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How often does wells fargo go after deficiency judgement after foreclosure on investment property.

New Port Richey, FL |

The property was trashed by a tenant whom we let stay in the house while trying to help them catch up with back rental amounts due. We finally got them out, the house was unlivable and we tried a short sale but the bank refused a really good offer, we could not fix it and still pay the mortgage and we could not carry the mortgage so we had to let it go. With that said, we also had to use a debt settlement company for other consumer debts related to trying to fix real estate problems in all our investments (3) and then could not pay them due to tenant issues and the real estate market tanking so we could not sell them. We have managed to keep the others that are not worth anywhere near what we paid. It is a mess.

Attorney Answers 3


Wells Fargo can be depended upon to ALWAYS pursue deficiency judgments after foreclosure. I am defending several such cases right now. High ranking people at Wells have actually made this statement publicly. Worse yet, the statute of limitations for deficiency claims for Florida foreclosures is 5 years after the foreclosure judgment (or short sale). There is no way you can control when this occurs, it might be soon, it might be near the end of the limitations period. So, many people who have been through foreclosure think that they "walked away" and yet they are very wrong - the other shoe just has not dropped yet.

More bad news - debt settlement companies are generally a scam. They pay themselves long before any of your creditors get anything, and most such plans fail.

While this may sound counterintuitive, since the foreclosure is already over, you no longer have any ability to do anything about the deficiency problem by defending against foreclosure. An option regarding the deficiency claim is to defend it PROPERLY when it is made. As I indicated, I am defending several Wells Fargo deficiency claims right now, have won one, and see ways I can win the others. However, these are not straightforward cases to defend. One of the clients who just brought me a deficiency claim to defend had been to another attorney and told me the advice he had gotten from that attorney, which would NOT have worked...

You might also be able to get serious relief and improvement in this situation via some form of bankruptcy. If you and your situation qualify, the best option might be Chapter 13. It is difficult to explain here how Chapter 13 works, because it is extremely customizable to fit particular circumstances and objectives, and the potential result depends greatly on what you own, what you owe, and what your income is. Most people who have attempted to research Chapter 13 on their own have come away confused and misapprehending how it would work for them, because it can be so different from case to case.

With all that said, please contact a really experienced attorney, who knows how to properly defend against deficiency claims and to use all the bankruptcy chapters that may be available to you. Most bankruptcy attorneys do not, most only know Chapter 7, which may not be the best option for you.

If you want to give my office a call, I will be happy to sort through the situation and discuss it with you.

Please note that the above is not intended as legal advice, it is for educational purposes only. No attorney-client relationship is created or is intended to be created hereby. You should contact a local attorney to discuss and to obtain legal advice.

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There is not a heuristic that will allow you to predict whether Wells will go after a deficiency. However, there are other factors that may increase the likelihood of them pursuing same. 1) If they have financials that indicate a strategic default and borrower liquidity; 2) If there is insurance covering the loss or difference between the home value and the mortgage principal, the insurance may pursue in a action; 3) Freddie Mac owns the loan (they have become more aggressive this year in pursuing deficiencies). Keep in mind that 9 times out of 10, Wells Fargo is just a servicer. I strongly suggest you keep documentation as to the short sale offer and the banks rejection of the offer. While it is not a strong argument against a deficiency, it is a mitigator. Also, keep documentation that shows the house was worth considerable more than it went for a the foreclosure sale. This will also mitigate a deficiency when it comes for the judgment. There are two consultations that I think you should consider with a local attorney 1) a bankruptcy attorney who practices individual 11s (no you don't have to surrender all your property), and 2) a asset protection lawyer.

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Margery Ellen Golant

Margery Ellen Golant


I agree in part and disagree in part. I agree that if the asker can qualify to file bankruptcy (depending on the details, maybe 13 and if not, maybe 7 ) and avoid the mess that way, that should definitely be considered. If not, asset protection is a must. However, I emphatically disagree that the existence of one or more layers of insurance in this mix makes any difference, nor does indicia of strategic default or liquidity. If there were any insurance payouts, the carrier is subrogated to the claim of its insured, but whether there was or not, someone has a right to the claim. Both Fannie and Freddie are obligating their servicers to pursue deficiencies, as are many of the "private" securitizations. Whether they pursue them directly or sell them to debt buyers who pursue them, the result for the borrower is the same - more liability and aggravation. Due to the long time horizon available to the servicer, investor, or other claimant, they c

Margery Ellen Golant

Margery Ellen Golant


can wait if it suits them for 5 years, or make a move sooner if they want to. Pursuing a deficiency is easy and cheap, since it can be done for the small price of a reopen fee and first class postage, no service is necessary, or they can sell the claim to a debt buyer and deposit a nice clean check. Debt buyers are in the business of suing everyone, unless they can torment them into paying by calling them a million times a day. We are seeing deficiency claims by Freddie and Fannie, by insurance carriers, by debt buyers, by mortgage creditors. Most deficiency claims are sizeable, some are huge. There is no reason to believe that any of the owners of these debts will just walk away, and they admit privately they have no such intentions. Thinking about it logically, they couldn't even if they wanted to, not that they want to. They are all "for profit" operations, and are looking to reduce their loss any way they can. Many borrowers did not realize the risk they were taking when they did not defend against foreclosure, or trusted a realtor in a short sale advising them "oh, don't worry, no one is pursuing deficiencies". Not even close to true, and a perfect example of why it is a felony in Florida for a realtor to give legal advice. To be clear, this pertains to the rights of Florida mortgage creditors. There are some states who have anti-deficiency legislation, which prohibits or limits pursuit of borrowers. Florida has none, and has a generous statute of limitations besides. This is just the beginning of what I call "Chapter 2".


I recommend that you retain an experienced foreclosure defense attorney in your area. Unfortunately it appears the foreclosure already occured meaning you can not assert defenses in the foreclosure and then agree to the foreclosure in exchange for the lender not seeking a deficiency. You can, however, look into the way the property was sold and whether the purchasing entity was related to the lender in addition to some other defenses. The lender may never file anything seeking the deficiency but it could at a later date when it feels like it.

Please do not consider this legal advice. The information is only a useful gauge for future consideration or activity on your part. By my definition, legal advice can only be had through a thorough in-person consultation with me, which would involve a detailed question and answer session.

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