The fight for their home ended long ago with the fall of a foreclosure court gavel — or so they thought.
This summer, hundreds of South Florida residents are facing new foreclosure ramifications as banks pursue the unpaid mortgage debt for homes that were sold at the auction block up to five years before.
In a month-long period beginning June 1, about 110 lawsuits were filed in Palm Beach County against former homeowners by a Texas-based debt collection company named Dyck O’Neal. The same firm filed more than 300 cases in Broward County and nearly 200 in Miami-Dade County.
The lawsuits seek to collect deficiency judgments — the balance left on borrowers’ unpaid mortgages after deducting for what was recouped at a home’s foreclosure sale.
Homeowner attorneys interviewed by The Palm Beach Post were surprised to learn that Dyck O’Neal is filing on behalf of federal mortgage backer Fannie Mae, which has stepped up its efforts to collect back mortgage debt.
Until now, deficiency judgments were so rarely sought that many homeowners gambled the banks would never come after them — walking away from homes they could afford but that were so underwater the investment no longer made sense.
Others had no idea what lurked years down the road, thinking that losing the house was the worst that could happen.
“The whole thing was devastating,” said Palm Beach County resident Rose Weinstein, who had an Orlando condominium foreclosed on in 2010 and a deficiency lawsuit filed against her June 29. “I had lost my job, I lost the condo and now here I am being sued by some bozo company bottom-feeder.”
A change in Florida law that went into effect July 1, 2013 reduced the timeline that banks and mortgage companies have to file for a deficiency judgment from five years to one year after a foreclosure is final, which is when the home is sold at auction. That meant cases that weren’t already timed out had just one more year to file.
The law change, however, did not alter the 20 years that debt collectors are allowed to collect on the debt once the claim has been filed by garnishing wages, placing liens on investment properties or drawing from other assets.
While tens of thousands of South Florida borrowers whose foreclosures were finalized within the five years leading up to July 1 have now escaped the threat of a deficiency judgment, many of those who didn’t have been stunned.
“People are getting served with these deficiency suits and are absolutely shocked,” said Paul Baltrun, director of corporate development for the Law Office of Paul A. Krasker in West Palm Beach.