. They may have been less common relatively speaking after the 2008 subprime crisis.
James Wiedemer wrote a primer, an orange paperback, “A Homeowner’s Guide to Foreclosure” as far back as 1992. In the 90s, sometimes original holders of assumed notes could get stuck with deficiencies of subsequent owners, under FHA and other lenders started requiring assumption buyers qualify.