Recently, a couple, husband and wife, contacted me in a panic after realizing that $20,000 had been deducted from their bank account. After inquiring their bank about the deduction, they were notified that their account had been garnished by a Lender pursuant to a final judgment of foreclosure entered 3 years prior against the Husband when he was a single man. The Husband had an investment property that he lost in a foreclosure in 2011, due to the economic downturn. Since it was an investment property, he assumed that losing it or just giving it up to the bank, would not be a big deal. He was wrong.
When a lender forecloses on a mortgage, the total debt/loan amount owed by the borrower frequently exceeds the price it was sold for at auction. The difference between the sale price and the total debt is called a deficiency. For example, a final judgment of foreclosure is entered for $350,000, but is bid/purchased at auction for $150,000. The Borrower, by signing the promissory note, is still on the hook for the difference, in this example $200,000. The lender has complete right to pursue this deficiency amount against the borrower. In Florida, the lender can seek a personal judgment against the debtor to recover the deficiency. Once the lender gets a deficiency judgment, the lender can collect this amount by doing such things as garnishing the borrowers’ wages or levying the borrowers’ bank account – which is what happened in this case.
Deficiency judgments can haunt you way after a final judgment is entered. The worst thing one can do is ignore a foreclosure case, even if you “don’t care” about the property. You’re still on the hook for the promissory note’s loan amount. An experienced lawyer can help you negotiate a waiver of the deficiency amount if done before a final judgment is entered, so consult with a lawyer no matter what at the inception of a foreclosure or any lawsuit.