Old foreclosure debt coming back to haunt former homeowners

The full article can be accessed here: http://money.cnn.com/2014/11/17/real_estate/zombie-foreclosure-debt/index.html

SOME THOUGHTS:

         It seems that one of the major after-shocks of the housing crisis and the ensuing foreclosures is foreclosure debt.   Foreclosure debt can be characterized as the difference between the cash owed on the foreclosed home and the amount the lender was able to recoup after selling the property.   Those who may have lost their homes seven years ago, at the onset of the housing crisis, are now being sued for foreclosure debt. After these individuals lost their homes, destroyed their credit, and finally dug out of their financial holes, they are being handed a new shovel and being told to start digging out again.   The debt collectors who are suing for this debt are not suing for ten thousand or even twenty thousand dollars, one example in the article discusses an individual being sued for $115,000.  A single debt collector in Florida has filed over 10,000 suits totaling approximately one billion dollars in foreclosure debt.  

       In an effort to quell foreclosure debt activity, a law made in Florida reduced the statute of limitations in which lenders could pursue foreclosure debt to one year.   Unfortunately, an unintended consequence of this law is a greater effort by debt collectors and government-sponsored mortgage companies to recoup their losses suffered through the financial crisis within the statute of limitations. Going after foreclosure debt is legal in thirty states, however it is not often pursued.   Most borrowers are not aware that they can in fact be sued for this old mortgage debt.

        Fortunately, there are some alternatives and things to be aware of that can help if someone finds themselves in this precarious situation.  Firstly, Fannie Mae and Freddie Mac are only targeting individuals who had the ability to make payments and foreclosed regardless.  This means that if a case involves job loss, divorce, illness, or another related financial hardship, it would not be pursued.  If the case does go to court, individuals have solid avenues of defense, such as a plea of hardship or a challenge to the foreclosure paperwork.  Individuals being sued for old mortgage debt can also attempt to make a deal with the bank; if the bank forgives the debt they will not contest the foreclosure.