Dear J.D.;
My name is Veronica and I had been finally adapting to my new lifestyle after several tumultuous years when I received some shocking news. My story begins in 2008 when my husband and I agreed to an uncontested divorce after 15 years of marriage. I received one year of rehabilitative alimony while I studied for my master’s degree in the bio tech field. I received a job offer at the beginning of this year and was excited to begin a career in research.
In 2009, my ex-husband and I sold our marital home in a short sale. Although the process was arduous and the buyers threatened to cancel the contract two times, I was relieved to receive the short sale approval letter from the lender after months of waiting. I was surprised that the lender accepted $150,000.00 less than the amount we owed. I was happy to complete to the sale of the home that I had shared with my ex-husband.
Last week I opened some mail and saw an envelope from a law firm. I had avoided the court system through the uncontested divorce – and the short sale prevented a foreclosure of my marital home. I was not prepared for the letter with the following message:
“We have been retained by your former lender to seek the payment of the deficiency in the mortgage resulting from your short sale. You and/or your ex-husband are responsible for the sum of $150,000.00. If we do not receive the amount you owe within 10 days of your receipt of this letter, we will proceed to recover the debt in the courts along with our attorneys’ fees and costs.”
I read the letter a second time in disbelief. How could this be happening? I immediately went to my desk and opened the file for the short sale. I fumbled through the papers looking for the short sale approval letter. Surely I would find the language that I could provide to the law firm to stop them in their tracks. I read the letter over and over looking for the language in which the lender confirmed that the mortgage was considered paid and the lender waived or released the deficiency. I became frantic as I realized that the waiver or release was not in the letter. The phone began to ring and I noted on the caller id that it was my ex-husband calling. He confirmed that he received the same letter and he was experiencing the same reaction.
Please publish my letter to help other unsuspecting homeowners to avoid my nightmare.
Signed, Frustrated in Florida
P.S. I was told by several people I did not need a real estate attorney for the sale of my home!
Answer
Posted : July 12, 2010
Dear Veronica,
Many lenders have not been releasing or waiving the deficiency in short sales. Most sellers do not know that they should be seeking a release or a waiver. The deficiencies in shorts sales total billions of dollars and there are collection attorneys and agencies willing to pursue these monies. They can sue the homeowners and obtain a judgment against millions of unsuspecting sellers who failed to ask about a waiver or release of the deficiency. You and your husband are jointly and severally liable for the deficiency as outlined in your mortgage and note. That means that the lender can try to collect all or part of the debt from you or your ex-husband. In Florida, a certified recorded copy of the judgment will act as a lien for 10 years against your property and it can be re-recorded for an additional period. It will likely be reported on your credit reports. A judgment holder in Florida can require you to appear in Court and disclose all your personal financial information. Wage garnishment and levies on bank accounts and other investments are remedies creditors may pursue.
Since you did not understand the results of the short sale, you are now faced with surprising news. I advise you to seek the advice of an attorney regarding asset protection planning. In Florida your homestead and certain investments are exempt from the claims of creditors. You may also want to consult a bankruptcy attorney. Please tell everyone you know who is considering a short sale to read the approval letter to understand if the lender has waived a deficiency.
With the proper advice you will be Less Frustrated in Florida.
Sincerely, J.D.