Deficiency Judgments are an area of law, as they apply to real estate, that are frequently misunderstood and mis-stated. There are business cycles that help determine whether lenders will seek a deficiency and their are tax considerations as well.
The "investor" (lenders should call them who they really are - the government backed programs) cannot charge down the remaining debt until they have exhausted their means of collection. In other words, a lender cannot properly charge down a short sale deficiency amount until they have tried everything to collect the money i.e. obtain a deficiency judgment. That was a primary reason for seeking them in the past. They had to in order to obtain beneficial tax treatment out of a transaction.
There is also a complex relationship between original lender (now servicer) and the "investor". This affects strategy on deficiency judgments as well. I will discuss this is another blog...
However, many courts have begun granting the deficiency judgment at the same time as the forclosure judgment. Banks do not need to file for a deficiency in such cases. This is a reason that I always recommend that home owners defend a foreclosure - they may at least avert a deficiency.
BofA, Chase, Wells and other major lenders (or more appropriately paper pushers since they do not own most of the debt) have all been implementing new strategies and experimenting with new policies..partially out of financial considerations ands partly out of PR strategies.
Comments(1)