Florida borrowers face a more aggressive debt collection landscape in the event of a foreclosure than borrowers in many other states. According to a government report released on the state of government-backed mortgage companies Fannie Mae and Freddie Mac, it is legal and even encouraged for banks to pursue unpaid mortgage debt from borrowers who have been through a foreclosure.

The process, called a deficiency judgment, has been uncommon in Florida up until the point even though it is legal here.

The report argues that allowing this type of collection could help deter people from choosing a strategic default. A strategic default is when a homeowner stops making their payments because it will cost less in the long run to go through foreclosure than it will to stick with the payments on the property and try to sell it. This happens most often on a mortgage that is for more than the home is worth with borrowers who could continue to make the payments.

Lenders in Florida need to file for a deficiency judgment within five years of the foreclosure, but then have 20 years to collect that debt. This could lead to some serious problems for homeowners who are confused when they receive a deficiency judgment notice but don’t immediately get a collections notice. This is one reason why it is so important to handle all aspects of a foreclosure very carefully and with the advice of a trust, experienced professional. Unexpected financial obligations years down the road could hinder borrower’s efforts to get back on track.

The Federal Housing Finance Agency says that seeking deficiency judgment payments from strategic defaulters will help lessen the burden on taxpayers for the government-owned Fannie Mae and Freddie Mac. However, a Florida foreclosure defense attorney has spoken out against the practice, arguing that individuals are being penalized more than financial institutions for strategic default decisions.

Source: Palm Beach Post, “Floridians who lose homes to foreclosure may be doggedly pursued for unpaid mortgage debt,” Kimberly Miller, Oct. 17, 2012.