This morning, I read with interest a story in the Wall St. Journal called “House is Gone But the Debt Lives On.” When I finished reading the story, my first thought was…this is going to freak out a lot of people unnecessarily.
(Aside: I read this on my Ipad and I highly recommend the WSJ tablet edition. It’s beautifully designed and very easy to read. It has a monthly fee, but it’s cheaper than the print edition).
The story covers how there has been an increase in deficiency judgments entered this year in a Florida community. A deficiency judgment is a court judgment entered against the owner after a foreclosure for the difference between the mortgage balance and the market value of the property.
The community is Lehigh Acres, an overbuilt central Florida boom town. It’s so bad down there that they could rename it “Deficiency Judgment Acres.” In the first 7 months of 2011, there have been 42 deficiency judgments entered against foreclosed owners in this subdivision alone for more than $7 million. Most of these judgments will be uncollectible, I would guess.
Here are the main points of the story:
1. Deficiency judgments are increasing in Florida.
2. Deficiency judgments elsewhere are still rare, unless the foreclosing bank is small bank or a credit union.
3. Down the line, debt collectors may buy foreclosed mortgages for two cents on the dollar and then may try to collect against foreclosed owners.
How does this apply to Illinois? Deficiency judgments are still rare in Cook County, so there is really no comparison to what is happening in Lehigh Acres.
It is always possible that foreclosed first mortgage debt could be dumped to debt collectors. I haven’t seen that happen yet, but you never know.
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Thanks for posting this response to the article. It is good to get a “local” perspective. I have two questions. 1)When I move from my home, will I receive forwarded mail about any selling of my debt to a creditor? 2) As I move closer to the one year (1/1/2010) anniversary of my first missed mortgage payment, I am wondering just how much longer I will be able to stay in my house. I try to get updates on the process from the court clerk’s website, but it is very slow to update. Is there another way to get the information?
Maggie,
Most times mail is forwarded to your new place. Creditors will find you easily by skip tracing you, so even if the mail is not forwarded, they will find you.
Generally, you can keep possession of the house until about 60 days after the sheriff’s sale. I agree that it’s hard to figure out when you have to leave. I will be happy to tell you how I check it (it’s too involved to explain here so please call if you want to go over it). It varies based on what county you are in.
Best of luck,
Tom