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In last week’s post, we briefly discussed deficiency decrees and how those can affect homeowners who are facing foreclosure. Our readers in Florida might like to know more about deficiency judgments and how they work.

In Florida, the court has the sole authority over whether a deficiency judgment will be issued. This type of judgment is one that mortgage holders sometimes request to try to recoup money they lost because of the foreclosure.

The laws pertaining to these judgments make a distinction as to whether the property in question was occupied by the owner. When the owner occupies the home, the deficiency judgment can’t be more than the difference between the fair market value of the property and the judgment amount of the foreclosure. As an example, if a home is worth $100,000 but sells at a foreclosure sale for $90,000, a deficiency judgment for $10,000 might be issued, regardless of the amount the homeowner owed on the home.

According to FindLaw, anti-deficiency laws aren’t usually applicable to second mortgages. They might not apply to home equity loans either.

There are two ways that a mortgage holder might seek a deficiency judgment in Florida. One is to seek the judgment at the time of foreclosure. The other is to seek it after the foreclosure sale. If the judgment is denied during the foreclosure, the mortgage holder can’t seek it again later.

Deficiency judgments can have a long-term effect on your finances. Fully understanding the law and how it applies to your foreclosure is vital for anyone facing this type of situation.

Source: Online Sunshine, “702.06: Deficiency decree; common-law suit to recover deficiency” Oct. 18, 2014