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Foreclosure and Short Sale -- Mortgage Deficiencies treated differently?

Many people are aware that, in 2013, the Florida legislature shortened the period within which a lender must start a suit for the mortgage deficiency from five years to one year. What is a 'mortgage deficiency?' This is essentially defined as the amount a court determines is the difference between the value of the real property at the time it is sold and conveyed by the Clerk after the entry of foreclosure judgment and the total amount owed on the mortgage at that time.

Some people have jumped to the conclusion that the same law applies to the time the bank has to sue for the deficiency after a short sale.  Well, at least two Florida courts have said: NO, it is NOT the same.

Two 2017  Florida appellate cases have addressed this question.  It should be noted that both concerned the same bank and had very particular circumstances. Specifically, in both cases, there was NO foreclosure lawsuit pending, the parties entered into a short sale by written agreement, and that written agreement reserved the right of the lender to pursue the deficiency balance owed.

Whitney Bank v. Grant is a First District case decided in August 2017. The court found that the five-year statute of limitations period governing contracts applies in actions for deficiency proceedings arising out a short sale agreement (as opposed to deficiency actions arising out of a foreclosure sale). The court would NOT apply the one-year limitation provision (enacted in 2013) concerning deficiencies after mortgage foreclosure or deed in lieu of foreclosure. However, the court did say the one-year law clearly DOES apply where the borrower executes a Deed in lieu of Foreclosure bank to the lender.

In Bush v Whitney Bank, the 5th DCA said essentially the same thing in May of 2017.

Remember, every case is different and this blog is not intended as specific legal advice.  Visit our website to learn more about how we can help you.

Also, click here to read about the Florida Supreme Court's Bartram decision permitting lenders to sue over and over again.

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