Robo-signers: They’re Ba-ack
Millions of foreclosures still happened, though. And if the foreclosure doesn’t pay off the bank in full, the homeowner may be left owing the difference between the balance owed and the foreclosure price. This is called the “deficiency.”
What do robo-signers have to do with a foreclosure deficiency? Well, banks often have to provide paperwork to courts to be entitled to collect the deficiency. And banks are using robo-signers to create the deficiency paperwork in the same way they did with foreclosures. A recent news story highlighted this issue (Borrowers Beware: The Robo-signers Aren’t Finished Yet).
Fannie Mae is now one of the major aggressors when it comes to collecting deficiencies. Fannie Mae went into government conservatorship a few years ago due to its risky business practices.
When homeowners are sued for a deficiency, however, they often don’t show up for court. As one law professor explained, “Ninety-five percent of borrowers don’t even show up — they think they don’t have a defense, or they’re scared or can’t afford a lawyer. As long as judges don’t question the claims, the debt collectors win.”
In Massachusetts, a bank can sue a homeowner to get a deficiency judgment within two years of the foreclosure. If the bank gets the judgment, it is good for 20 years or more. And the judgment bears a 12% rate of interest. The law governing deficiency judgments is in the General Laws of Massachusetts, Chapter 244, Section 17A.
So what can a Massachusetts consumer do if he or she is sued for a deficiency? Show up. There is a 20-day period during which to respond to a collection lawsuit, and it is vital to contact a lawyer to file a response with the court before that deadline expires.
What could possibly be a defense to one of these lawsuits? Lots of things. For example, some debt collectors are not licensed to collect debts in Massachusetts. Other banks may have committed unfair business practices before the foreclosure, foreclosing on homeowners while they were under review for loan modifications, or mishandling or losing loan-modification paperwork. These defenses can put the bank on the defensive. In cases our office has handled, these issues have enabled us to settle or dismiss banks’ deficiency lawsuits.
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Culik Law is a Massachusetts Law Firm. The posts on Culik Law’s blog are not intended as legal advice. If you have questions about your particular situation, CONTACT CULIK LAW for a Free Consultation.