I was asked what the story was on statues of limitations (in Florida) for enforcement of deficiency judgments.

The Florida Statute of Limitations (time to enforce) the Promissory Note is 5 years from the time it went into default. What defines when that default is can have more than one meaning.

If your property has been foreclosed, the time starts with the date of the foreclosure sale. If your property has been sold at short sale, the time is the date of the closing (although it could be a few days later whent he lender gets its money from the sale). If it is a deed in lieu of foreclosure and there remains an unsatisfied deficiency, it is the date of the recording of the deed. If the lender takes no action at all, such as a 2nd mortgage lender that does not defend its worthless mortgage, it can be the date of the foreclosure of the first mortgage OR the date of notice of the default in the 2nd mortgage promissory note.

There is also a rule on how long a plaintiff can keep open a foreclosure lawsuit that has no activity. That rule says after 1 year of inactivity, the lawsuit can be dismissed by the court. The rule is referred to the "Failure to Prosecute Within One Year" rule. IF the court dismisses the lawsuit after one year and before the bank asks for a deficiency judgment, the lender can still file a new lawsuit and sue just on the promissory note unpaid balance. Some people think that once the one year has past, they are free of the deficiency after a foreclosure. This in incorrect.

Florida courts have noted that a claim for deficiency in a foreclosure action does not accrue until the foreclosure sale has occurred. Thus the five year period starts at the time of the foreclosure sale (not the time of the default).


With the above being said, please understand that this response is a general comment about the law and is not expressing a legal opinion about the very general fact pattern raised herein. As such, this brief response may not be relied upon for any purpose. Please consider obtaining formal legal advice if you have a specific fact pattern with respect to which you need an answer.
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Copyright 2010 Richard P. Zaretsky, Esq.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.
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Replies to This Discussion

Should the Lender bid the full amount of the Final Judgment there cannot be any deficiency. Borrowers should not let their property be sold at the Clerk's auction for $100.00. Typically, any bid in excess of $100.00 will cause the Lender's representative to bid the full amount of the FJ which elimiates the possibility of any deficiency on that note. Junior lien holders are another story.
Richard- That is a very good explanation and you made it very easy to understand and as with anything these days, the answer seems to be: it all depends:) We are wishing you and your family a very happy new year. Say hello to your wife for us.
Thanks Twice, Katerina - and the same to you and Nestor. Let's see lots of work between us this coming year.
Stephen - Essentially you are correct, except we have noticed at the sales that lenders are for larger transactions getting more sophisticated in bidding so that they do not put a huge documentary stamp tax burden on the lender for the overbid. Many lenders are now bidding up to a stop price - usually based on the pre-foreclosure (updated) value as done by a drive-by appraisal (simple bpo) - sometimes as in the old days called a horseback appraisal. In Florida the difference between a $100 bid and $100,000 bid is $699.30. Multiply that for a $300,000 judgment and it becomes real money that cannot be recouped AND the lender is as you say, throwing away the deficiency opportunity by bidding the judgment.

Stephen B. McWilliam said:
Should the Lender bid the full amount of the Final Judgment there cannot be any deficiency. Borrowers should not let their property be sold at the Clerk's auction for $100.00. Typically, any bid in excess of $100.00 will cause the Lender's representative to bid the full amount of the FJ which elimiates the possibility of any deficiency on that note. Junior lien holders are another story.
RIchard:

Yes, I have heard some very few lenders are doing this but only in very isolated instances and only if it is one of their portfolioed loans, especially commerical properties. The same thing occured in the early 9o's with the S&L meltdown. This all becomes academic if the Borrower has junior notes that will force an eventual BK 7 or 13.

On the commerical side I just assisted a customer faciliate a stip lien (a/k/a cram down) on a commerical property using BK 11. Unfortunately, Congress just ignored that latest proposed bill that would have allowed residential cram downs.
There is a new and more important problem developing in the deficiency arena that I have been awaiting. Lenders are now starting to chase Sellers in short sales for the deficiency between the net received and the note's current balance. What makes this situation very unusual is that the SOL do not apply in the same fashion. Whereas, a mortgage is considered an installment loan typically with 360 payments; the 5 year SOL applies only to those individual payments that are not more than 5 years overdue. Basically, every payment that is not 5 years late and/or still to be made in the future are collectable.

In a foreclosure action the lender accelerates the note's balance for payment in full. Therefore, in a foreclosure action the 5 year SOL is applicable to the total deficiency balance but not in a short sale.

Let's be careful out there.
can a family member of the defendants bid on a property auctioned by palm beach clerk auction?

Thanks.


Stephen B. McWilliam said:
Should the Lender bid the full amount of the Final Judgment there cannot be any deficiency. Borrowers should not let their property be sold at the Clerk's auction for $100.00. Typically, any bid in excess of $100.00 will cause the Lender's representative to bid the full amount of the FJ which elimiates the possibility of any deficiency on that note. Junior lien holders are another story.
Hi... Great information...  i am working with someone who was served with  foreclosure papers about 2 yrs. ago,  and  there has been no follow up on the bank's part... Under "Failure to Prosecute Within One Year" rule, can the bank still file for foreclosure, if the first case is thrown out of court?

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