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Wednesday, June 16, 2010

WaPo on Foreclosures and Deficiencies

by Calculated Risk on 6/16/2010 01:44:00 PM

From Dina ElBoghdady at the WaPo: Lenders go after money lost in foreclosures

Here is an excerpt:

Carlos Cortez and his wife['s] ... second lender came after them for $70,000 when their short sale was completed on his Manassas Park townhouse in 2008.

Cortez knew that was a possibility, but he went through with the sale because his real estate agent said the lender was engaging in scare tactics.

James Scruggs, an attorney at Legal Services of Northern Virginia, said the lender appears to have backed off after Cortez argued that that the loan officer falsely qualified him and his wife for a home-equity line by fabricating key details about their finances.
Tanta (my former co-blogger an a mortgage banker) sent me an email about this in 2007:
Back in my day working for a servicer ... the absolute all time last possible thing you could get me to do is send an attorney barging into court demanding a deficiency judgment if I had any reason whatsoever to fear that my own effing loan officer was implicated in fraud on the original loan application. Any borrower with half a brain will raise that as a defense, and any judge even slightly awake will not only deny the deficiency but probably make the lender pay all costs, or worse. And I'd call that justice.
It is unclear how often lenders are pursuing borrowers for deficiencies - but it is clearly happening more often now. This is one reason why people involved in short sales or considering "walking away" should consult an attorney. I suspect this is part of the reason for the recent surge in personal bankruptcy filings.