Can lenders still go after you for the unpaid debt on your foreclosed home?

Jun 18, 2013

In "Lenders seek court actions against homeowners years after foreclosure", Post reporter Kimbriell Kelly found that lenders such as Fannie Mae and Freddie Mac have been taking foreclosed homeowners to court for the outstanding debt on their former homes, years after the houses were taken. Kelly and database reporter Steven Rich will be online Tuesday at 11 a.m. to answer your questions about her story.

Hey everyone, thanks for joining today's chat. We'll try to get to as many questions as possible. Let's get to it.

Your story was great, but I am curious how it applies to Virginia -- what is the length of time that banks can wait to file, how does Virginia compare nationally and with Maryland, and are there any reforms on the way in Virginia? We have many people who are probably in the same situation as the people you profiled so it would be great to know how good/bad the situation is for them here.

It’s hard to tell in Virginia the length of time a bank has to file because there is no specific statute in Virginia for deficiency judgments. However, if contract law is applied, that would be five years.

Once a judgment is filed however, the law is clear. A bank has 20 years to pursue the debt. If the debt isn’t collected in those 20 years, a bank can renew the judgment for another 20 years. This can continue to happen if the bank petitions the courts to renew the judgment before it expires.


I live in South Carolina.. What are the laws pertaining to this? B L Nichols

Based on our understanding of the law, South Carolina is a one-action state. This means that a lender must pursue or waive a deficiency judgment at the time of the foreclosure.

Once a judgment is entered, a lender has ten years to pursue the debt.

South Carolina also allows a homeowner to hire an appraiser within 30 days of the foreclosure sale to determine the fair market value of the property. The deficiency judgment can then be limited by that amount instead of the amount of the sale.

Does Texas allow lenders to pursue former "foreclosed upon" homeowners in deficiency judgments? If so, for how long? How about "deeds in lieu" or "short sales"? Thanks!!

Deficiency judgments are allowed in Texas but with more protections than there used to be in the state. The current statute of limitations allows banks and lenders to bring cases within two years of the foreclosure sale.

There is no law expressly forbidding a deficiency judgment in the case of short sales or deeds in lieu. In order to avoid a deficiency judgment, a homeowner should make sure to have a lender agree to waive the deficiency.

It should also be noted that the state has a "fair market value exemption" that allows deficiency judgments to be reduced in cases where the court sees evidence that a house wasn't sold at a fair value.


Can you provide a list for all states please? We would like to let relatives know.

This is a tricky question, though it seems simple at face value. There's a lot that goes into a state statute as to whether a state can or cannot pursue deficiencies.

Here's a good report that list which states can/cannot. Plus, it's a good primer on some of the nuances.

The timeframe varies from state to state. In most cases, you unfortuntaley have to look up each state statute. And many states don't have laws specifically governing deficiencies, it may fall under other laws, such as ones that pertain to "contracts"  (i.e. breach of contract).

Here is a list linking you to some state statutes:

Has any one looked at robosigning as a defense? Since most of these judgement are default the issue can possibly be raised as a defense to the deficiency judgement. Suits on notes are technical and if there is not a clear line of title to the suing party that may be a defense. The expert in that area is a lawyer named April Charney in Florida. She used to head a community law office in Florida, and lectured nationally on the topic. I think that she is now in private practice in the Jacksonville area. Steve Seldin

I don't know off-hand, but that's a great question. I know that some lawyers up in Boston and have been successful in defending their clients based off of improper service. Basically, the clients were served at their foreclosed house instead of where they actually lived. The problem with that however, as I was told, was that the debt collector would then have an opportunity to turn around and serve the homeowner at the right address, still being able to file the motion for deficiency judgment.

But, I would be interested in hearing from any attorneys out there as to whether they've been successful with a robosigning defense.

I have a 3 year old foreclosure on my record from a property in California, a non-recourse state. The lender re-possessed and sold the home in 2009. I am now on my feet again financially and am re-locating to DC. When I move from California to DC would the lender (or Fannie or Freddie) then be able to pursue me under DC law or does the state law where my property was located prevail?

Based on my reporting, the law applies to the state where your property is located. However, people should know that if you live in a recourse state (one where a lender can puruse you for deficiency) and you move to a non-recourse state, the lender can still pursue you based on the law in the state where the property is.

It also works like this if you live in CA where you have protections, but say you have a vacation home in FL that gets foreclosed. Just because you live in CA, you're not off the hook for the deficiency on your Florida property.

Also, here's something to keep in mind. While CA is lauded as a state with a lot of consumer protections in this area, I've heard several stories about lenders getting around some of these laws.

For example, a lawsuit was recently filed against JPMorgan Chase Bank for sending a letter to someone in California saying that the "customer is still responsible for all deficiency balances per the terms of the original loan."

The lawsuit was filed in District Court  Case No. SACV 12-0609

Your excellent article revealed unfair situations where foreclosed consumers might be in danger of litigation and liability plus interest for 12, 24 even 36 years after the forcelosure. Under federal or state consumer protection law, is there any legal hope for consumers facing this unconscionability?

Thanks for the compliment and the great question. Unfortunately, I'm not an attorney. But I did consult one to answer your question.

According to Alys Cohen at the National Consumer Law Center: 

"Deficiency judgments are regulated by the states as part of the foreclosure process.  The nature of these protections varies widely.  In 36 states and the District of Columbia, a homeowner can be subject to a deficiency judgment even after the home has been sold via foreclosure.  These claims can be pursued without conditions in 15 states and the District of Columbia, and only under certain conditions in the other 21 states. "


Hope this helps.


What is the statute of limitations on these types of cases and when does the clock begin ticking? From the date of the foreclosure sale? Or from the date of the resale?

The statute of limitations is very different from state to state. Many states don't have specific limitations for this type of judgment, and so it's up to attorney's and judge's interpretations of the state law. Allow me to use Maryland, which I know a lot about from reporting, as an example:

In Maryland, a lender has three years to bring a deficiency case (Maryland Rule 14-216(b)). The date at which it starts is a little complicated, so allow me to get a little wonky for a moment:

Shortly after a foreclosure sale, an auditor submits a report detailing the costs of the foreclosure and the debt still owed. When that's ratified in the courts, the clock starts.

Once a judgment is entered, a lender can pursue a homeowner for 12 years, unless they renew before the time expires, in which case they can get another 12 years to collect.

Finally, an arcane exception in the law may allow lenders to extend the three-year deadline to a 12-year deadline, simply if the word "Seal" appears next to where a homeowner signed a mortgage (Md. COURTS AND JUDICIAL PROCEEDINGS Code Ann. § 5-102). These "contract under seal" laws are in more than a dozen states.


I've been wondering through out the mortgage/foreclosure meltdown - - what is Private Mortgage insurance for?? I had to pay it until my mortgage reached the magic percentage, then it was dropped. I never really understood what it was for, only that it wasn't for me, but for some corporate entity. What role, if any, does the probably billions of dollars in PMI we've all paid over the years have in any of this mess?

This is a great question. Many homeowners assume that PMI is an insurance that benefits solely them, and that's not necessarily the case. I'm not a lawyer, so I solicited the help of folks at the National Consumer Law Center to help answer this one.

Alys Cohen is an attorney at their Washington office and says:

"In general, PMI insures the lender against potential nonpayment by the homeowner.  Homeowners who are borrowing more than 80% of the purchase price of the home often are required to obtain such insurance, because they are considered more likely to default.  A federal law helps many homeowners cancel the insurance when they are at about the 80% mark.  One way in which PMI has contributed to the recent foreclosure crisis is that many homeowners obtained loans and then were told their PMI was going to cost much more than expected, resulting in unaffordable monthly payments.  In other cases, homeowners were told their monthly payment without including taxes and insurance."


Judgments and deficiencies can be sold to market investors usually for pennies on the dollar. How can a homeowner who is being hounded by one of these investors negotiate a fair result?

I'm not sure how you could negotiate a fair result if the motion for deficiency has already been filed against the homeowner. Unfortunately, at that point it's a pretty standard legal process. Judge reviews the motion and generally within a short period of time approves the request from the noteholder.

There was a case recently in Boston where the attorney was able to get his client off based off of an argument that the debt collector didn't properly serve the homeowner. The debt collector filed the notice at the foreclosed property versus the home where the foreclosed homeowner lived. But there's the chance in cases like that where the debt collector will just turn around and then properly serve the homeowner.

Remember that lots of people saw that they were underwater and just did a strategic foreclosure and just mailed in the keys to the bank. They thought they could keep their cars and their savings without anyone ever coming after them. Am I right here? Would someone have to actually declare bankruptcy for the banks to never come after them?

Bankruptcy is only so much of a solution. In the case of chapters 11 and 13 bankruptcy, debt is only restructed and therefore does not eliminate a deficiency. Chapter 7, however, should provide reprieve for a homeowner. The problem lies in that once people are back on their feet, they can still be hit for that debt, as was the case with Arturo Ventura from the original story.

It may not be likely that a bank comes after a homeowner anyway, as many larger banks tend not pursue in most cases.

Given your in-depth research on the subject of deficiency judgments and its detrimental impact on families struggling to recover from the financial crisis, what do you see as the potential impact of these actions by banks and courts and financial institutions in the next few years?

While these deficiency judgments don't impact a huge segment of the population, many of these people who are pursued could likely end up in bankruptcy court.

In the big picture, some sources have told me that this will further restrict people's access to credit, which will prevent them from contributing to helping the economy rebound.

I relocated back to the Washington area in search of employment. My home in Atlanta is underwater and I have not paid the mortgage since January 2013. I have not paid the HOA fees since that time either. I will likely do a Chapter 7 bankruptcy. What should I discuss with the bankruptcy attorney to ensure that the lender is unable to come after me in the future for any debt associated with the home? FYI: I am a responsible person who had a financial setback. The bankruptcy will enable me to regain my financial footing and not be stuck; but to move on and be a responsible contributor in economic life again. Businesses financially restructure (Chapter 11) and move on all the time

That's an excellent question. For people who haven't foreclosed already, they have some options. At this point, lenders are willing to forgive deficiencies on short-sales and deed-in-lieus. So if you haven't officially foreclosed yet, you might still have an opportunity to get it waived.

Now, if your foreclosure is final, I'm not sure what options you have to avoid the debt collector coming after you in the future. As you saw with one of the people we profiled, they had originally filed for bankruptcy shortly after their foreclosure. However, the debt collector had not yet filed their claim to the debt, which meant the homeowner had to then file bankruptcy a second time once the collector eventually came after him.

The interesting thing in that case, however, was when I looked at the guy's original bankruptcy filing, the debt collector's name was listed, and if memory serves me correct, the debt was listed as $1. It wasn't until years later that the collector filed a motion against the homeowner for the full amount of nearly $100,000, which included years of interest.

We have about ten minutes left in today's chat. We can take one or two more questions so if you've got them, send them to us!

Maybe I missed it in the article, but what is the approx number of properties nationwide that could conceivably be affected by either deficiency judgements or debt collection? All underwater properties that were foreclosed upon?

We did not include that in the article. But essentially, to do the math on that you'd probably need to add up the number of the nation's foreclosures (not including short sales or deed-in-lieus) that occurred in recourse states. That would probably get you pretty close to the number of properties that are eligible for motions for deficiency judgment. Now, that's not to say that lenders would go after all of those people, because the pursuit of these judgments are still pretty rare.

For example, Fannie Mae and Freddie Mac flagged 12% of their foreclosed properties in 2011 for deficiency judgment collection -- more than 35,000 properties.

Here's a link to the report that details this.

The article says, "Database reporter Steven Rich contributed to this report." Steven, did you have to scrape public records to compile any of the information in the article? Also, which programming languages and tools did you use to do the scraping?

I did. It was very difficult because the records are kept differently from county to county within the state. Four counties don't calssify them the same as all the others. Another two counties are kept by individual counties.

These are not records the state keeps track of so we had to scrape tens of thousands of court cases from across the state to find very specific verbiage.

I used Python with the requests module to pull cases and then another Python scraper to find relevant cases in our haystack.

If you want more detailed information, feel free to email me at

Thanks for spending your pre-lunch hour with us. Feel free to e-mail me or Steven post-chat if you have any additional thoughts/questions. Thanks, again!!

Kimbriell.Kelly@washpost &

In This Chat
Kimbriell Kelly
Kimbriell Kelly is a reporter on the Investigative Unit at The Washington Post. Her reporting on mortgage lending sparked a lawsuit that resulted in an $8.7 billion settlement with Countrywide Financial and led to a $335 million discriminatory housing settlement between Countrywide and the U.S. Department of Justice, the nation's largest fair lending settlement.
Steven Rich
Steven Rich is a database reporter on the Investigative Unit at the Washington Post. He works on long-term investigations analyzing large datasets and co-created the database of deficiency judgments in Maryland for the story by scraping tens of thousands of court records from across the state.
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