Jan. 28 (Bloomberg) -- When John King stopped making payments on his home in Coral Gables, Florida, two years ago, he assumed the foreclosure ended his mortgage contract, he said. Last month, a Miami-Dade County court gave collectors permission to pursue him for $44,000 stemming from the default. King is among a rising number of borrowers who are learning that they can be on the hook for years after losing their homes. Amid a crisis that stripped $6.4 trillion, or 28 percent, from the value of U.S. residential real estate since the 2006 peak, lenders are exercising their rights to pursue unpaid mortgage balances. To get their money, they can seize wages, tap bank accounts and put liens on other assets held by debtors. âThe big dogs get a bailout, and the little man gets no mercy,â said King, 39, referring to the U.S. governmentâs rescue of banks and other financial institutions. While there are no statistics on the number of deficiency judgments approved by courts, the Federal Deposit Insurance Corp. tracks the amount banks collect after defaulted loans were written off. These mortgage recoveries rose 48 percent to a record $1.01 billion in the first nine months of last year compared with the year-earlier period, according to the Washington-based regulator. Recoveries on defaulted home-equity loans almost doubled to $392 million, the FDIC data shows. The figures donât include money retrieved by trusts overseeing mortgage-backed securities, such as the one that holds the loan on Kingâs former home, or efforts by distressed- asset funds and companies that buy bad loans to profit from collection rights. Judgments such as the one levied against King usually tack on court fees, fines and interest. http://www.bloomberg.com/apps/news?pid=20601087&sid=aIf_vUQZFt.s&pos=7
âThe banks have been too underwater with foreclosures to spend much time on deficiency judgments, but thatâs beginning to change,â Hillard said in an interview. âThis is going to be the next big crisis.â Get a bunch of cases going now before the next reset this year holds things off a bit..then really start going after everyone in 3-5 years when things begin to cool off. More money for the banks, money for the courts, money for lawyers... What a racket
It all depends, if he bought the property assuming he would be living like Steven Schwarzman, then NO. However if he only wanted a roof over his head and try to make ends meet, then YES.
I thought Florida was a non-recourse mortgage state. Is that not true ? The article is referring only to second mortgage loans right ?
The only idiots are those who think that they can walk away from a mortgage and not still be on the hook. Nothing has changed. Foreclosure is only the bank taking away the house, not giving up on the debts... You are on the hook for the debts, plus penalties, interest, lawyer's fees, etc. What did these people think all the fine print was in the contract to buy the house?